We all watched the housing market go over the edge in late 2007 when rising inventory was greeted with a tremendous credit crunch. For the next 18 months, we watched prices fall until lenders reduced the supply on the market to match the weakened recessionary demand. The banking cartel's unwritten policy of restricting supply in combination with a plethora of government props has stabilized home prices temporarily; however, with the ongoing failure of loan modifications, the distressed properties must be sold, and the burgeoning inventory threatens to undermine market stability.
In a sign that the housing market has taken another turn for the worse, a new report shows almost a quarter of all home listings in the U.S. had at least one price reduction in June.
The price cutting is widespread too. The report, released Wednesday by residential real estate tracking firm Trulia, shows 21 of the country's 50 largest markets cut prices on at least 30% of their listings, up from 10 markets in May. (See pictures of Americans in their homes.)
Minneapolis led the way, with 40% of its listings registering at least one price reduction. This was followed by Milwaukee, Dallas, Boston, Baltimore, Phoenix and Memphis, which all slashed prices on more than 32% of their listings.
"Sellers are feeling the heat this summer as the economic recovery simmers down and home inventory levels climb," said Pete Flint, co-founder and chief executive of Trulia, in a statement. "We're seeing more sellers reduce their home listing prices to attract potential buyers." Housing inventory rose 5% between April and July.
Moreover, waning consumer confidence, continued high unemployment, fears about a double-dip recession and a volatile stock market are all shaking buyer confidence in a possible housing-market recovery. "It's the perfect storm for creating less demand," says Ken Shuman, a spokesman for Trulia. "People are nervous." Recent housing data, including sharp drops in pending home sales, housing starts and mortgage applications for new home purchases, have all served to fan those fears. (See a PDF of housing price reductions.)
Probably the biggest factor influencing sales recently has been the federal homebuyer tax credit. The credit was particularly effective in bringing first-time homebuyers into the market. But now that it's over, move-up buyers are having a tougher time selling their existing homes, since the entry-level buyers have all but disappeared, says Alex Barron, founder and senior research analyst at Housing Research Center LLC. Under the federal tax-credit program, a home had to be purchased by April 30 in order to close by the June 30 deadline. "The whole market has slowed down anywhere from 30% to 40% across the country," says Barron. "When supply exceeds demand, you have to lower the prices."
Although the average price cut, according to the Trulia report, was 10%, some markets saw significantly bigger reductions: Detroit slashed prices by 26% on average, Las Vegas dropped prices by 15%, and both Miami and Phoenix saw average cuts of 13%. The total dollar amount slashed from home prices in June was $27.3 billion, the report said. (See high-end homes that won't sell.) ...
I got this email recently from a reader describing their experience buying a home in LA:
We've spent the last months helping my son buy a house in LA, focusing on specific micro-neighborhoods ....
We paid cash.... The details of what we bought aren't important, but what surprised me was how broken the entire market is.
Very large quantity of houses at some stage of foreclosure not proceeding to any resolution.
Very few listings are real listings anywhere close to market prices. Short sales at prices that are absurdly low (trying to solicit bids) or too high ( lender-approved but above market ).
The relatively small number of properties priced at market in the under 400K price range sell very, very quickly if they don't have real issues like foundation, drainage, substandard unpermitted construction.
Lenders are horribly inept at disposing of properties and the agents they hire do a crappy job. We saw a couple of houses where the stuff they had done to fix the house had substantially reduced the value ( covering up wood floors with crappy carpet or pergo, installing crappy appliances, painting over beautiful wood. )
Most agents are floundering badly and are clueless about what's going on.
... Buying with cash allowed us to close on a property about 10% under market when we found an anxious seller.
It's my gut feeling that everything above the entry level market ( under 450K) is due for another step down. Imbalance between supply and demand.
Commentary: The economic recovery is just an illusion
July 20, 2010 -- Robert P. Murphy
NASHVILLE, Tenn. (MarketWatch) -- Economists and financial analysts are currently arguing whether the economy will experience a "double dip," a recession followed by a short recovery, followed by another recession.
Some think the worst is behind us, and that output and employment will slowly but steadily increase during the next few years. Others believe we are headed for another crash. The lessons from the last business cycle favor the case for pessimism.
It has been said that if one laid all the world's economists end to end, they wouldn't reach a conclusion. Even so, a surprisingly large number of economists now agree that then-Federal Reserve Chairman Alan Greenspan made a tragic mistake. After the dot-com bubble burst in 2000, Greenspan opened the monetary floodgates.
Specifically, Greenspan allowed the "monetary base" to increase 22% from June 2000 through June 2003. The monetary base, also called "high-powered money," is the base upon which bank loans are pyramided, expanding the total amount of money held by the public.
During the same three-year period, Greenspan cut the federal funds rate -- the interest rate commercial banks charge each other for overnight loans -- from 6.5% down to 1%, the lowest federal funds rate in more than 40 years.
The rationale for Greenspan's easy-credit policy was to provide a "soft landing" for the economy in the wake of the dot-com crash and Sept. 11 attacks. And for a while, it seemed he had succeeded. People marveled that housing prices continued to rise, even amidst the recession of 2001. Indeed, people referred to Greenspan as "the Maestro."
