I haven't come across very many houses in Chapel Hill where the owners owe more than the asking. Generally, this is a good thing for the owners and for the town, but the bear in me who wants to see a return to normal home pricing would prefer to see foreclosures and strategic-defaults which would flush out all the bad debt in the system quickly. Instead, it looks like housing will be a drain on the economy for the next several years.
This was a big day for mortgage data. First: a link to CR, who today posted a graph of the negative equity populations for all 50 states; NC ranked 38th (lower rank meaning higher %age of negative equity). Overall, 23% of mortgage holders are underwater.
Case-Shiller was up again for October, as it was for September. This is both a shock given the last year and a half of consistent declines, and given the a-seasonality of the uptick. September and October are usually cooling periods where volume drops considerably from the summer month highs.
Most believe that the boost in price and volume for the past two months was due to first-time homebuyers rushing to beat the Nov 30th deadline for the homebuyer's tax credit (which was extended). This borrowing forward of future demand should depress volume until we near the April deadline. I am expecting November volume to come in very low. We'll see.
Tuesday, November 24, 2009
Friday, November 20, 2009
Not really a short sale
XXX Cheswick Ct $187 /sqft. Asking $239,900.
Today's property has a pink kitchen. Maybe that's why they feel it is worth so much.
It's also a "short sale," according to the listing.
It's asking $239,000 after having been purchased in 2007 for $250K.
Today's seller does not understand the term "short sale." A short sale is when the BANK looses money. If the seller looses some or all of their down payment, that is not a short sale. It's a bummer.
When the seller is trying to sell their house for less than what they owe on it, that is a short sale. In that case, the bank has to approve the sale and usually drags their feet for a long time. Short sales take twice as long to close as do conventional sales.
Fortunately for the knife-catcher who ends up buying this place, the bank is not losing money and will not drag their feet on closing this sale. The bank doesn't care at all if the seller looses their down payment.
Todays owner put 10% down on a $250K purchase price. The took out $200K from "Florida Corporation" and another $25K HELOC from National City Bank. The owner stands to loose $10K of their $25K down payment. This house is only selling at a 4% discount from its 2007 price. The $10K loss, however, is assuming they get their asking price. That's also ignoring the 6% cut that the realtors will take -- 6% of 240K is 14.4K. Holy cow. 4% depreciation + 6% realtors fee. That's 10% of the price of the house. If the sellers get their asking price, they will lose 100% of their down payment.
100% loss. That's a staggering figure.
Fortunately for the bank, they at least had 10% down. 20% down is the norm, but 2007 was a different era.
6% goes to Realtors. Gee. That's 60% of the down payment for these sellers. 60% seems awfully high. Are Realtors really worth that much money?
CR links for the day
I love CalculatedRisk. If you're reading my blog, and you're not reading CR, I'd recommend doing so. Because CR posts so much content so frequently, keeping up with his blog is a full time job. So the service I'll offer is to link to relevant CR stories.
It's only 8 am on the west coast, but already CR has had two terrific posts.
1) North Carolina unemployment is now at 11%. It is very near it's all time high. CR has a graph comparing the unemployment figures for all 50 states. NC ranks 11th for unemployment.
2) Forecasters are calling for housing price decreases through 2010. These forecasts are based on the observation that foreclosures are still climbing and are seemingly not based on the "interest rates have to return to historical levels sometime" argument that I've been making.
It's only 8 am on the west coast, but already CR has had two terrific posts.
1) North Carolina unemployment is now at 11%. It is very near it's all time high. CR has a graph comparing the unemployment figures for all 50 states. NC ranks 11th for unemployment.
2) Forecasters are calling for housing price decreases through 2010. These forecasts are based on the observation that foreclosures are still climbing and are seemingly not based on the "interest rates have to return to historical levels sometime" argument that I've been making.
Monday, November 16, 2009
Meadowmont
I haven't picked on Meadowmont for a long time, but only because it seems too easy.
There is one realtor in Chapel Hill whom I like. I won't link to his blog, because I don't want him to know I read it -- and judging by my recent harsh words for realtors in the area, I don't want to stigmatize him*. What he does is post regular updates for recent transactions, broken down by neighborhood, and which houses are for sale in that neighborhood. This includes their asking price and the square footage of the house. It's really useful for watching transactions over time. I've been keeping a record of everything he's posted since June or so. You can find his blog pretty quickly on google if you search for chapel hill real estate blog neighborhood update.
(*I used to have a realtor follower, and she left a message once saying she enjoyed my blog. But she's deleted that message, either to distance herself from my bearish attitudes, or because she doesn't like my opinion of her national organization.)
