"The most dramatic rise was among condominiums, where the cancellation rate jumped to nearly 124 percent ... which means there were more cancellations of previous sales than there were new sales."
Oh my, triple digit cancellation rates have arrived.
And to think it was mere months ago in these very same comment sections that I had to defend my prediction of at least one HB having a negative sales month before the end of the year.
This is actually good news in a way.
The the quicker these things directly hit employees of the DC based regulators, Congressional staff, and other DC based homeowners the faster we will see action. If the DC metro area was not being touched by these massive problems it would be ignored much longer.
Gravatar This is actually good news in a way.
The the quicker these things directly hit employees of the DC based regulators, Congressional staff, and other DC based homeowners the faster we will see action. If the DC metro area was not being touched by these massive problems it would be ignored much longer.
FFDIC |
So do you think the consequent "action" is likely to be beneficial? And to whom exactly?
Gary, yes, the rate can even go over 100% for a given quarter! Usually the cancellations come from sales in earlier quarters - so in this article the 78 cancellations are probably from sales in Q1 and Q2.
I've seen reports from builders in Florida of more cancellations in a single quarter than sales!
This article is for a D.C. area builder (an area that was supposedly immune). And it struck me as funny.
DrChaos - some actions will be beneficial and some will not as in most Congressional acts. I have no idea who will benefit, however somebody will. You can bet on it.
I live in Brooklyn, and I don't think many people around here can conceive of this happening "here".
But there is an unprecedented amount of condo construction going on, not only in Manhattan, but all throughout Brooklyn and Queens and across the river in Hoboken and Jersey City.
The sheer scale of the condo boom is incredible; I have a feeling we're going to see a lot of these projects (we already have, to an extent) turn to rentals . . .
I have been tracking a subset of MLS listings in my DC neighborhood (Capitol Hill) for about eight months, and compiling amateur statistics for the last three or so.
The subset I am considering is in a defined area (Parts of zips 20002, 20003, and 20024), and includes only those homes with at least 2 bed, and 1.5 baths.
As of today's analysis, an average of 157 active listings have dropped their prices by $4.5 Million in the last ninety days--about $29k/active listing. This month's drops are the most dramatic, with active listings each losing $666.56 per day. In spite of this, the subset inventory is increasing by a net of 1.08 listings per day. The bottom is soggy, and will soon collapse.
One oddball statistic I calculate is the ratio of active listing price reductions to final sales prices, excluding seller subsidies (which BTW averaged nearly 10k earlier in the year--but I've not checked lately). That ratio, I think, gives a sense of how hard the sellers are chasing the market down, and my uneducated guess is that when the ratio reaches a sustained level of about 1.6 or 1.7 (over several days), freefall will exist. Since July, the ratio has moved from .78 or so (sellers in denial) to a current reading in excess of 1.1 (coming to realization of doom). It may never reach a freefall state, but it is interesting to watch.
Bear in mind that this is in a decent neighborhood within waklking distance of much of the employment in the District. Public transportation is plentiful and convenient. This is one of those places that realtors and mortgage brokers were telling me wouldn't feel the pain of a bubble burst, because the property is just too desirable. The last three mo0nths tell a different story. We have REOs and short sales everywhere, and big condominium projects are offering incentives that make them sound like General Motors (O Down! NO PMI! Furniture!).
Sounds like somebody had an "investment luncheon" , and the sales were as reliable as these usually are. In my neck of the woods, it's generally "free lunch at Olive Garden" offers. I'd rather go to Subway and and not sign anything.
"One oddball statistic I calculate is the ratio of active listing price reductions to final sales prices, excluding seller subsidies (which BTW averaged nearly 10k earlier in the year--but I've not checked lately). That ratio, I think, gives a sense of how hard the sellers are chasing the market down, and my uneducated guess is that when the ratio reaches a sustained level of about 1.6 or 1.7 (over several days), freefall will exist."
Could you elaborate please. Is this number of price reductions to non price reductions? Is it per day or over time? It seems an interesting stat to me.
I was actually writing this about the M-LEC thread but it will get read more here.
I think all of you are missing what is really going on.
