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| 5/19 |
| 2005/12/11-14 [Reference/RealEstate] UID:40962 Activity:moderate |
12/11 Housing Bubble pops in Northern Virginia:
http://csua.org/u/e9a
\_ Watch foreclosure rates over the next few years as all those ARMs
are pushed up by the fed's prime rate increases...
\_ Ah, finally, someone posts something that makes sense re:
real estate bubbles. Certainly, whatever is going on in another
state has little if anything to do with pricing here. Location,
location, location!
\_ Yes, I think Chicago's housing market will hold up much better
than Bay Area's.
\_ Interest rates will affect everywhere and will affect the
places where people borrow a lot of money relative to
income the most.
\_ Of course as interest rates rise, there will be fewer
buyers, price rises will slow, housing will take longer
to sell, etc. No one disputes that. That is a natural
part of the housing cycle. However, rates slowly rising
is not going to magically burst the bubble and bring
prices down to where a 24 y/o new college grad can afford
one on their first job like a few people here are praying
to happen. Those people are just screwed if they want a
house before 30 without getting lucky or having two good
incomes.
\_ I worry that the exotic financing schemes (interest
only, reverse amort., and even simple ARMs) being
peddled to people who can't financially handle the
repercussions of rising rates and stagnant prices,
especially combined with stricter bankruptcy laws,
are ingredients of a dangerous economic storm. Can
you set my mind at ease? Also, as the feasability of
ownership is pushed further and further into retirement
years (buying at 35, mortgage done at 65), what will
that do to the overall economic state of "frothy" areas?
Not to mention the burden of financing retirement when
you've worked so hard to build that equity, but had
little or nothing left to save.
\_ This is very similar to what's going on in Livermore, CA.
\_ And in Boston:
http://csua.org/u/e9c
\_ Ooh, the median price dropped 5%.
\_ Their super hot market sold houses in 20 days? Houses here now
sell in a week instead of a weekend. My God! At this rate, we'll
be at their 20 day super hot mark in 6 months! The sky is
falling!
\_ I did notice this. Houses took 20 days to sell? That's about
the norm for California (well, maybe 30 days) in an average
market. Houses here were selling in, like you said, a
weekend. However, I have noticed a lot of houses on the
market in my area and they are selling much more slowly.
It's probably because the prices are so damn high. The woman
across the street is selling for $100K more than she paid
for the same house last year. Also, someone is trying to
sell a house for $1M in VA an hour from DC and they wonder why
it won't sell very fast? Heck, prices aren't that high in CA
once you get 50-60 miles from the urban centers. I think the
frenzy in places like CA has people in other areas losing
their minds. After all, real estate doesn't appreciate like
that in other parts of the country very often, if ever. A
house in Northern Virginia could be bought for $160K just 10
years ago, when houses in CA were already $300K+. I don't
think houses in many of the hottest markets (e.g. Miami and
Las Vegas) will hold their value when this runup stops -
certainly not as well as CA will. CA is a bit of a unique
situation. However, it certainly is not immune and I think
prices will fall here, too. They will just rebound faster.
In some other places the market may never rebound.
\_ Prices may pull back a bit and some speculators are going to
get burned but the sky is not going to fall. Normal single
income people still won't be able to get into a first house
without a miracle, a lot of saving, or getting a second good
income into the equation.
\_ How about Modesto and Gilroy?
\_ What about them?
\_ yea, sun and cisco stayed hot for a little bit longer than the
rest too during the internet bubble pop.
\_ You give two divergent examples which undermine your point.
Sun is a company which fundamentally lost its way, not to
mention lost a lot of money; its stock would have tanked no
matter what happened with the rest of the market. Cisco is
a fundamentally sound company that still has profits. CSCO
is still as high as it was at the end of 1998, and double
what it was at the beginning of 1998. If you bought in
February 2000, and had a < 5 year time horizon, you got
screwed, but even then you probably still will be OK in
the long run. -tom
\_ yes, cisco is in a much better position than sun, but
growth and margins have both fallen, and I am not sure
if these will improve anytime soon. what do you think?
are you still holding your ge stocks?
\_ I still own CSCO and have no intention of selling.
In fact, at current levels I am probably going to
add to my holdings. I haven't owned GE in 10+ years.
-tom
\_ what does the stock market have to do with anything?
everyone needs a place to live. few people need a router
and even fewer need a solaris box.
\_ what do you mean? how many of the products you use
daily were made by companies in the stock market?
\_ dotcoms? almost none. sun? nothing not easily
replaced if they vanished. cisco? same story.
my house? brrrr sure is cold outside!
