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Interesting update today on the current outlook for the real estate market by the CEO of KB Homes.
NEW YORK, July 19 (Reuters) - The chief executive of KB Home (KBH.N: Quote, Profile, Research), the No. 5 U.S. home builder, said on Thursday he does not expect the overall U.S. home market to bottom out until the end of next year and that prices will not increase until well into 2009.
There are at least 10,000 vacant, overpriced houses in the LV Valley that the owners cannot sell for what they owe, because the builders can always underprice them. It will take years of gradual decline in prices to get to the bottom. Only suckers would buy now.
Fellow from KB is wrong about Vegas. New homes here are still significantly above resales...more than 10%.
Note that the article in yesterdays RJ makes the point that housing prices here have fallen very little and are unlikely to do so in the forseeable future. This is the classical CA market phenomena. A large run up is followed by a very gentle down turn with very limited demand for a period. The big guestion is how long the period. Does the continuing influx into Las Vegas mitigate that? Looks like the existing situation will continue through this year.
Gee, do you think olecapt is a realtor? Just kidding olecapt, don't get mad at me and tell me to leave, but I can't bekeive that there are still some of you out there that are still telling the same old story like this has happened before. Don't get me wrong, it's great that you do because without realtors and their spin control, no one would be buying houses anywhere.
Real estate prices have to fall as long as inventories keep climbing and sales remain flat. It's the basics of economics, supply and demand. How many sellers are getting their asking price, or even close to it. Days on the market is also climbing. Instead of getting that bump in the Spring and Summer, just the opposite happened, inventories continued to climb, leading to an all-time high. Almost half the homes in the valley are vacant because flippers and wanna-be flippers can't flip anymore. Those wonderful ARMs are gone, making it harder for those flippers and people with poor credit to get into a home. This takes a very large segment of buyers right out of the pool, especially since many of these same people are now beggining to pay the price for their actions over the last few years.
I don't sell houses for a living so I'm not as optomistic as olecapt. I also don't see any signs that point to this ending anytime this year or the next.
Since this is going on all over the country and is worst of all in the Southwest, all that California money is going to slow down as well. If they are losing money, then how are they going to bring it with them when they move here and over pay for their Las Vegas house. It wouldn't be so bad if so many Americans didn't refinance and buy and sell over the last few years. All that equity they had is gone and won't be back for a long time, making it hard for them to continue to fuel the housing market.
Gee, do you think olecapt is a realtor? Just kidding olecapt, don't get mad at me and tell me to leave, but I can't bekeive that there are still some of you out there that are still telling the same old story like this has happened before. Don't get me wrong, it's great that you do because without realtors and their spin control, no one would be buying houses anywhere.
Real estate prices have to fall as long as inventories keep climbing and sales remain flat. It's the basics of economics, supply and demand. How many sellers are getting their asking price, or even close to it. Days on the market is also climbing. Instead of getting that bump in the Spring and Summer, just the opposite happened, inventories continued to climb, leading to an all-time high. Almost half the homes in the valley are vacant because flippers and wanna-be flippers can't flip anymore. Those wonderful ARMs are gone, making it harder for those flippers and people with poor credit to get into a home. This takes a very large segment of buyers right out of the pool, especially since many of these same people are now beggining to pay the price for their actions over the last few years.
I don't sell houses for a living so I'm not as optomistic as olecapt. I also don't see any signs that point to this ending anytime this year or the next.
Since this is going on all over the country and is worst of all in the Southwest, all that California money is going to slow down as well. If they are losing money, then how are they going to bring it with them when they move here and over pay for their Las Vegas house. It wouldn't be so bad if so many Americans didn't refinance and buy and sell over the last few years. All that equity they had is gone and won't be back for a long time, making it hard for them to continue to fuel the housing market.
Inventory has now been climbing for 18 months. It has doubled and doubled again. Volume has gone to hell. Pricing has pretty much remained stable. Oh it is down 2 or 3% but that is pretty much negligible in the present economics. So where is the price drop? Don't kid yourself the RE Agents are pushing like mad to get prices down...but it ain't happening. RE Agents care about volume not price. If they can double volume with a 20% drop in price they would go for it in a minute.
I don't know where you are getting your facts from but both Los Angeles and San Francisco continue to slowly increase though there volume has also dropped a lot. SD shows some weakness...but that is about it.
Vacancy is well less than half the homes which ARE FOR SALE...not half the homes in the Valley. Over 90% of the short sales offered are locals and 60% are owner occupied. That tells you that the people in trouble are mostly over extended locals...the flippers, if there are any left, are riding it out.
Olecapt is not in the least an optimist on this subject. But Olecapt does point out that the bubble bursters are simply wrong. If it was going to burst it would have by now. So we are just going ride out an ugly market. Certainly nothing about that the makes Olecapt happy.
olecapt, for the sake of the country and the economy, I hope you are right. However I do not see how real estate is going to ride out a "gentle downturn" given poor state it is in due to many things, including median home prices far outpacing wage growth, and the days of lax borrowing drying up. Worst yet, the country still has billions in subprime loans coming due over the next several months so it is possible that we haven't seen the worst yet. Inventories aren't going down anytime soon either. At some point interest rates have to climb again as well since the dollar continues to fall further into the toilet, making it even harder for buyers. I guess that will be held off as long as inflation is in check, but how long will that continue?