The entire pyramid of debt is being held up by Joe Atlases or Joe Sixpacks and Marymixs.
They have been piled up with much more than they can handle and one by one are starting to give up. This puts more of the load on their neighbors who are not much better off than they are. Have you ever looked at the average house hold incomes? The only way to live in this current system is by amassing huge amounts of debt. The load carrying capacity is not infinite. It is very finite and has been exceeded. The weight is growing with unreported rising costs and lowering benefits. We all recognize this but those at the top dont.
All this current frenzied financial engineering at the top by the Antoinettes is just total desperation. They have leveraged the system for their benefit for so long, they probably have no real concept of the carrying capacity of the American consumer/worker that supports the system. All they know is that their leveraged system is collapsing because the dollars feeding the loans used as assets for their leverages are diminishing. I doubt if they have ever consider the Joe Atlases. Any more than they considered the families in Iraq or anywhere. All they care about are themselves. And they never can have enough to fill their hollow souls. That amount doesnt exist in this world.
When leverage is high, it doesnt take much of a diminishing income stream to undermine the whole pyramid. Think of this as a pyramid sitting on a hill of sand. It was built way bigger than the hill so it really had no real support. And now a wind starts blowing. As the hill erodes away beneath it, the pyramid builder are trying disparately to shore it up.
It really doesnt matter at this point what they do because the carrying capacity was exceeded a long time ago and all they really could do would be to break up the pyramid to throw on the sand hill for support. But this would mean that they have to get dirty and give up what they have gained over the years. This isnt going to happen so they are trying desperately to put more burden upon the Joe Atlases. Sorry Charlie! All that is going to do this time is cause the over build pyramid to have less and less support until it falls over.
This is essentially what they are doing with these bridges and conduits. They are throwing everything they can at the sand hill trying to shore it up. Next they start throwing each other.
Even if they can lighten it enough, they will still end up with a house of cards and the wind is still blowing. This system of ever increasing debt was not built on a solid foundation. In fact to build it higher and bigger, they kept undermining the real supports by shipping our productive factories and jobs over seas in order to make the pyramid bigger. There has always been only one possible conclusion. It was going to fall
The ratio I calculate is the average reduction (in whole dollars) per listing per day, ACTIVE; divided by the average reduction per listing per day, SOLD.
As of today, SOLD properties netted $224.54 less than their high ask price for each day they were listed (ex seller subsidies). ACTIVE properties are being reduced at the rate of $253.83 per day on market, since their list date. This give a ratio of 1.130--which means sellers are discounting their properties 10% more steeply than sold properties, but even so, the net inventory continues to rise by more than 50 bps/day.
The average high ask for homes in my subset was $474,676. The average current ask for these same homes is $448,165. Median ask prices for the subset are nearly identical. Today is the first day for many weeks when the average Days On Market has fallen below 95. This is largely because 21 brand new listings have been added in the last four days (total of 193 active), skewing the number down.
October numbers are far, far more dismal for sellers than the previous two months--and that's bad. Put simply, there ain't no bid, unless a given property is exceptional. Any further credit tightening, or a jolt to general consumer confidence seems like the proverbial straw waiting to be loaded onto the housing camel--at least here in DC.
koko's a semi-regular and that was well thought out. His stuff moat always is - kudos.
And I mostly agree though don't quite understand how we got here... or rather got this far in the doodoo without realizing it... but then I live in a world that more closely resembles a 1950s neighborhood... small affordable housing with people not terribly in debt. Many folks own old beat up cars and even walk to work... my wife and I are their portal on the 21st century and they aren't real eager to join us there.
the amazing thing is that it has held up this long (look at Sept.s sales numbers - they still aren't falling off as much as one would expect from the 'apparent doom').
But regardless, this is why we will need to 'produce' our way out and financial engineering won't count as 'production'. We need to produce tradable goods and services to send out into the world to soak up some of those expatriate dollars.
It is why the dollar has to take such a big hit to make this happen - jo6pk has to stop consuming China & India & OPEC and there is no other way to make that happen. They conversely have to see value in what we do.
