Tue 26 Jun 2007
From the Otteau Valuation Group:
SALES REBOUND IN MAY BUT STILL LAG LAST YEAR
Contract-sales in New Jersey increased by 1,090 homes in May, a 14% increase, above the April level as the housing market continues to struggle with low buyer confidence and an increasing inventory of unsold homes. Despite the increase in May sales however, that was 6% less than May 2006. So far in 2007, year-to-date contract sales are running 4% lower than the same period last year which equates to 1,800 fewer home sales.
Compounding the lagging sales pace is that unsold inventory now exceeds 71,000 homes, the highest on record for New Jersey. The prior record was 68,000 reached in September 2006. Based upon seasonal housing patterns it is likely that unsold inventory will continue to increase for several more before receding later in the year. The present supply of 71,000 represents an 8-month supply as compared to a 7-months one year ago.
The New Jersey housing market has been stalled for several months now following increasing sales earlier in the year. That this is occurring in the face of low mortgage interest rates, a reduction in home prices, increasing worker salary and fewer new home construction starts is evidence that the current slowdown is deeply embedded and not likely to reverse soon. Part of the reason is that concerns about sub-prime mortgage delinquency are sending shock waves through the housing market by causing mortgage lenders to tighten loan approval standards and at the same time creating uncertainty in the mind of potential home buyers. As a result, many buyers are either unable to obtain affordable financing or have put their home-buying plans on hold out of concern about this issue. The facts however suggest that the ‘bark is bigger than the bite’ on this topic as actual foreclosures in New Jersey are few in number and have been steadily declining over the past several months. 270 in March, 162 in April, 147 in May. Even more compelling is to consider these figures within the context of 71,000 homes for sale and you can see that any real impact on the housing market to date is insignificant. The problem comes from the counting of foreclosure activity which has been dramatically overstated, casting a dark shadow over the housing market. Some relief on this issue will come later this month, largely as a result of criticisms in this newsletter, as counting methods will be revised to reflect more accurate figures (read more about this story at the following link - RealtyTrac to revise formula).
Any benefits of the recounting however will likely come too late to avoid a further decline in home prices as the housing market now faces the additional challenges of rising mortgage interest rates and the likelihood of a further slowing of sales pace during the approaching fall and winter selling seasons. As a result, any significant recovery will likely be pushed off until 2008 at the earliest. Given the current situation, home sellers should understand that Right-Pricing! will take on even greater significance in coming months. From the buyer’s perspective, rising mortgage rates and increasing seller flexibility will present significant opportunities during the 2nd half of the year that will likely disappear in 2008.
The problem comes from the counting of foreclosure activity which has been dramatically overstated, casting a dark shadow over the housing market. Some relief on this issue will come later this month, largely as a result of criticisms in this newsletter, as counting methods will be revised to reflect more accurate figures (read more about this story at the following link - RealtyTrac to revise formula).
Any benefits of the recounting however will likely come too late to avoid a further decline in home prices
I think Otteau puts entirely too much blame on RealtyTrac for what is happening in the market. I do agree that the data is easy to misinterpret by a lay reader (or media), but I don’t feel that any single dataset has the power to sway the public in this manner.
jb
Four important datapoints here:
1) NJ May Sales down 6% YOY.
2) NJ YTD Contracts (a leading indicator of future sales) running 4% under 2006.
3) NJ Inventory, at 71,000, is at a record high.
4) Inventory absorption, at 8 months, is higher than last year.
I’d like to take just a second to plug Otteau. This comes from me, I wasn’t asked to do so.
Agents, if you aren’t attending the Otteau Spring and Fall Workshops, you really are missing out. Otteau is, without a doubt, one of the best sources for real estate market data in NJ. I’m looking forward to attending the upcoming seminar in the Fall. I’d suggest you take a day and do the same.
As far as builders and developers, I’m sure I don’t need to plug, you already know who they are. Anybody who is anybody is already a client.
jb
The Ledger piece by Sam Ali is worth reading, if you haven’t already.
RealtyTrac to revise formula
Tuesday, June 12, 2007
BY SAM ALI
Star-Ledger Staff
Anyone have specific stats on how Hoboken condos are selling?
“but I don’t feel that any single dataset has the power to sway the public in this manner.”
You will be surprised what a single data sheet can do if every major media organization reports on it…
From NPR:
Should You Buy in a Sliding Real Estate Market?
Let me sum up Mr. Otteau’s report for you:
-Inventory is at all time highs.
-Sales are down, more so than last year
-Who or what can Mr. Otteau blame for this other than his crumb bum cronies? gee wiz, lets try sub-prime mortgage delinquency, and counting of foreclosure activity (let me ask, anyone whom has bought or considered buying, was running to the reality tracks foreclose list the first thing you did?)
Prices will continue to decline rest of 07, and lets pray for all our livelihoods that 08 will be the bottom.
Sellers, please don’t make this market worse with your arrogance and stupidity, lower your prices.
Buyers, please buy…or else…or else….by golly…. 08…these “significant opportunities”…they will just….errr….they will just “will likely disappear in 2008″
and thats sum it up.
compliments of me,
SAS
That NPR story is worth a listen. Very well balanced, no shills, good commentary.
jb
I have to disagree with you on this one JB:
Mr. Otteau’s report here was something right out of some Edward Bernay’s writings.
