Something to remember about new homes supply. In a slow market developers will keep homes "on the pinks" meaning just short of final inspection. This for reasons of loan covenants and property taxes. these are the new home segments' shadow supply.
Everybody focuses on the big homebuilders. But in our market, NYC suburbs, where big tracts of land are in short supply, there's been a lot of activity in one-of-a-kind rebuilds.
A developer buys an old small house in a ritzy neighborhood, puts it in dumpsters, and starts over with a modern McMansion.
Lately, all of the news in this market has been terrible. Some such rebuilds are now being sold by Realtors half-finished, as-is. Even when developers finish and can find buyers, they are eating big losses.
This market is probably dead in NYC suburbs going forward for awhile. It's not worth anybody's time and risk until the market settles. Collectively, the loss of these projects is a huge hit on the local economies.
Rob Dawg writes: "Something to remember about new homes supply. In a slow market developers will keep homes "on the pinks" meaning just short of final inspection. This for reasons of loan covenants and property taxes. these are the new home segments' shadow supply."
Ah, this explains a recent development near where I live. It took the builders over ten months to finish this one house, taking their sweet time. Now I see why.
Another part of the "sticky recovery" for new homes could be gas prices. People are really feeling this pinch and are probably more willingto look at resales near their jobs versus far-flung new developments.
I've overheard enough conversations from people about how gas prices are driving their decisions... combining errands, getting rid of one car, weighing out carpooling versus public transit. It's for real and it'll be at play in the recovery in some form.
Home builders are chasing the maarket down just like resales. the difference is huge margins which have them holding out longer. The big HBs have been burning through their credit lines like drunks at a Lefty's half off sale.
tg, I'm already seeing gripes on local forums from people who thought their HOA dues would be paying for better services at their condos. The rationale used to be they came with enough "amenties" that justified the price.
Quickest things to be let go will be staff. Doormen, concierges, entry guards, etc. Then comes maintenance.
There have already been some HOA's in my area unable to pay the street lighting bills. Then hobos steal the wiring from the unlit lamps.
The rationale for condos is that real estate always goes up in value, while everyone else is "throwing their money away" on rent. [Suzanne researched this.]
Bosch, I "sort of get it" - I have lived in apartments before and I liked the convenience and the free time that it offers to not need to handle maintenance.
But I never have understood either, the concept of "paying more for less" - that condos would sell for a premium to single family homes. That is still happening in my city.
I moved a few months ago (got tired of my old 1950s house, the rooms were small and was kind of gloomy). I did consider moving to a condo closer to work, but even 2 BR condos were priced higher than a 3 BR home... So I ended up buying a 1970s ranch house on a half acre that I liked better than my old one.
This was still cheaper than a condo and close enough to town to still use public transit. I think the trade-offs and trade-ups of condo living are overblown.
My small developer client has 3 houses just short of completion, which he's holding off completion to keep taxes down.
The cheapest one he will probably complete, since he wants to rent it, but he has to fight like a dog with the authorities to get his certificate of completeion. Don't know how he stands dealing with the building authorities.
Now, about the FC bill. who actually thinks the banks/lenders will take a hit to 85% of appraisal unless the appraisal is massively jacked up and the market has no prospect of even stabilizing ? Better to come up with a more efficient FC system and boot the deadbeat to the curb.
I love the YoY bar chart format as it describes the drop in context of the seasonality.
Regarding existing, we're about to reach the slow season. That will add to the doom and gloom factor. If I were selling my house, it would be sold by now. The lower price I would have sold it at is bound to be higher than in the coming months.
Anonymous B: "Can you really envision a realtor saying, 'Now's not a good time. Come back and see me in three years.'"
Believe it or not, that's what a realtor in Kilmarnock, VA, told my wife and I this spring. "You're too early. Prices will come down further. Come back in two years."
But this was in rural Virginia and the advice came from a crusty guy who helped build Liberty ships in Baltimore's Sparrows Point shipyard in WWII. He still remembered a christening party on board one of the ships that was attended by a bunch of nurses from somewhere. What we do remember!
The foreclosure-prevention gimmick will fail. It's like trying to prevent a stockbroker from selling out your underwater stock position, purchased on full margin, by pretending the loss is much smaller than it really is, or by supplying you a bigger margin loan. But that won't support the market price of the stock. That won't prevent the interest on that margin loan from increasing.