Locally consumed stuff that is domestically produced here won't increase that much (since most of the factors of production are local & USD denominated)... Production that can be imported or easily exported will increase a ton as the dollar corrects.
And the dollar fall isn't the Fed or Treasury Dept's fault - it's the result of decades of large and growing current account deficits - trade deficits mostly, oil a lot of that. They are just now reacting to the symptoms of those causal agents.
It was inevitable but we are just now feeling the full effects (or will be feeling them soon). JMHO.
"This is actually good news in a way.
The the quicker these things directly hit employees of the DC based regulators, Congressional staff, and other DC based homeowners the faster we will see action. "
Good news for who? Government intervention in the free market is the last thing I want to see.
"but then I live in a world that more closely resembles a 1950s neighborhood... small affordable housing with people not terribly in debt. Many folks own old beat up cars and even walk to work... my wife and I are their portal on the 21st century and they aren't real eager to join us there.
"
I think a lot of people on the coasts will live in that world, a few years down the coast. It won't hurt them any, as long as health care and education are available and affordable.
When America was supposedly its richest, back in the '50s and '60s, we lived in small houses and drove old cars. Vacations were a road trip to Yellowstone or Disneyland. It was okay. And it'll be okay the second time around.
at some point, this has to hit the commercial banking system. they have financed a great deal of HB inventory and they continue to carry almost all of it at par. lending exposures, relative to the balance sheet, are even higher than in last banking crisis.
HBs are facing a significant liquidity crunch in coming months. the banks will most likely allow HBs to draw down on unfunded commitments under the misguided belief that an upturn is just around the corner. this will only increase their exposure at the end of the day.
this will not have a pretty ending, but it will take some time to manifest as the banking regulators will not be aggressive in forcing recognition of the problem.
Spending a lot of time trying to measure the icecube that was the August/september sales market. It iced up with the credit crunch.
Prior to that it was actually measureable and survivable, but during the crunch period, any price did not matter in most markets. Saw a condo project auctioned off at 60% of construction loan value, lender refused all 20+ contracts, preferred to wait it out.
During the past 2 weeks, starting to see the higher end market trickle back to pre August sales rate. . . whew.
Good news for who? Government intervention in the free market is the last thing I want to see.
'free markets'? Where, in your dreams?
Ayn Rand & Allen Greenspan's - where the mythical rational actors live and are well-behaved stochastic processes.
And we should want to live there too! The total lack of regulation of lenders has really revolutionized our lives for the better....can't you see how well things are going right now? This is all just wonderful creative destruction. If we can just keep those pesky dems from bailing people out and coddling them from the consequences of their terrible judgement - including the lenders - this whole mess will sort itself out. That's tough love, but we've just got to take our medicine. Just ignore those pesky disruption costs and lost opportunity costs. Who really wants equilibrium? Massive upheaval lets us make a buck faster! It clears the system faster. So what if a large number of economic actors get wiped out - taken out of the game.
You know..the more I think about this...we really need to get back to honest-to-good lazziez-faire...we need to get serious about personal responsibility and non-interference by the government - it is time for a Ron Paul REAL Libertarian Revolution - Let's do away with the corporate and limited liability statues! Let's turn the laws back to, say, 1854!
No? You don't want to accept personal financial liability for all of your investment activities? Is that Atlas shrugging because it's not his...assets?
Well, theoretically it could have been worse . . .
Remember the sale of the century in by Hovanian? I wonder how many of their "thousands of sales have been canceled....
"The most dramatic rise was among condominiums, where the cancellation rate jumped to nearly 124 percent ... which means there were more cancellations of previous sales than there were new sales."
Oh my, triple digit cancellation rates have arrived.
And to think it was mere months ago in these very same comment sections that I had to defend my prediction of at least one HB having a negative sales month before the end of the year.
This is actually good news in a way.
The the quicker these things directly hit employees of the DC based regulators, Congressional staff, and other DC based homeowners the faster we will see action. If the DC metro area was not being touched by these massive problems it would be ignored much longer.
How can a cancellation rate BE over 100%?
Gravatar This is actually good news in a way.
The the quicker these things directly hit employees of the DC based regulators, Congressional staff, and other DC based homeowners the faster we will see action. If the DC metro area was not being touched by these massive problems it would be ignored much longer.