These "overextended" types are the ones who fueled much of the rise in property values to begin with, so who's going to bail out the overextended in order to keep housing chugging along?
The number of short sales are continuing to climb, and are likely to keep climbing as more and more subprimes become due. These are people who helped drive the market, but won't be buyers again anytime soon due to poor credit and zero assetts.
olecapt, for the sake of the country and the economy, I hope you are right. However I do not see how real estate is going to ride out a "gentle downturn" given poor state it is in due to many things, including median home prices far outpacing wage growth, and the days of lax borrowing drying up. Worst yet, the country still has billions in subprime loans coming due over the next several months so it is possible that we haven't seen the worst yet. Inventories aren't going down anytime soon either. At some point interest rates have to climb again as well since the dollar continues to fall further into the toilet, making it even harder for buyers. I guess that will be held off as long as inflation is in check, but how long will that continue?
These "overextended" types are the ones who fueled much of the rise in property values to begin with, so who's going to bail out the overextended in order to keep housing chugging along?
The number of short sales are continuing to climb, and are likely to keep climbing as more and more subprimes become due. These are people who helped drive the market, but won't be buyers again anytime soon due to poor credit and zero assetts.
Short sale pricing is not controlled by the short seller. It is controlled by the bank who holds the mortgage. Their problem is that a lot of new build was sold and mortgaged at 120 percent of market value. The builders got their money and the buyer and their banker got the bad news. The Banks however are pricing these products at resale market...not below it. Thus sustaining the resale price point.
Can everyone hold on? Well it depends. I got 8 listings and 4 or 5 more in my pocket. Of those two will be in economic problems if they don't sell in the next year or two. And one of those is a premium product where taking a big price cut will do little good. So of my set of 12 or 13 we got two that have pressures to sell and one of those will not get anywhere cutting price.
And the banks holding shorts and foreclosures can hold out forever for all practical purposes. I suspect the banks see the same problem I do. If you cut five, ten even 15 per cent it makes very little differnce in the liklihood of selling the property. You have to cut 25 or 30% to get enough attention to get a quick sale. So you hold price and wait a year.
The buyers are out there...but many are now conditioned to wait for the break. I got one guy who is going to go most of the way to a million bills. Just rented for a year to wait for the bust. He is not convinced but thinks there is enough noise to wait a year and see what happens. When nothing does he may wait another year or jump in. If at any point any number of these buyers tire of the wait the thing will turn swiftly. Most of my sellers are buyers...going up or going down. They will buy as soon as they can sell. So even a minor uptick in buyer activity will likely reinforce and run up pretty quickly. Is that day next month? I doubt it. This year? Improbable. In the spring? Some chance...lots of pressures on buyers in the spring. But to far off and too obscured to call.
Could this go on for years? Sure. Particularly if we reach a stable inventory level. Is it likely to do so? Got me...crystal ball get cloudy past spring.
By the way a RE Agent can make a living in this market. Not as good as one would like but likely to get better as the herd thins. My wife and I can comfortable get by for years under existing conditions. But we will do very well when and if it turns.
The East Coast is in a huge slump, we have Realtors stating even the top of the re-sale listings, immaculate homes, ready to move- in condition, priced well...are on the market for weeks and weeks, weeks,weeks without a showing. Where as historically the 1st week to 3 weeks is typically where they see the majority of activity. I think I comprehend what caused the downward market, but to be honest I am confused or should I say don't understand why there are NO Qualified Buyers. Are greedy investors, banks, lenders, Realtors, etc. the root cause...by allowing individuals to buy a home that ,under normal standards would have never qualified, so therefore everybody and there brother jumped on the wagon regardless of financial ability. Prior to Sub-prime, the Realtor was always the 1st line of defense to ensure buyers were qualified and then lenders opened the doors and everyone walked in and jumped on the money wagon. Now the entire economy has been affected by ill-will. The only people have have pity for are the poor legitimate homeowners that are now trying to sell for one reason or another and cannot...so who gets screwed, because of greed... I
f unemployment is at a low, mortgage rates are lower than June 06- 6.74% -East Coast, July07- 6.37%., prices are down..., I would think this would benefit the buyer?
I don't think the main problem is not enough buyers. It's more that there are too many sellers, and this gives the buyers the impression that they can either low-ball the sellers or wait for the sellers to drop prices. It's a waiting game.
I'm just going to continue doing what I've been doing - making my house the nicest one on the block. When I do have to sell, hopefully that will be the edge I need to get the deal done as quickly as possible. I'm shocked at the way people put houses on the market - especially this market - dirty, not maintained, decades of crap piled up in every corner.
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