From this Realtor's blog, I was able to watch something astonishing:
The only houses to sell in Meadowmont this summer sold for ~$200/sqft. They have a dozen houses in the $300 to $400 per square foot range. Ok -- some of those links were for houses in the $200 /sqft range -- but those were 6K sqft houses. Each one that I linked to cost more than $1M. Or I should say, each one is asking over $1M.
Today's property is a foreclosure. It's not yet on the market. SunTrust foreclosed in July. They haven't gotten their act together yet to put this property -- originally purchased for $1,048,000 -- onto the market. Instead, it stays on their books as a non-performing asset. If I held shares in SunTrust, damn right I'd sell.
The history for the property doesn't look good.
XXX Circle Park Place
(As identified by realtytrac.com)
Todays owners placed a $28K down payment on a $1M house. 2.6% of the purchase price.
How long do you think SunTrust will keep this off the market? What happens to the other Meadowmont sellers when they see that the only house to sell since MARCH 2009 is a foreclosure property?
There is one realtor in Chapel Hill whom I like. I won't link to his blog, because I don't want him to know I read it -- and judging by my recent harsh words for realtors in the area, I don't want to stigmatize him*. What he does is post regular updates for recent transactions, broken down by neighborhood, and which houses are for sale in that neighborhood. This includes their asking price and the square footage of the house. It's really useful for watching transactions over time. I've been keeping a record of everything he's posted since June or so. You can find his blog pretty quickly on google if you search for chapel hill real estate blog neighborhood update.
(*I used to have a realtor follower, and she left a message once saying she enjoyed my blog. But she's deleted that message, either to distance herself from my bearish attitudes, or because she doesn't like my opinion of her national organization.)
From this Realtor's blog, I was able to watch something astonishing:
The only houses to sell in Meadowmont this summer sold for ~$200/sqft. They have a dozen houses in the $300 to $400 per square foot range. Ok -- some of those links were for houses in the $200 /sqft range -- but those were 6K sqft houses. Each one that I linked to cost more than $1M. Or I should say, each one is asking over $1M.
Today's property is a foreclosure. It's not yet on the market. SunTrust foreclosed in July. They haven't gotten their act together yet to put this property -- originally purchased for $1,048,000 -- onto the market. Instead, it stays on their books as a non-performing asset. If I held shares in SunTrust, damn right I'd sell.
The history for the property doesn't look good.
XXX Circle Park Place
(As identified by realtytrac.com)
Todays owners placed a $28K down payment on a $1M house. 2.6% of the purchase price.
How long do you think SunTrust will keep this off the market? What happens to the other Meadowmont sellers when they see that the only house to sell since MARCH 2009 is a foreclosure property?
Sunday, November 08, 2009
Chapel Hill Realtors love the housing credit
Marie Scheuring wants you to know that this is great news:
Jody Bakst is really excited about the extension:
Chapel Hill realtors are not alone in loving this credit.
Of course Realtors are excited about the credit. They skim an extra $195 per sale off the top because of this credit. They expose either their stupidity or their dishonesty by pretending that the credit is a good thing for buyers. If they don't see the tax credit as making housing more expensive, then they are stupid. If they do see it as making houses more expensive, but want you to ignore that fact and purchase a house anyways because the credit earns them more money, then they are being dishonest.
If Realtor's excitement over the credit were genuinely their excitement for you the buyer, then here's what they should offer. They should acknowledge that the tax credit only means that buyers have to bid more money on houses they would otherwise be able to purchase for less. They should acknowledge that this higher bidding price means a higher commission for them, since they take 3% of the purchase price. Finally, they should voluntarily reduce their fees by $195 so that they don't directly benefit from the tax credit.
Hey, if the tax credit was actually causing people to buy who otherwise wouldn't, then Realtors would still be benefiting indirectly from the credit due to increased sales volume.
I'll bet you $100 that no realtor would ever suggest this plan.
Congress has passed a bill to extend the original Dec 1, 2009 deadline to include buyers who are under contract by April 30th and closed no later than end of June 2010. This is great news for first time buyers who just couldn't get it together or find the right home by now.
Jody Bakst is really excited about the extension:
The significant changes are that the tax credit has been extended, the income limits have been raised to cover more buyers AND now there is a credit available to move up buyers that have lived in their houses at least 5 of the last 8 years. The time is still right to buy. There is great inventory and interest rates are at all time lows.
Chapel Hill realtors are not alone in loving this credit.
Of course Realtors are excited about the credit. They skim an extra $195 per sale off the top because of this credit. They expose either their stupidity or their dishonesty by pretending that the credit is a good thing for buyers. If they don't see the tax credit as making housing more expensive, then they are stupid. If they do see it as making houses more expensive, but want you to ignore that fact and purchase a house anyways because the credit earns them more money, then they are being dishonest.