FFDIC |
So do you think the consequent "action" is likely to be beneficial? And to whom exactly?
Sign 10 contracts for sale, accept 15 cancellations of contracts made over the past several months and you have a 150% cancellation rate.
Gary, yes, the rate can even go over 100% for a given quarter! Usually the cancellations come from sales in earlier quarters - so in this article the 78 cancellations are probably from sales in Q1 and Q2.
I've seen reports from builders in Florida of more cancellations in a single quarter than sales!
This article is for a D.C. area builder (an area that was supposedly immune). And it struck me as funny.
Best Wishes.
If it's turned ugly now, imagine 2009 when the lobbyists find their industry downsized.
DrChaos - some actions will be beneficial and some will not as in most Congressional acts. I have no idea who will benefit, however somebody will. You can bet on it.
I live in Brooklyn, and I don't think many people around here can conceive of this happening "here".
But there is an unprecedented amount of condo construction going on, not only in Manhattan, but all throughout Brooklyn and Queens and across the river in Hoboken and Jersey City.
The sheer scale of the condo boom is incredible; I have a feeling we're going to see a lot of these projects (we already have, to an extent) turn to rentals . . .
Cote, congratulations on your prescience.
I have been tracking a subset of MLS listings in my DC neighborhood (Capitol Hill) for about eight months, and compiling amateur statistics for the last three or so.
The subset I am considering is in a defined area (Parts of zips 20002, 20003, and 20024), and includes only those homes with at least 2 bed, and 1.5 baths.
As of today's analysis, an average of 157 active listings have dropped their prices by $4.5 Million in the last ninety days--about $29k/active listing. This month's drops are the most dramatic, with active listings each losing $666.56 per day. In spite of this, the subset inventory is increasing by a net of 1.08 listings per day. The bottom is soggy, and will soon collapse.
One oddball statistic I calculate is the ratio of active listing price reductions to final sales prices, excluding seller subsidies (which BTW averaged nearly 10k earlier in the year--but I've not checked lately). That ratio, I think, gives a sense of how hard the sellers are chasing the market down, and my uneducated guess is that when the ratio reaches a sustained level of about 1.6 or 1.7 (over several days), freefall will exist. Since July, the ratio has moved from .78 or so (sellers in denial) to a current reading in excess of 1.1 (coming to realization of doom). It may never reach a freefall state, but it is interesting to watch.
Bear in mind that this is in a decent neighborhood within waklking distance of much of the employment in the District. Public transportation is plentiful and convenient. This is one of those places that realtors and mortgage brokers were telling me wouldn't feel the pain of a bubble burst, because the property is just too desirable. The last three mo0nths tell a different story. We have REOs and short sales everywhere, and big condominium projects are offering incentives that make them sound like General Motors (O Down! NO PMI! Furniture!).
We are all bubbleville now.
kurtyboy-
Don't worry, I'm calling a bottom riiiiight now! No wait, riiight now.
Sounds like somebody had an "investment luncheon" , and the sales were as reliable as these usually are. In my neck of the woods, it's generally "free lunch at Olive Garden" offers. I'd rather go to Subway and and not sign anything.
X,
Exactly the same question occurred to me when I read this posting - how many of those sales stuck for HOV?
WaPo new homes ads in real estate section have mark downs of up to $200,000.
kurtyboy | 10.13.07 - 1:29 pm |
"One oddball statistic I calculate is the ratio of active listing price reductions to final sales prices, excluding seller subsidies (which BTW averaged nearly 10k earlier in the year--but I've not checked lately). That ratio, I think, gives a sense of how hard the sellers are chasing the market down, and my uneducated guess is that when the ratio reaches a sustained level of about 1.6 or 1.7 (over several days), freefall will exist."
Could you elaborate please. Is this number of price reductions to non price reductions? Is it per day or over time? It seems an interesting stat to me.
I was actually writing this about the M-LEC thread but it will get read more here.
I think all of you are missing what is really going on.
The entire pyramid of debt is being held up by Joe Atlases or Joe Sixpacks and Marymixs.