\_ yea, I am sure your land line, cell phone
service, internet connection just magically
works.
\_ I had a land line before the dotcoms. I also
had net.
\_ Yes because if you lost your house you would
live on the street. There are no available
domiciles left. And the ones we have were made
by the high men of old; their art has been lost.
\_ yea, everyone needs toilet paper, that's why they
should sell for $10 a roll.
\_ You mean I could live with you? Gosh, thanks!
\_ yea, but the japanese are weird, that's why their housing
price slipped for 14 straight years and is now 40% below
the peak in 1991.
\_ I think that housing prices will fall, but what
people seem to miss is that if they fall 40% over
the next 14 years most of us are still ahead. The
same is true of the stock market. If you always buy
at the tops then you are very unlucky indeed.
\_ If they fall 40% I'm going to buy 4 or 5 of them.
I don't care what the paper value of my house is.
It isn't important since I'm not selling. Too bad
for me I didn't buy a few houses 5-6 years ago.
\_ If they fall 40% they probably won't be any
more affordable than they are now unless you
are planning to buy them cash. Rising rates
will make the mortgage payments about the same
for most people. I don't understand the
advantage to buying a house for 50% off if
you have to pay 50% more interest for it.
Yes, eventually you can refinance. Why not
just buy now then? You are either going to
wait out a fall in rates or wait out a rise
in prices. Funny how the two are linked like
that. I think it's better to get the low
rate, because prices will take care of
themselves over the long term.
\_ A lower price and higher rate means that I
have some upside if the prices rise so I can
sell and take some profit or buy more. A lower
rate at a higher price means I'm a landlord for
life.
\_ I guess it depends on if you plan to
keep the property or sell it. Most
people I know who made millions in real
estate kept it a decently long amount of
time (i.e. were landlords) and only sold
if they saw a better (income-generating)
opportunity or found themselves needing
cash for another reason (e.g. medical).
\_ Of course. I didn't say I was flipping.
Over time, real estate and everything
else goes up (mostly). Since the idea
is to grow a real estate empire and
destroy Trump, buying low and selling
high is better than buying high and
renting the same properties forever. I
see no reason for buying high at any
realistic interest rate.
\_ The people I know who own millions
in real estate are still buying
quality. It's the same as with
stocks. Low or high, the key is
to buy quality and keep buying.
The cycles of the market become
irrelevant over time. A woman I
know casually lost more in a quarter
of investing than I make in 2
years. She keeps buying, though.
Why? She's been buying for the
last 40 years is why. Same with
her real estate. Sure, some times
are more ideal than others, but
in general you play the game or
you don't. It doesn't pay to sit
out (time the market). You might
lose some battles, but you will
win the war. Your ideal situation
(falling prices) may never
materialize. What if prices fall
10%? Is that the bottom? 50%?
What if you buy at 50% off and
they fall to 75%? You're still
hurt. --dim
\_ In stocks, the woman is doing
dollar cost averaging (investing at fixed
intervals). In buying a house, most people
only have one or two houses, so the point
of entry is important.
\_ If you only have one house you aren't an
investor, so don't worry about it. The
person above is talking about starting a
real estate empire. Real estate investors
buy low and buy high. The typical homeowner
shouldn't care. He's buying a place to live.
\_ If he is talking about big investors,
his generalization to stocks is even
less true. Warren Buffet buys low and
hold and hold. He doesn't buy high.
Dollar cost averaging applies to small
investors who aren't confident in what
they are doing. As for real estate,
I know people who own millions worth,
and I also know they will laugh at you
if you think buying high is good.
\_ The motd is the only place you'll get
financial "advice" telling you that
buying high is good.
\_ Buying high is good as long as you
can sell higher.
\_ Buffett is buying all the time. He
didn't stop when the market got high. He
just had to work harder to find value. In
any market there is something worth
buying. That's why I say 'buy
quality'. Buying low is better than
high. No one is disputing that.
Investors don't time the market. They
look for the right stocks/properties
to buy. Many would've told you the
real estate market was at a top a few
years ago and yet it wasn't. When you
buy a quality stock/property you come
out ahead no matter the prevailing
market at the time you bought it. If
your friend the investor is out of
the market now then when will he
reenter? It's easy to miss entry/exit
points. It's better to just keep
buying - high or low. Your implication
that DCA is for people who don't know any
better is ridiculous. People DCA
because the alternative it to put
your money in a CD. It's better to
buy equities with it whatever the
market conditions.
\_ CD is the alternative? huh?