In retrospect, economists across the political spectrum recognize the role Greenspan's Fed played in fueling the housing bubble. The more cynical analysts argue that Greenspan's policies weren't "easy" at all and merely postponed the inevitable day of reckoning for the economy. Rather than gritting its teeth and suffering through the necessary adjustments in the early 2000s, the nation got an injection of artificial credit that masked the underlying problems with a euphoric boom.
The housing market eventually collapsed, as all bubbles do. At this point, Ben Bernanke was at the helm of the Fed. Unfortunately, he got his policies out of Greenspan's playbook, except Bernanke doubled down.
Rather than pushing short-term interest rates down to 1% as Greenspan did, Bernanke has pushed them down to almost zero percent. And in contrast to Greenspan's 22% increase in the monetary base during a three-year period, Bernanke increased it by 94% in one year.
The unprecedented monetary stimulus from the Fed, in conjunction with the massive deficits of the federal government, did succeed in partially re-flating the stock market and stabilizing home prices. Time magazine named Bernanke its 2009 Person of the Year, and Obama administration officials are taking credit for nipping the Great Recession in the bud. Yet the parallels with the Greenspan episode are clear.
It makes no sense to "rescue" the economy by having politicians borrow and spend trillions of dollars. It also makes no sense to fix the horrible mistakes of the housing-bubble years by having the Fed create electronic money out of thin air to buy "toxic assets" from investment banks that would otherwise be insolvent.
The alleged economic recovery is unfortunately just as illusory as the prosperity of the housing-bubble years. It is disturbing to consider that if this is the calm before the storm, then the pending crash will be painful indeed. In the current debate on the direction of the economy, those predicting a "double dip" have the stronger -- if more depressing -- case.
Robert P. Murphy is a senior fellow in Business and Economic Studies at the California-based Pacific Research Institute.
I don't have much to add to that brilliant synopsis.
When you add it all up, it certainly looks as if the housing market is in for a rocky fall and winter. But Irvine is different, right?
Another peak buyer and another Palladio Properties LLC flip
This property was purchased on 8/22/2005 for $740,000. The owner used a $592,088 first mortgage and a $147,912 down payment. He obtained a $100,000 HELOC on 7/11/2006, but it isn't clear if the owner ever used that money. He stopped paying last spring, and after about 12 months, the foreclosure went forward.
Foreclosure Record Recording Date: 11/17/2009 Document Type: Notice of Sale (aka Notice of Trustee's Sale) Click here to get Foreclosure Report.
Foreclosure Record Recording Date: 08/14/2009 Document Type: Notice of Default
The operators of the Palladio Properties LLC investment fund appear to know what they are doing. They have been consistently been targeting 10% to 15% profit margins depending on renovation expenses, and their resale pricing is within market comps. Their property turnover is probably good. I have seen many of their flips recently.
If you would like to learn how you can get involved with trustee sales, please contact me at sales@idealhomebrokers.com.
Home Purchase Price … $596,000 Home Purchase Date .... 4/30/2010
Net Gain (Loss) .......... $70,460 Percent Change .......... 11.8% Annual Appreciation … 71.5%
Cost of Ownership ------------------------------------------------- $709,000 .......... Asking Price $141,800 .......... 20% Down Conventional 4.59% ............... Mortgage Interest Rate $567,200 .......... 30-Year Mortgage $140,030 .......... Income Requirement
$2,904 .......... Monthly Mortgage Payment
$614 .......... Property Tax $333 .......... Special Taxes and Levies (Mello Roos) $59 .......... Homeowners Insurance $203 .......... Homeowners Association Fees ============================================ $4,114 .......... Monthly Cash Outlays
-$696 .......... Tax Savings (% of Interest and Property Tax) -$735 .......... Equity Hidden in Payment $243 .......... Lost Income to Down Payment (net of taxes) $89 .......... Maintenance and Replacement Reserves ============================================ $3,015 .......... Monthly Cost of Ownership
Cash Acquisition Demands ------------------------------------------------------------------------------ $7,090 .......... Furnishing and Move In @1% $7,090 .......... Closing Costs @1% $5,672 ............ Interest Points @1% of Loan $141,800 .......... Down Payment ============================================ $161,652 .......... Total Cash Costs $46,200 ............ Emergency Cash Reserves ============================================ $207,852 .......... Total Savings Needed
Property Details for 184 RHAPSODY Irvine, CA 92620 ------------------------------------------------------------------------------ Beds: 4 Baths: 2 full 1 part baths Home size: 2,000 sq ft ($355 / sq ft) Lot Size: n/a Year Built: 2005 Days on Market: 46 Listing Updated: 40329 MLS Number: S619238 Property Type: Condominium, Residential Community: Woodbury Tract: Wdch ------------------------------------------------------------------------------
Gorgeous Detached Home in Woodbury. Main floor Bedroom & Bath. Mater Bedroom with Retreat area & Balcony. Recessed lighting & pre-wired Surrounding Sound Speakers in Living room. Planation Window Shutters. Move-in ready.
Another listing before it hits MLS. It is a 2bd/2.5ba 1,197 square foot condo in Laguna Niguel. It is priced at $299,900. It is a Plan E in the Milano tract in Rancho Niguel. This home is not yet on MLS but will be in 7 days.
If you want to learn more about this property, please contact us:
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