patrick.net

Sorry to be off-topic as usual, but I have to mention this.
Warning : Purely anecdotal.

UNDERBIDS HAVE STARTED AND BEING ACCEPTED IN CUPERTINO.

Over last 2-3 weeks, this has been mentioned by more than one RE agents to me. During an open house, the agent's assistant who was there mentioned to me that "We have an offer, but you can still make your offer. If you want you can try offering less than list, you know". Some houses, which were being sold as "AS IS", the sellers have accepted underbids by 10-15K.

Those not in BA may not realize the significance of this. The underbids are small, and are from ridiculously high valuations. Still, it is a major milestone. I have no intention to buy in Cupertino. But just the possibility of seeing this sacred spot in BA get in trouble is too exciting.

Face Reality can tout the gains in median price. Even the RE agents reports on realtytimes.com and sanjoseproperty.com give the reason for this as more activity in high end market. If Larry Ellison's estate is the only thing that gets sold in a month, the median for that month would be over 10M. Doesnt mean the 50+ year old sh*tboxes in Cupertino are worth equivalent.

I am going to drink a beer now. Folks, if Cupertino median goes down by 20% a year from now, then I will sponsor the beer for the next blog party.

Shouldn't the next blog party happen before another year goes by? Free beer or no free beer?

National Public Radio's mundane & bland reporting on any economic catastrophe will make you feel that everything is fine. As long as they keep focusing on peoples inconsequential personal issues, the real news that matters will continue to be passé. This is how they play.

The future? Lou Dobbs takes over the helm at NPR, and I no longer have to listen to all their mundane garbage any more.

My future's so bright, I have to wear shades.

Hey ya'll, I'm back.

There are segments of Southern Utah and Nevada that I'm willing to call a dystopia. I saw huge swaths of cookie cutter fake stucco homes squeezed 10 to an acre outside of LV, Cedar City, St. George, and Kanab. These homes border about 50 miles of nothingness. LV has crazy numbers of condos in construction. I definitely saw those with FAB and Bap33's section 8 visions dancing in my head.

As for the vacation. Very nice. I had my personal best New York Strip in a little place between Bryce Canyon and Capital Reef. I would highly recommend the Cassidy Arch hike in Capital Reef and Willis Creek hike off of Skutumpah Road.

Robert Cote,

I think exurbanism will develop in a way quite different from what you project. Telecommunication and globalization has made parts of India and South Carolina extensions of Silicon Valley, but I think exurbs as we know them has hit its high watermark for the time being. I hear more and more about people who are sick and tired of dealing with the grind of exurbs.

Also, if we'd look beyond certain parts of America (namely LA, which basically a coreless suburban clump), I think most of the world find urban living preferable to suburban or exurban living. As long as the government can provide superior public services in the cities, as is the case in many European cities and which is certainly the case in Asian cities, people seem to prefer them. There's nothing innately preferable about the suburban lifestyle. I maintain that it is largely a matter of social conditioning.

LiLLL,

I'm sorry you've been having email problems. I swear I am not responsible for them. Believe it or not, I'm not that petty, and I don't do hateful and destructive things just because I disagree with another person. I didn't do it against others here when I had much louder and more substantive disagreements with them, and I certainly wouldn't do it when our disagreements essentially amount to molehill policing policy differences.

Furthermore, I haven't had internet access for the last two and a half weeks. I just deleted 2500+ pieces of junk mail in my primary email box.

astrid,

Welcome back! When you're rested up tell us all about your adventures. I've often wondered why homes in LV (or St. George) would need to "shoe horned" 10 to an acre when the next nearest civilization is Area 51?

————–said: I don’t understand how sales can drop so significantly yet ————–the prices are still rocketing forward. Doesn’t supply and dema
————–say that if demand is low, prices drop? Greedy bastards.

In the northwest suburbs of Detroit, this phenomenon has been happening for more than a year and a half now. It seems like a standoff between buyers and sellers

It is a combination of factors. Price reductions are slower to show up in data than inventory rises because inventory numbers are fairly immediate and sales data comes some months later. There is also the lag imposed by seller psychology, or the "stand off" if you will. I refer back to "mental accounting" again. It is natural for a seller to mentally "book" a price/profit at some known level, say what their neighbors sold their similar house for. They then use that as the point of reference, seeing anything less as a "loss", even if it is still a huge gain. They will continue to do this until they make the mental leap to "rebooking" everything in their head into different accounts. This usually involves some more pressing alternate use of the gains, for something like retirement or perhaps college for children/grandchildren. At that point, they quit seeing not getting the peak price as a loss but instead getting the best price possible as a gain, even though it's a lower price.