They have been piled up with much more than they can handle and one by one are starting to give up. This puts more of the load on their neighbors who are not much better off than they are. Have you ever looked at the average house hold incomes? The only way to live in this current system is by amassing huge amounts of debt. The load carrying capacity is not infinite. It is very finite and has been exceeded. The weight is growing with unreported rising costs and lowering benefits. We all recognize this but those at the top dont.
All this current frenzied financial engineering at the top by the Antoinettes is just total desperation. They have leveraged the system for their benefit for so long, they probably have no real concept of the carrying capacity of the American consumer/worker that supports the system. All they know is that their leveraged system is collapsing because the dollars feeding the loans used as assets for their leverages are diminishing. I doubt if they have ever consider the Joe Atlases. Any more than they considered the families in Iraq or anywhere. All they care about are themselves. And they never can have enough to fill their hollow souls. That amount doesnt exist in this world.
When leverage is high, it doesnt take much of a diminishing income stream to undermine the whole pyramid. Think of this as a pyramid sitting on a hill of sand. It was built way bigger than the hill so it really had no real support. And now a wind starts blowing. As the hill erodes away beneath it, the pyramid builder are trying disparately to shore it up.
It really doesnt matter at this point what they do because the carrying capacity was exceeded a long time ago and all they really could do would be to break up the pyramid to throw on the sand hill for support. But this would mean that they have to get dirty and give up what they have gained over the years. This isnt going to happen so they are trying desperately to put more burden upon the Joe Atlases. Sorry Charlie! All that is going to do this time is cause the over build pyramid to have less and less support until it falls over.
This is essentially what they are doing with these bridges and conduits. They are throwing everything they can at the sand hill trying to shore it up. Next they start throwing each other.
Even if they can lighten it enough, they will still end up with a house of cards and the wind is still blowing. This system of ever increasing debt was not built on a solid foundation. In fact to build it higher and bigger, they kept undermining the real supports by shipping our productive factories and jobs over seas in order to make the pyramid bigger. There has always been only one possible conclusion. It was going to fall
Kokopelli,
Where did you come from?
What a brilliant essay you just wrote.
I've been a professional writer for 30 years. I can't write like that.
I nominate Kokopelli as our new #1 blogger of the month. Do I hear a second?
So they sold three homes in three month. Wonderfull.
WTF:
The ratio I calculate is the average reduction (in whole dollars) per listing per day, ACTIVE; divided by the average reduction per listing per day, SOLD.
As of today, SOLD properties netted $224.54 less than their high ask price for each day they were listed (ex seller subsidies). ACTIVE properties are being reduced at the rate of $253.83 per day on market, since their list date. This give a ratio of 1.130--which means sellers are discounting their properties 10% more steeply than sold properties, but even so, the net inventory continues to rise by more than 50 bps/day.
The average high ask for homes in my subset was $474,676. The average current ask for these same homes is $448,165. Median ask prices for the subset are nearly identical. Today is the first day for many weeks when the average Days On Market has fallen below 95. This is largely because 21 brand new listings have been added in the last four days (total of 193 active), skewing the number down.
October numbers are far, far more dismal for sellers than the previous two months--and that's bad. Put simply, there ain't no bid, unless a given property is exceptional. Any further credit tightening, or a jolt to general consumer confidence seems like the proverbial straw waiting to be loaded onto the housing camel--at least here in DC.
koko's a semi-regular and that was well thought out. His stuff moat always is - kudos.
And I mostly agree though don't quite understand how we got here... or rather got this far in the doodoo without realizing it... but then I live in a world that more closely resembles a 1950s neighborhood... small affordable housing with people not terribly in debt. Many folks own old beat up cars and even walk to work... my wife and I are their portal on the 21st century and they aren't real eager to join us there.
the amazing thing is that it has held up this long (look at Sept.s sales numbers - they still aren't falling off as much as one would expect from the 'apparent doom').
But regardless, this is why we will need to 'produce' our way out and financial engineering won't count as 'production'. We need to produce tradable goods and services to send out into the world to soak up some of those expatriate dollars.