If Realtor's excitement over the credit were genuinely their excitement for you the buyer, then here's what they should offer. They should acknowledge that the tax credit only means that buyers have to bid more money on houses they would otherwise be able to purchase for less. They should acknowledge that this higher bidding price means a higher commission for them, since they take 3% of the purchase price. Finally, they should voluntarily reduce their fees by $195 so that they don't directly benefit from the tax credit.
Hey, if the tax credit was actually causing people to buy who otherwise wouldn't, then Realtors would still be benefiting indirectly from the credit due to increased sales volume.
I'll bet you $100 that no realtor would ever suggest this plan.
Saturday, November 07, 2009
Everybody gets $6.5K to buy a house
Who benefits from the extension of the homebuyers tax credit?
1) Current home owners
2) Realtors
3) Banks
Why?
1) Current home owners: The new extension to this tax credit allows anyone*, not just first time home buyers, to receive a tax credit. That means that people who are currently selling can expect their buyers to bid $6,500 more than they would otherwise be able to. The market will rest on an artificial support.
It's certainly not the home buyer who would benefit. If the tax credit allows them to bid $106,500 on a house that they otherwise would only be able to bid $100K on, that doesn't make it any more likely they would win the auction. Anyone else who could have bid $100K on the house can ALSO get the tax credit and also bid $106,500 on the house. If everyone can bid X more for an item, the price of that item goes up by X. Handing out $X to everyone doesn't make anything more affordable.
No, the people who benefit are current home owners who are able to sell their house at a higher price than they would otherwise be offered. If they were shrewd, they would pocket the extra money and wait until house prices declined (renting in the mean time) before buying another house.
*Minor disqualification for current homeowners that have lived in their current house for less than 5 years.
2) Realtors. Realtors get 3% commision on a transaction. Since all the tax credit does is make houses $6500 more expensive, realtors who close a particular transaction can expect to make more money on that transaction. Their 3% commission for the extra $6500 is an unearned bonus of $195. American tax payers are giving realtors $200 bonuses.
3) Banks. The artificial floor in housing causes fewer people to think that they are under water. These people are less likely to walk away from their mortgages. The banks are scared to death that consumers will wisen up to their bullshit story of homeownership as the keystone to the american dream. Maybe they'll realize you can be happy without an obscene mountain of debt hanging over you. If everyone were to walk away from their overpriced shelters, then the banks would be left holding the bag. The foreclosure of all the properties that are currently underwater would reset housing prices downwards -- banks would be able to recoup less than 60% of the value of the loans they had made.
I'm not happy to see my tax dollars benefiting any one of these groups.
1) Current home owners
2) Realtors
3) Banks
Why?
1) Current home owners: The new extension to this tax credit allows anyone*, not just first time home buyers, to receive a tax credit. That means that people who are currently selling can expect their buyers to bid $6,500 more than they would otherwise be able to. The market will rest on an artificial support.
It's certainly not the home buyer who would benefit. If the tax credit allows them to bid $106,500 on a house that they otherwise would only be able to bid $100K on, that doesn't make it any more likely they would win the auction. Anyone else who could have bid $100K on the house can ALSO get the tax credit and also bid $106,500 on the house. If everyone can bid X more for an item, the price of that item goes up by X. Handing out $X to everyone doesn't make anything more affordable.
No, the people who benefit are current home owners who are able to sell their house at a higher price than they would otherwise be offered. If they were shrewd, they would pocket the extra money and wait until house prices declined (renting in the mean time) before buying another house.
*Minor disqualification for current homeowners that have lived in their current house for less than 5 years.
2) Realtors. Realtors get 3% commision on a transaction. Since all the tax credit does is make houses $6500 more expensive, realtors who close a particular transaction can expect to make more money on that transaction. Their 3% commission for the extra $6500 is an unearned bonus of $195. American tax payers are giving realtors $200 bonuses.
3) Banks. The artificial floor in housing causes fewer people to think that they are under water. These people are less likely to walk away from their mortgages. The banks are scared to death that consumers will wisen up to their bullshit story of homeownership as the keystone to the american dream. Maybe they'll realize you can be happy without an obscene mountain of debt hanging over you. If everyone were to walk away from their overpriced shelters, then the banks would be left holding the bag. The foreclosure of all the properties that are currently underwater would reset housing prices downwards -- banks would be able to recoup less than 60% of the value of the loans they had made.
I'm not happy to see my tax dollars benefiting any one of these groups.
Sunday, November 01, 2009
Residual Delusion
There are some attractive properties below $150/sqft within the Chapel Hill school district. Today's property is not one of them.
XXX Oxford Road $225/sqft. Asking $289K.
Purchased new in 1992 for $139K.
Total debt, $178K.
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