And at the risk of inciting yet another stickiness argument. These are some of the mechanics of price stickiness. There really is no debate about whether RE is sticky; the only question is how much so.

RC,

The Cotean Dystopia is what happens when we don’t force people into smart growth new urbanist crime crib rabbit warrens.

Your Cotean arguments have more force without the subjective commentary. The logic of exurbanism is solid enough to not need to resort to lefty/righty kind of prattle. Not all exburbs are Walden, not all Metropolii are Manga.

MISH had a great article about poor sub-contractors getting "stiffed" in AZ. Some of the workers haven't been paid in up to 5 weeks. Some are no longer showing up. You knew this had to come. I feel for these guys, really I do. The "sub" claims the lack of cash flow was caused by a dispute between the general contractor and the sub? Well, whatever. After at least 6+ years of THE biggest RE orgy to end all RE orgies you can't come up with these poor guys 2 weeks back pay? I don't know how "dystopia" ends but I'm pretty sure this is how it starts.

SP,

I can also confirm the same. Many of the homes we wander through are similarly "just priced as a target". I've been knocking more like 30% off (I'm trying to anchor), and I still get over half the agents practically begging me to offer. What I can't be sure of is whether they actually think that lowball offers might be accepted, or more that they'll use any offer to try to get follow-on offers from others who've expressed interest but are hesitant.

Of all the "Top 25" cities on ajh's list that gives us the most insight as to what "An Ameican Dystopia" would look like please visit # 16. Yep, Manila. Stanley Karnow (recognized S.E Asia expert) wrote "In our Image" about the westernization of the Peoples Republic of the Philippines. Karnow spent most of his adulthood in S.E Asia. Because we share a cultural overlap that exceeds 80% (from pizza to the Rolling Stones and a tolerance for political corruption) I think it's safe to say that LA will look a lot like Manila in about 5 years. 10 tops.

Oh, for those that haven't had the "pleasure", Manila is a crime/drug infested, polluted and corrupt nightmare where infrastructure is collapsing under it's own weight. Your only prayer is for a layover of two hours or less.

newsfreak,

I'm sorry to hear about "the check". I can relate. Both my father and brother worked in "the trades" and well recall their talking about doing the "sprint to the bank" to make sure THEIR check cleared. What amazes me is after all of this unprecedented market expansion that these guys are STILL living hand to mouth? What would it take for them to be financially comfortable?

hey astrid,
Welcome back. Did you get a chance to check out Zion? One of my faves.

SP,

LOL! Whatever else happens today (and it's still plenty early) that post made my day!

"at which point they admit there are no other offers"

"I won't play in a multiple offer situation"

And of course the ahem, (* - interesting aside:

Damn!

RE: Dystopic model cities, how about one with horrible congestion, pollution, overpriced RE, and a corrupt mayor? That would be SAN JOSEBAG.

skibum,

(From previous thread) but definitely interesting enough to follow up on, you'd mentioned that there was this "rumor" this "leak" that realtors are actually encouraging the MSM to do as many "doom and gloom" articles as they please to intentionally "crash the market" to stimulate some transaction volume?

Now, ahem, I'd never ask you to reveal your source but uh, just between you me and the fence post..........

DinOR and newsfreak,

The good news is that German tourists are still #1 interruptors of desert solitude. The two hikes I highly recommended provided complete solitude. We were probably the only hikers on the trails for those days.

We counted 30+ deer on the road, including at least 3 near misses. 5 suicidal rabbits got their wish with 10X that number in near misses. One medium distance encounter with a rattle snake.

I'm kind of ambivalent about the 10 to an acre shitboxes - at least there's no lawn to water. There's also tons of $500K+ houses on less than an acre land --- there is no industry there except cleaning up after German tourists and working for the government.

skibum,

We hiked up Angel's Landing and Taylor Creek, plus a couple shorter hikes. Kolob Canyon is amazing at sunset. We didn't hike up the narrows though, since my boyfriend didn't want to hike in wet sandals.

newsfreak Says:

the Great White Throne

yup, awesome sight.

astrid,

that is so true. what's up with all the german tourists at every single national park?

stcamp,

When you say 2 years is that 23 months and 29 days or......... is that 24 months and ONE day?

"Gee hon, who's that a knockin' on our door"?

"It's the realtwhore and he says if we list and sell now not only will we get multiple offers but that the money will be TAX FREE"!

Arghhh! Why me Lord, why me?

DinOR Says:

(From previous thread) but definitely interesting enough to follow up on, you’d mentioned that there was this “rumor” this “leak” that realtors are actually encouraging the MSM to do as many “doom and gloom” articles as they please to intentionally “crash the market” to stimulate some transaction volume?