Tut tut tut. Didn't we just have a 300+ set of replies on the bailout bill? That's so "Saturday" =:-)
But FWIW, I also think the bill is more of an election-year punt than anything. There are what... 20 million or so homeowners in California alone? And how many of those bought or took cash out in the last 5 years? Several million, probably.
The lamestream media says it's anticipated this bill could help approximately 400,000 people. This bill is going to reverse the tide? Come on.
"Japan's goods-trade surplus fell 89% last month from a year earlier to 138.6 billion yen ($1.28 billion), marking the fourth consecutive monthly decline, the Finance Ministry reported Thursday."
"It now seems that exports may have also peaked and entered a decreasing trend," said Takeshi Minami, chief economist at Norinchukin Research Institute. The Japanese economy "will unavoidably face harsh conditions ahead," he said."
I have found the one useful thing a cat can do is, when you tie them to a long pole, you can wash the second floor windows of your house with them.
Some don't like the soap.
"Looking forward, I'm much more pessimistic about existing home sales, and existing home prices, than new home sales." CR
Of course, because a fall of a couple hundred thousands pales to what already has transpired. However, new home sales are instrumental to the economy, so as they fall more and stay low for several years, the economy will suffer mightily. No jobs for construction workers and the loss of other massive trickle down wealth is a huge problem. New home sales are often indicative of the economies health (except the bubble years), and what they indicate over the next few years is a severe recession/depression. For this reason, new home sales make me pessimistic, pessimistic about the economy.
Elvis-Isn't that funny? The fact that investment will go into productive uses like transportation infrastructure, clean power generation and reengineering the auto fleet, rather than building McMansions make me optimistic. I'm not opening the champagne just yet, but I am looking to see if Lefty has any nice vintages on sale.
One of the generalizations that can be made regarding this bill is that many debts that were previously "private" and subject to civil laws will become "public," payable to the IRS/US Government.
E.g. the $7,500 tax credit that must be paid back over 15 years or when the home is sold.
Three points...
There will be greatly increased demands on the IRS's functions,
It will be a lot harder for anyone to "walk-away" from IRS/government debt than private debt,
An alternative title for this bill could have been "The H&R Block and CPA Enrichment Act of 2008."
"The fact that investment will go into productive uses like transportation infrastructure, clean power generation and reengineering the auto fleet, rather than building McMansions make me optimistic." AOC
Might be work in the long-term, but not the next few years. That what I'm talking about. By the way, I find your examples odd.
Incidental Intelligence:
Bank REOs in 6 SoCal Counties 7/25: 64,274
REO Sales, June (41% of 17,424 TTL): 7,143 approx.
Months of Inventory of Bank REOs = 9 MOs
Problem is, bank REO inventories are rising over 15%/month(!) and summer buying season is ending.
Please excuse my ongoing, OT interest in what's happening in the last 2-4 weeks, but I want to watch the wheels when they start falling off.
My question is, how accurate the article is? Is there any Energy Industry insiders/analyst willing to share their view?
(p.s. just don't share insider info, please..there is justice department for whistle blowing)
I wonder if our government deregulates Energy Firms separating Energy production business from Energy Distribution, will it increase the competition and as the result lower the prices?
Any insights into the Chicago northside real estate market?
I'm still seeing tear downs and huge brink monsters being build (typically either 4 units or 3 units and a storefront when on a commerical street) yet on the ride home I see vacant buildings, some new single family and some never-sold condos.
What gives? Can there still be banks lending money to build on spec, or are these builders just dipping into their equity from successful deals done more than a year ago? Are the contractors doing work so cheap, just to keep working, that it makes any sense to continue to build? And this is leaving out the high rises that are still being build that were financed two years ago.
Any ideas?
BTW I saw the engineer that I know who does surveys for large deals (he's inspected the GM building in New York, the PATH tubes between NJ and NY, the State of Illinois building in Chicago) and he says that him and his partners are just hanging on. One of their large clients has been General Growth and according to this blog, they're next up for trouble.
A builder in northern Ocean county of central NJ put up a sign in front of a small (8 unit) community about 3 months ago indicating -- in very large type mind you -- "starting at 499,995". Went by that this morning and saw the first 9 covered by a new smaller number "5". $40K off. Still about $150K too high, but getting there.
I'm not sure why some of those government reports have sounded so optimistic. I'm not a big fan of lowering standards just to make one feel better. That's not an achievement. Just tell it like it is.
I've heard of retial stores having "January Sales in July" but this takes the cake. No bounce whatsover.