It is why the dollar has to take such a big hit to make this happen - jo6pk has to stop consuming China & India & OPEC and there is no other way to make that happen. They conversely have to see value in what we do.
Locally consumed stuff that is domestically produced here won't increase that much (since most of the factors of production are local & USD denominated)... Production that can be imported or easily exported will increase a ton as the dollar corrects.
And the dollar fall isn't the Fed or Treasury Dept's fault - it's the result of decades of large and growing current account deficits - trade deficits mostly, oil a lot of that. They are just now reacting to the symptoms of those causal agents.
It was inevitable but we are just now feeling the full effects (or will be feeling them soon). JMHO.
"This is actually good news in a way.
The the quicker these things directly hit employees of the DC based regulators, Congressional staff, and other DC based homeowners the faster we will see action. "
Good news for who? Government intervention in the free market is the last thing I want to see.
Good news for who? Government intervention in the free market is the last thing I want to see.
'free markets'? Where, in your dreams?
the dc numbers were absolutely Fing abysmal last month for existing sales.
inventory clearing ratio went from under 5 (Where it had been for 8 months) to over 8 months. explosion
sales in the pooper
inventory sky high
and yet on my last final residential unit to sell into this market i have multiple offers and my pick of buyers......
locoisimo
we're building schools now instead of apartments or houses
schools, nonprofits, associatons, etc
hello counter cyclical!!
"but then I live in a world that more closely resembles a 1950s neighborhood... small affordable housing with people not terribly in debt. Many folks own old beat up cars and even walk to work... my wife and I are their portal on the 21st century and they aren't real eager to join us there.
"
I think a lot of people on the coasts will live in that world, a few years down the coast. It won't hurt them any, as long as health care and education are available and affordable.
When America was supposedly its richest, back in the '50s and '60s, we lived in small houses and drove old cars. Vacations were a road trip to Yellowstone or Disneyland. It was okay. And it'll be okay the second time around.
at some point, this has to hit the commercial banking system. they have financed a great deal of HB inventory and they continue to carry almost all of it at par. lending exposures, relative to the balance sheet, are even higher than in last banking crisis.
HBs are facing a significant liquidity crunch in coming months. the banks will most likely allow HBs to draw down on unfunded commitments under the misguided belief that an upturn is just around the corner. this will only increase their exposure at the end of the day.
this will not have a pretty ending, but it will take some time to manifest as the banking regulators will not be aggressive in forcing recognition of the problem.
Spending a lot of time trying to measure the icecube that was the August/september sales market. It iced up with the credit crunch.
Prior to that it was actually measureable and survivable, but during the crunch period, any price did not matter in most markets. Saw a condo project auctioned off at 60% of construction loan value, lender refused all 20+ contracts, preferred to wait it out.
During the past 2 weeks, starting to see the higher end market trickle back to pre August sales rate. . . whew.
NVR, a Washington DC based publicly trade homebuilder....still trade at over 2X book value....
These guys are toast, IMO.
Dentler
dryfly @ 10.13.07 - 5:15 pm wrote
Good news for who? Government intervention in the free market is the last thing I want to see.
'free markets'? Where, in your dreams?
Ayn Rand & Allen Greenspan's - where the mythical rational actors live and are well-behaved stochastic processes.
And we should want to live there too! The total lack of regulation of lenders has really revolutionized our lives for the better....can't you see how well things are going right now? This is all just wonderful creative destruction. If we can just keep those pesky dems from bailing people out and coddling them from the consequences of their terrible judgement - including the lenders - this whole mess will sort itself out. That's tough love, but we've just got to take our medicine. Just ignore those pesky disruption costs and lost opportunity costs. Who really wants equilibrium? Massive upheaval lets us make a buck faster! It clears the system faster. So what if a large number of economic actors get wiped out - taken out of the game.
You know..the more I think about this...we really need to get back to honest-to-good lazziez-faire...we need to get serious about personal responsibility and non-interference by the government - it is time for a Ron Paul REAL Libertarian Revolution - Let's do away with the corporate and limited liability statues! Let's turn the laws back to, say, 1854!
No? You don't want to accept personal financial liability for all of your investment activities? Is that Atlas shrugging because it's not his...assets?