Not a rumor, but a conspiracy theory. To me, it makes perfect sense. Sales have been slowing for months now, and median prices are still going up. Until recently, this has been spun by the MSM as "everything is going along fine, look at the new record prices!" It seems almost instantaneously, the articles are all doom-and-gloom. Here's a good example. From the mercury news website RE section, 6/8 headline stories are, literally cut-and-paste from the headlines section:

"More signs of slowdown in housing"
"Housing market slowdown in forecast"
"Foreclosures may jump as ARMs reset"
"Even foreclosure hawks hurt by sagging real estate market"
("Farrell buys house amid rumors of his engagement")
("A place for entertaining above Almaden Valley")
"Housing's engine -- low rates -- losing steam"
"With Fed rate hike likely, mortgage rates up"

Aside from the fascinating stories about Colin Farrell's RE/love life or the Almaden Valley fluff piece, every article is negative. I interpret this as the MSM/NAR mouthpieces saying, "hey you dumb seller, lower the damn asking price so your realtor can make their commission."

I think the German tourists (to less extent Frenchies) treat the Southwest like Americans treat Europe. The Colorado plateau is not cool enough for American college students and new grads, but probably mindblowing for Europeans. I can see the same scenario playing out in Europe in reverse.

Saw lots of columbines and maidenhair fern in Zion. We were too early for wildflowers in Cedar Break though.

newsfreak,

Oh you're right. I DO "luv" it.

I'd have to admit though, the NAR/CAR have had absolutely NO success motivating the "buy side" so why not put the fear of God into the "sell side"? One thing I did learn in the service is that if you take THE most wild, outlandish and improbable rumor it somehow winds up being the one that comes true! Because the Cartel is all about the Cartel, this makes perfect sense. Their very future hinges on transactions, volume dries up, revenue dries up. What do they care if you have to short sale your 599K townhome? Watch, I'll bet the "new trick" will be to get Mr. and Mrs. FB into their new (more reasonably priced sh@tbox) while their credit is still tolerable, then either turn around and do the short sale or let their old home slide into foreclosure! (It'll work until lenders catch on) then watch volumes REALLY dry up. Realtors (like mortgage brokers) live from month to month so it's all about surviving the game until next month. When next month comes, well we'll figure that out when we get there.

skibum,

What makes this even more probable is that the papers will eat this stuff up! I have friends that are reporters and I've been solicited for "dirt" in the past. I don't think the average subscriber has any idea how hard a reporter has to work to get someone (with intimate knowledge) to say;

"Yeah, I knew so and so and he is total dirtbag"

Almost NEVER happens! Getting someone to go on record is tough! Now all of a sudden their getting a steady diet of "inside dirt" on builders, lenders etc. If they have to take one on the chin themselves? Hey whatever, just let's get the commission machine primed and running again!

John M,

Thanks for that great article link! I have "gone to blows" w/Blanche Evans before. After years of mindless cheerleading she finally wrote an article in 2005 that acknowledged there just might be a bubble. Gee, ya think Blache? (Startling make over btw, she used to be a red head). Anyway shortly thereafter she published a complete 180 retracting any possible presence of a bubble. Now she is back to "an alleged bubble".

After years of sucking up for the revenue the papers are finally "growing a pair" (albeit miniscule) and she doesn't like it! The papers are coming after realtors Blanche? Oh give me a break. The MSM did their level best to keep the lipstick on the pig up until at least 2006! Only AFTER it there was undeniably a problem did they reluctantly acknowledge it.

If her theory is in fact even remotely accurate why have Business Week, Marketwatch and so many other periodicals jumped on the bandwagon to persecute poor innocent realtors? Uh, when was the last time you saw an ad for a "cute 3/2 with huge backyard" advertised in Business Week? Please Blanch, isn't it just possible that what they're printing is true? Not very gracious about they're turn in the barrel are they?

T Lynch,

Hey btw, great having you on board and remember "Friends don't let friends buy houses" (until they're back into a lower orbit).

I hate to say this but screwing people over is the "Real Estate Way" not the American way! We've discussed at length here (and you would have no way of knowing) that virtually ALL other industries have infinitely more regulation than real estate. Your kids t-ball coach went through more back ground checks than someone handling a 1.4 mil transaction. Pawn shops have more scrutiny than realtors. What's odd about this uneasy arrangement is that buying a home is supposed to be the "biggest investment in a person's life" and yet we continually entrust that considerable transaction to GED grads that are in cahoots with one another. This "round table" is about more than comiserating about high prices. We're honestly trying to reform an age old system of abuse. At least I hope so.