Something to remember about new homes supply. In a slow market developers will keep homes "on the pinks" meaning just short of final inspection. This for reasons of loan covenants and property taxes. these are the new home segments' shadow supply.
Nothing like a rally in homebuilders to illustrated the knifecatching denial of reality.
We have plenty of new homes.
we just lack buyers with jobs that pay enough to meet a conventional loan...
Someday this war's gonna end...
Everybody focuses on the big homebuilders. But in our market, NYC suburbs, where big tracts of land are in short supply, there's been a lot of activity in one-of-a-kind rebuilds.
A developer buys an old small house in a ritzy neighborhood, puts it in dumpsters, and starts over with a modern McMansion.
Lately, all of the news in this market has been terrible. Some such rebuilds are now being sold by Realtors half-finished, as-is. Even when developers finish and can find buyers, they are eating big losses.
This market is probably dead in NYC suburbs going forward for awhile. It's not worth anybody's time and risk until the market settles. Collectively, the loss of these projects is a huge hit on the local economies.
Worst since 80-82. Bad times. My parents went BK during that one.
And Volker had jacked FFR to liuke 1 gazillion percent.
That ain't happening this time. I suspect Volker had it right. So this time things will be worse.
Cheers,
rich,
"Some such rebuilds are now being sold by Realtors half-finished, as-is."
I've seen several such heere in the Encino hills. Which I suspect is similar to your NYC digs.
Cheers,
AllenM
'We have plenty of new homes.
we just lack buyers with jobs that pay enough to meet a conventional loan...'
This is the result of the fight against "wage inflation." So short sighted.
Does anyone else sense that Monday will be a bad day at Black Rock in light of the NAB action Friday?
Rob Dawg writes: "Something to remember about new homes supply. In a slow market developers will keep homes "on the pinks" meaning just short of final inspection. This for reasons of loan covenants and property taxes. these are the new home segments' shadow supply."
Ah, this explains a recent development near where I live. It took the builders over ten months to finish this one house, taking their sweet time. Now I see why.
Now I think I understand what 'seeing red' means.
Ok, we are gonna need another round of stimulus checks. Seriously though, what bullets does the fed and congress have left to stop the losses?
Yo Misean!
Did you try my fix for your photo? Hope I explained it plainly. Put the code in carats < >.
Will,
The losses have occured. Can't be stopped. And the gov't is technically BK so...printing press FTW!
Cheers,
Another part of the "sticky recovery" for new homes could be gas prices. People are really feeling this pinch and are probably more willingto look at resales near their jobs versus far-flung new developments.
Ok, we are gonna need another round of stimulus checks.
Exactly what Obama just said (he's being interviewed live at the moment in Chicago.
Anonymous Bosch,
Got the comment and thanks. No haven't. Kinda kicking around doing Sunday shite right now. I'll give it a go after lunchish.
Cheers,
Even the ghetto is quieter at night this summer. Could it be gas prices?
Home Owner Alligators need to eat.
404 - Not Found - sacbee.com
What is the typical profit margin on a new home? And how many months of carrying costs does it take to burn through it?
Are we there yet?
I've overheard enough conversations from people about how gas prices are driving their decisions... combining errands, getting rid of one car, weighing out carpooling versus public transit. It's for real and it'll be at play in the recovery in some form.
Home builders are chasing the maarket down just like resales. the difference is huge margins which have them holding out longer. The big HBs have been burning through their credit lines like drunks at a Lefty's half off sale.
tg, I'm already seeing gripes on local forums from people who thought their HOA dues would be paying for better services at their condos. The rationale used to be they came with enough "amenties" that justified the price.
Quickest things to be let go will be staff. Doormen, concierges, entry guards, etc. Then comes maintenance.
There have already been some HOA's in my area unable to pay the street lighting bills. Then hobos steal the wiring from the unlit lamps.
Rob Dawg,
"Lefty's half off sale."
WTF am I doing here. BRB!
Cheers,
Rich and Misean, these "in-fill McMansion abortions" are happening in NoVA as well - Arlington, Vienna, etc.
-Jaso
Misean writes:
"Lefty's half off sale."
WTF am I doing here. BRB!
You'll find the Gin & Tonic aisles empty. I got mine. Used my HELOC too.
Yet we see wanna be homeowners camping out overnight in order to get a chance to buy new condos in Orange County CA.
Condo deals draw buyers to Stadium Lofts | condo, one, line - News - The Orange County Register
those 2008 numbers are so low compared to 2003-2007. How far back in time do we need to go to get comparable numbers to this year's?