There are so many things you can
do like long term bonds, short
term bonds, municipal bonds,
foreign bonds, REIT, option
hedges, shorting, utilities,
TIPS, commodities, infrastructure,
foreign stocks, emerging market
stocks, etc. No, it is not
"better to buy equities whatever
the market conditions".
\_ foreign stocks are equities,
you know.
\_ Lots of research (and experience)
proves you wrong. You might
shuffle your mix, but if you
stop buying equities altogether
at some point then you are an
idiot. |
| 5/19 |
|
| csua.org/u/e9a -> www.businessweek.com/magazine/content/05_51/b3964052.htm That's the sound of the air finally leaking from the real estate bubble in Loudoun County, Va. Since 2000 it's been the nation's f astest-growing county, where eager homebuyers always seemed to outnumber happy sellers. Bob Semmens, a 60-year-old retired pressman, has heard that sound. After he offered up his 3,000-square-foot colonial, with three acres and a swi mming pool, in early July for $759,000, he sat back to wait for the fren zied offers. A year before, houses had remained on the market for just 2 0 days and were snapped up in bidding wars. But "very few people were ev en coming out to look," Semmens recalls. After four months, he was about to take the house off the market until next spring. But then he struck a deal -- for $620,000, an 18% price cut. Semmens rues his bad timing: " Just at the time I was getting the house on the market, everything reall y started to slow down." By October, agents had 2,908 existing Loudoun houses on the market, an in crease of 127% over a year earlier. The average time on the market had c limbed 62%, to 42 days, since the fall of '04. And in just two months, f rom August to October, the median sales price for houses dropped from $5 06,100 to $480,000. In kitchens and coffee shops from Purcellville to Le esburg, anxious homeowners swap stories about a market rapidly going sof t: The real estate agent who gets 10 to 15 e-mails a day from developers now offering price cuts of $10,000 or more to move new houses. The sign installer who's putting up three "For Sale" signs for every two that he takes down. What's happening in Loudoun is a rapid shift in psychology -- a classic s ign of a market turn. The buoyant optimism that fueled speculation and e xpectations of ever-rising prices is now succumbing to the fear of being left standing when the music stops. Real estate, the hottest play of th e century in Loudoun, is rapidly cooling. The same signs of a slowing market can be seen in hot spots across the co untry, from Boston and Miami to Phoenix, Las Vegas, and San Diego. Natio nwide, a leading indicator for housing -- sales that are pending but not completed -- declined 32% in October from September, the National Asso ciation of Realtors reported on Dec. Many other overheated areas could suffer even larger price drops than Lou doun County. Some, like Boston, lack the rapid growth in jobs to support rising prices. In Phoenix, high prices and cheap land have sparked a co nstruction boom that's beginning to deflate the bubble. Other areas, suc h as Las Vegas and Florida cities like Miami, have seen rampant speculat ion. "If a significant portion of demand is speculative, that can evaporate very quickly." FROTH SUBSIDES Speculation is swinging the market in Loudoun as well. Underlying demand is strong, with families flocking in for jobs and well-regarded schools. But the recent froth was churned up by investors convinced that housing supply can't keep up with demand. Now, investors' scramble for the exits is creating problems for owners like Omar Singh, 29, owner of a trucking co mpany in Herndon. His townhouse in Sterling has been on the market for $ 525,000 since October. He's hoping to hold out without cutting his askin g price until April. That Loudoun could continue to balloon through the 2001 stock collapse, S eptember 11, and 12 Fed rate hikes is a testament to its resilience. Loc ated in the shadow of the Blue Ridge Mountains some 50 miles from Washin gton, Loudoun has accommodated tract houses and mansions alike without t urning into a crowded suburban grid. Now, the stock of houses on the market is at a four-year high. At Metropo litan Title Insurance Agency in Leesburg, closings dropped from 30 in Oc tober, 2004, to just 10 in the corresponding month in 2005. Letty Mallery decided to put her historic four-bedroom house in quaint do wntown Leesburg on the market in June for $1 million after a nearby home drew a megaprice in April. But by the time she and her husband, John, had spruced up the home for sale, "t hings had cooled off," she said. The Mallerys already have bought a smaller house near the ir grandchildren in nearby Berryville. Whatever price the stately 104-ye ar-old house fetches, the couple can console themselves that they bought it for just $76,000 in 1976 as a fixer-upper. Loudoun homeowners who arrived later can take comfort in the area's econo mic fundamentals. The county is pinning high hopes on the Howard Hughes Medical Institute, which next year will open a research facility that co uld attract other bioscience organizations. New hotels and transportatio n services tied to nearby Dulles International Airport will let more Lou doun residents live near their work. With 10% of the county's workers em ployed in construction -- vs. Loudoun's real estate community insists the market is merely reverting to a more normal state. "We're coming back to more of a balance," says Kar en Overheu, a Long & Foster Realtor with listings in Loudoun County. Compare up to 4 Free Refinancing Offers Homeowners - reduce and consolidate your debt here! Comparison shop for mortgage quotes, refinance quotes and home equity loan offers. Online Training - "Managing Product Profitability" Product and marketing managers can improve the performance of their products and marketing plans by understanding financial concepts & practices with this unique web-based tutorial. Columbia Business School Executive Education Are there better w ays to drive growth for your company? 