T Lynch, George,
I'd add to the points George made about median price stickiness a couple of other things: potential buyers are probably taking the mentality of planning to spend at a certain price point (more likely, spend at a certain monthly payment level). They would therefore simply buy a nicer property at the same price they wanted to originally spend, rather than follow similar quality listings downward with the market. Second, and maybe less importantly, median sales prices are simply lagging indicators because closings occur 2-3 months after contracts are signed - a built-in delay in the use of that measure as an indicator. That's why traditionally the new home sales numbers are seen as slightly more leading-edge, as they are reported at the time of pending sales.

DinOR,
On the topic of your current rant, you'll LOVE this Realty Times article:

http://realtytimes.com/rtcpages/20060616_perspective.htm

From the NAR machine, direct advice to the seller (to paraphrase): "Lower your asking price, you idiot!"

skibum,

"rather than follow similar quality listings down with market"

Wow! That really goes hand in glove with the article you linked btw! Peter P and I sort of touched on this a few threads back and it may be another huge factor in the evaporation of sales. Peter felt last year that a "so so" TH in a "so so" neighborhood might not be all THAT bad. Now he (and others) have the option of looking at SFH's and even at that he (as have I) have become more "finicky" about what we're willing to look at. I mean we've waited this long, what gems will another month's wait bring and for the same dollar amount?

newsfreak,

I think plague/pandemic is an ever present threat. But I also think we are living in the midst of what will be viewed historically as a "biogenetic revolution". It is also possible that technology to control or prevent such pandemics increases faster than population density growth. In my vision of a dystopian future the problems aren't technological or logistical in nature. I think we'll engineer food sources, biological health, and alternative energy. The problems instead will be things "humanistic". I'm pretty sure we can adapt our technologies and sciences to support many times today's population even with far less energy and usable land. I'm not so sure that *we* can adapt to living in such a world.

George,

I've made no secret that I am very much in the "hard landing camp" so what I'm about to say certainly won't suprise you.

Whatever else a person needs in life they need their dignity. And that's all I'm asking. Since I've yet to sell at the exact top after having bought at the exact bottom I'm not delusional enough to think that will happen this time either. My ideal crash would be RE at "pre-bubble" prices before the close of business today. Whaaat?

O.K since that's not going to happen I'm looking for "pre 9/11" prices with normal appreciation added back in. Inflation + 2% or whatever. I know this sounds extreme but living in Oregon isn't that different than FL. Since job/bus. prospects are few and far between so should your mistakes be. Buying outside of those rudimentary guidelines (for OR's anyway) could add 5-10 years to retirement date. I'm just not willing to do that (even though I'll probably work until I'm dead) it's the thought that counts.

Somone earlier pointed out that it's not just seller-psychology sticking things up, but buyer-psych too.

People think in nominal terms, not in real terms.

People think in numbers, not percentages or ratios.

People think in terms of cost, in this case monthly cost, not in terms of value.

This means that a buyer prepared to spend $4,000/mo on mortgage (buyers don't even think in PITI, though they should), is still prepared to spend $4,000/mo no matter how much homes drop in price all else being equal.

Unless the buyer loses a job or takes a pay cut, they'll just buy a higher-valued home which drops into their target price range. They won't go buy the home they wanted in 2004 for 30% less. In fact, they may have even saved up more $ thinking that they'd need more to buy into a rising market. The fact the market is dipping only means they get an extra bedroom, a hot tub, or a nice yard.

This explains a lot of the "anomalies" people intuitively feel about the current statistics.

SP,

Claret?

Randy, why did you put up a picture of the Utopia for this thread?

This means that a buyer prepared to spend $4,000/mo on mortgage (buyers don’t even think in PITI, though they should), is still prepared to spend $4,000/mo no matter how much homes drop in price all else being equal.

I thought pre-tax PI approximates after-tax PITI, right?

Unless the buyer loses a job or takes a pay cut, they’ll just buy a higher-valued home which drops into their target price range.

This explains median price stickiness.

newsfreak,

Cotean's visions of henry david thoreau notwithstanding, hyperdensity would save enough in energy transmission costs alone to account for most of that difference. Add to that the decreased loss of radiant energy (less heat and light required) and you could easily support enormous populations in acrology megacities. This is probably the first step towards preparing a "strain" of humans for multigenerational travel enabling interplanetary colonization.

Peter P,

;)

See that very tall glassy building in the thread graphics? I want a condo in that building. :) I bet there are trees inside the building.

I thought pre-tax PI approximates after-tax PITI, right?

Only for the first payments. The affect of T is iterative, because of the interest-shield.

Only for the first payments. The affect of T is iterative, because of the interest-shield.

I thought everyone uses interest-only loans nowaday. Why throw money away in amortization when it always goes up? ;)