(I know I can be pretty dense, but I've never understood condos.)
What's the attraction of buying the apartment you still have to pay rent on?
The rationale for condos is that real estate always goes up in value, while everyone else is "throwing their money away" on rent. [Suzanne researched this.]
Bosch, I "sort of get it" - I have lived in apartments before and I liked the convenience and the free time that it offers to not need to handle maintenance.
But I never have understood either, the concept of "paying more for less" - that condos would sell for a premium to single family homes. That is still happening in my city.
I moved a few months ago (got tired of my old 1950s house, the rooms were small and was kind of gloomy). I did consider moving to a condo closer to work, but even 2 BR condos were priced higher than a 3 BR home... So I ended up buying a 1970s ranch house on a half acre that I liked better than my old one.
This was still cheaper than a condo and close enough to town to still use public transit. I think the trade-offs and trade-ups of condo living are overblown.
My small developer client has 3 houses just short of completion, which he's holding off completion to keep taxes down.
The cheapest one he will probably complete, since he wants to rent it, but he has to fight like a dog with the authorities to get his certificate of completeion. Don't know how he stands dealing with the building authorities.
I still don't see home values coming down at all, if anything I see realtors trying to get in place for the "next boom" cycle.
Re: I expect a slow recovery because of the overhang of existing homes for sales
I suspect tighter lending less liquidity will slow things down also
if anything I see realtors trying to get in place for the "next boom" cycle.
(I'm not being snotty, but... What choice do they have? They sell RE.
Can you really envision a realtor saying, "Now's not a good time. Come back and see me in three years."
I fear the pain from this mess, and the repercussions spread so far and wide, are (despite being a full year on) just beginning.
Absolutely right Bosch.
By the way, I really like your tryptich. The vignette where the damned soul is defecating gold is really great.
Unless you were referring to the California detective guy? Like him too.
if anything I see realtors trying to get in place for the "next boom" cycle.
Good strategy, but I wasn't aware that humans could go for that many years without eating.
Nice work CR. Welcome back.
Now, about the FC bill. who actually thinks the banks/lenders will take a hit to 85% of appraisal unless the appraisal is massively jacked up and the market has no prospect of even stabilizing ? Better to come up with a more efficient FC system and boot the deadbeat to the curb.
Is it 85 or 90%?
Sorry if already answered: Does this 85% rule imply that the second loans get written down to zero? If so NFW this will have any effect.
I love the YoY bar chart format as it describes the drop in context of the seasonality.
Regarding existing, we're about to reach the slow season. That will add to the doom and gloom factor. If I were selling my house, it would be sold by now. The lower price I would have sold it at is bound to be higher than in the coming months.
You have to promise to not tell another living soul, liz.
One of my cats did that one. (those).
Shhhhh. Mum's the word though, right?
Heeheeheehee, Bosch.
Anonymous B: "Can you really envision a realtor saying, 'Now's not a good time. Come back and see me in three years.'"
Believe it or not, that's what a realtor in Kilmarnock, VA, told my wife and I this spring. "You're too early. Prices will come down further. Come back in two years."
But this was in rural Virginia and the advice came from a crusty guy who helped build Liberty ships in Baltimore's Sparrows Point shipyard in WWII. He still remembered a christening party on board one of the ships that was attended by a bunch of nurses from somewhere. What we do remember!
I've told people to wait, and may have lost some money thereby. Well, maybe not, probably would never have qualified.
Bosch--your cat extrudes gold? My cats sure don't.
One in a million, JohnR.
[fast-moving thunder storm nearly on top of me here now. May loose my connection.]
Fun conversations, everyone. TYVM.
Or do you mean your extremely talented cat did the painting?
The foreclosure-prevention gimmick will fail. It's like trying to prevent a stockbroker from selling out your underwater stock position, purchased on full margin, by pretending the loss is much smaller than it really is, or by supplying you a bigger margin loan. But that won't support the market price of the stock. That won't prevent the interest on that margin loan from increasing.
Tut tut tut. Didn't we just have a 300+ set of replies on the bailout bill? That's so "Saturday" =:-)
But FWIW, I also think the bill is more of an election-year punt than anything. There are what... 20 million or so homeowners in California alone? And how many of those bought or took cash out in the last 5 years? Several million, probably.
The lamestream media says it's anticipated this bill could help approximately 400,000 people. This bill is going to reverse the tide? Come on.