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| csua.org/u/e9c -> www.boston.com/realestate/news/articles/2005/12/09/sellers_chop_asking_prices_as_housing_market_slows/ The Boston Globe Sellers chop asking prices as housing market slows Cuts of up to 20% are now common as analysts see signs of a 'hard landing' By Kimberly Blanton, Globe Staff | December 9, 2005 Boston-area homeowners trying to sell their houses are sharply reducing a sking prices -- in some cases, by $100,000 or more -- in response to the sudden slowdown in the real estate market. Demand for single-family homes has declined as prices have risen in recen t years and interest rates have begun to climb, causing the number of pr operties on the market to pile up. The median price of a single-family home in Massachusetts has dropped 7 p ercent in the past two months, to $349,000 for sales that closed in Octo ber. But reductions in asking prices of 10 percent or 20 percent are now common in both high and moderately priced neighborhoods, according to r eal estate agents and listings of homes for sale. In suburbs like Tewksbury and Hopk inton, homes originally listed for around $500,000 have been slashed to the low $400,000s. There's no way of knowing, but what we're getting is more clues that you've got a decline in prices un derway. Agents said price cutting began last summer but accelerated in the past t wo months and is far more frenzied than in 2004, a year of record sales volume. Today, homeowners in no rush still have the option of letting th eir listing expire, unsold, and putting the house back on the market in the spring when brokers hope conditions will improve. But those who need to sell quickly -- couples in the midst of a divorce, employees who are relocating to another region, or owners who are purcha sing another home, for example -- may have no choice but to entertain of fers they would have scoffed at months or even weeks ago. Last February, Gary and Susan Kazmer were confident of selling their Foxb orough home for $949,900. He had landed a high-level job in Manhattan, a nd the couple planned to relocate their three daughters during the summe r to a house they purchased in Mendham, NJ, with a bridge loan. They built the Foxborough house on a pond in 1997 and filled it with extr as: two marble fireplaces and hardwood floors with dark cherry borders. But it attracted little interest at that price, and Gil Campos of Re/Max Real Estate Center in Foxborough lowered the price to $899,000 in early August. Since then, it has been reduced four times, to $800,000. The Kazmers' limbo ended this week, when they accepted an offer, which Ca mpos declined to disclose. But, he add ed, ''Once you're in that price-reducing mode, all the vultures are out, the people looking for a deal. Some houses are now listed below what buyers paid a few months ago for a similar house, making it very difficult for real estate agents to estima te an asking price for clients. In September, Steve Levine of Re/Max First Choice in Northborough apparen tly priced one client's house right, at $712,000. It sold ''within days" of putting it on the market Sept. But currently, two simil ar houses are for sale in the same area, at $689,000 and $699,000, he sa id, and ''those aren't moving." Moderately priced homes are feeling the brunt of the price squeeze, accor ding to an analysis of MLS listing data by Cambridge broker Bill Wendel. Statewide, 38,418 houses had priced reductions between Jan. But the number of price reductions on homes between $500,000 and $1 million increased by 36 percent. One price segment that ''jumps o ff the page as soft," said Wendel, is the $500,000 to $600,000 price ran ge, the fourth most active segment of the single-family housing market. It had 1,258 more markdowns, up 40 percent from last year. Coldwell Banker agent Egor Evsiouk said many househunters have walked thr ough his client's spacious 1970s Colonial in Tewksbury, which needs ''co smetic updating" but abuts state conservation land. Since late July, the Willants have cut the price by $100,000, or 20 percent, to $429,000, ba rely above the town's assessed value for the property. The house is an ''albatross around my neck," said Elsie Willant, creating so much stress she developed an inflamed sciatic nerve that has immobil ized her. In the midst of separating from her husband and still grieving the death, years ago, of her oldest daughter, she is anxious to ''move on" and buy a place in Maine, closer to her second daughter. Willant said they received one ''ridiculous" of fer of $380,000. com/business/specials/realestate/ Copyright 2005 Globe Newspaper Company. |