OT:
Japan's Surplus Narrows as Exports Fall - WSJ.com
"Japan's goods-trade surplus fell 89% last month from a year earlier to 138.6 billion yen ($1.28 billion), marking the fourth consecutive monthly decline, the Finance Ministry reported Thursday."
"It now seems that exports may have also peaked and entered a decreasing trend," said Takeshi Minami, chief economist at Norinchukin Research Institute. The Japanese economy "will unavoidably face harsh conditions ahead," he said."
I have found the one useful thing a cat can do is, when you tie them to a long pole, you can wash the second floor windows of your house with them.
Some don't like the soap.
Love ya, Lefty.
"Looking forward, I'm much more pessimistic about existing home sales, and existing home prices, than new home sales." CR
Of course, because a fall of a couple hundred thousands pales to what already has transpired. However, new home sales are instrumental to the economy, so as they fall more and stay low for several years, the economy will suffer mightily. No jobs for construction workers and the loss of other massive trickle down wealth is a huge problem. New home sales are often indicative of the economies health (except the bubble years), and what they indicate over the next few years is a severe recession/depression. For this reason, new home sales make me pessimistic, pessimistic about the economy.
Elvis-Isn't that funny? The fact that investment will go into productive uses like transportation infrastructure, clean power generation and reengineering the auto fleet, rather than building McMansions make me optimistic. I'm not opening the champagne just yet, but I am looking to see if Lefty has any nice vintages on sale.
we have some interesting Jan '08, and an impertinent Dec '07. Full price though.
One of the generalizations that can be made regarding this bill is that many debts that were previously "private" and subject to civil laws will become "public," payable to the IRS/US Government.
E.g. the $7,500 tax credit that must be paid back over 15 years or when the home is sold.
Three points...
There will be greatly increased demands on the IRS's functions,
It will be a lot harder for anyone to "walk-away" from IRS/government debt than private debt,
An alternative title for this bill could have been "The H&R Block and CPA Enrichment Act of 2008."
Yuck. The IRS as lender-of-last-resort?
Lefty-I'm too old to drink underage bubbly. Looks like I'll have to take my business elsewhere.
"The fact that investment will go into productive uses like transportation infrastructure, clean power generation and reengineering the auto fleet, rather than building McMansions make me optimistic." AOC
Might be work in the long-term, but not the next few years. That what I'm talking about. By the way, I find your examples odd.
Elvis-Yes, there we're 3 examples. That is an odd #.
Incidental Intelligence:
Bank REOs in 6 SoCal Counties 7/25: 64,274
REO Sales, June (41% of 17,424 TTL): 7,143 approx.
Months of Inventory of Bank REOs = 9 MOs
Problem is, bank REO inventories are rising over 15%/month(!) and summer buying season is ending.
Please excuse my ongoing, OT interest in what's happening in the last 2-4 weeks, but I want to watch the wheels when they start falling off.
There is a good article on Energy:
Criticism Of Medias Energy Coverage - Media - Portfolio.com
My question is, how accurate the article is? Is there any Energy Industry insiders/analyst willing to share their view?
(p.s. just don't share insider info, please..there is justice department for whistle blowing)
Also on Energy.
I wonder if our government deregulates Energy Firms separating Energy production business from Energy Distribution, will it increase the competition and as the result lower the prices?
What are con's and pro's of such a move?
Any insights into the Chicago northside real estate market?
I'm still seeing tear downs and huge brink monsters being build (typically either 4 units or 3 units and a storefront when on a commerical street) yet on the ride home I see vacant buildings, some new single family and some never-sold condos.
What gives? Can there still be banks lending money to build on spec, or are these builders just dipping into their equity from successful deals done more than a year ago? Are the contractors doing work so cheap, just to keep working, that it makes any sense to continue to build? And this is leaving out the high rises that are still being build that were financed two years ago.
Any ideas?
BTW I saw the engineer that I know who does surveys for large deals (he's inspected the GM building in New York, the PATH tubes between NJ and NY, the State of Illinois building in Chicago) and he says that him and his partners are just hanging on. One of their large clients has been General Growth and according to this blog, they're next up for trouble.
A builder in northern Ocean county of central NJ put up a sign in front of a small (8 unit) community about 3 months ago indicating -- in very large type mind you -- "starting at 499,995". Went by that this morning and saw the first 9 covered by a new smaller number "5". $40K off. Still about $150K too high, but getting there.
I'm not sure why some of those government reports have sounded so optimistic. I'm not a big fan of lowering standards just to make one feel better. That's not an achievement. Just tell it like it is.