I know Mr. Otteau is a smart man, who has to play the PC game as not to bite the hands that feeds his company.
But his name has become a product, rather than the works and reports being the product. Otteau uses his authority and Consensus to try to speak for itseld rather than the quality, or lack there of…
But in any case, I’m a lover of women, not a fighter of men (I had my fair share of that in the USMC), the scotch and sticks are always on me ;)
SAS
JB - You say NJ inventory is at an all-time high. Can you elaborate? When was the last time it was nearly this high?
And the old record was when? Would like to know when the old record was set, how quickly the market rebounded.
I really think anyone who hasn’t sold by the end of the summer is in trouble. just one guy’s opinion.
“You will be surprised what a single data sheet can do if every major media organization reports on it”
I’d have to agree with this Troll bloke on this one.
Don’t let this go to your head Troll ;p
SAS
Troll (6)-
Otteau’s point is a valid one. Counting a single foreclosure as 4-5 foreclosures (and duplicating that error over and over again) is erroneous and potentially misleading to the public.
However, MSM also parrots NAR’s party line and its ever-hopeful claims of better days immediately at hand.
In the final analysis, all the erroneous info floating around probably cancels itself out. There are plenty of undoctored numbers out there to give the careful reader a clear idea of where the market truly stands.
The Parasite Tour Guides called again today — “Just put in an offer.”
There are about 200 realtors in the vicinity, chasing the handful of transactions.
No enough checks to go around, lots of resumes submitted to the Macy’s perfume counter, no doubt.
#11, time is running out to close before school starts in September.
In 30 days, the squeeze will tighten further.
Then good luck finding a “move up” buyer who can successfully sell their old house.
JB: That NPR story is good. Finally some balanced reporting.
My main take so far is that majority folks have forgotten or have never lived the RE downturn. These are the folks who are buying right now, just looking at 10% discount. Patience is a virtue.
Otteau’s point is a valid one. Counting a single foreclosure as 4-5 foreclosures (and duplicating that error over and over again) is erroneous and potentially misleading to the public.
I think the real story though is the trend. The trend in foreclosures is up. I’m not so sure the raw number matters. Even as Otteau points out, with 71,000 homes for sale in NJ, what’s a few hundred homes?
I also see the Realtytrac numbers are more of a leading indicator. While most notices of default will not end in foreclosure, more NOD’s should logically mean more foreclosures down the road.
Renting,
I’d go a step in another direction, a higher level of NODs and LIS points to potentially higher inventory. I’m not sure why Otteau doesn’t acknowledge this fact. The numbers he cites, the REO properties, will undoubtedly reappear on the market as inventory, however, it is plausable that a homeowner facing foreclosure will attempt to sell as well, adding additional inventory.
jb
PLEASE…give me one decent mainstream reporter that will just come out and say….homes aren’t selling as well in 07 because people realize that prices went up too much between 01 and 05 and that they have to come down a bit and normalize…
AND…enough of the “rates at historic lows BS”…the ARMS and fixed rates are much higher than they were back in 04/05…
Realtytrac numbers for May:
NOD: 2,890
NTS: 891
REO: 147
Lennar’s Earnings: A Sign on Housing Sector’s Fate?
The home-building sector’s canary in the proverbial coal mine might be Lennar.
The Miami company reacted to the severity of the housing downturn earlier than many of its competitors. With incentives of up to 10% on unsold homes last year, it was one of the first large builders to aggressively discount to reduce its overhang of land and houses. When it reports earnings today, it could signal how effectively the industry is unwinding the excess.
Discounting eroded Lennar’s profit margins, but it has helped the company pull in cash to reduce debt. “You could argue this early mover strategy was the right thing to do especially the way this market has played out,” said Paul Puryear, an analyst at Raymond James & Associates.
Reducing land, especially lots that have been prepared for development, is critical to homebuilders and the broader housing market. For homebuilders, the land is a dead weight on the balance sheet unless it is put to use. For the industry, it looms as future supply in a market already swelling with both new and existing homes. At the current sales rate, it would take 8.9 months to sell off the supply of existing homes already on the market in May, the highest level of inventory since 1992, the National Association of Realtors said yesterday.
This puts downward pressure on prices for everybody. Many analysts believe home supplies will decrease, and prices will stabilize, only after builders shed their unwanted land.
i find myself more or less wrapped up in the mania currently surrounding the market I work in. and coincidentaly i find myself looking for my first home because the timing in my life is about right for it.
anyone have views on the housing market in the upscale towns sprinkled around essex county? more specifically, the towns within a 35-40 midtown direct train ride into penn station in nyc. there is something about those towns that reminds me of the sustainability of the market for apartments in NYC…but what do I know anyway! Thoughts?? Thank you.
50% OFF HOME PRICES needed to avoid Housing Crashes in New Jersey !!!
imho
Bear Stearns Rivals Reject Fund Bailout in LTCM Redux (Update3)
By Jody Shenn and Bradley Keoun
June 25 (Bloomberg) — Bear Stearns Cos. is getting a taste of its own medicine.
It was Bear Stearns, the biggest broker to hedge funds, that nine years ago declined to join 14 other investment banks in the bailout of Long-Term Capital Management LP. Then last week, as New York-based Bear Stearns pleaded for help to rescue two of its hedge funds teetering on the brink of collapse, many of the same firms refused to come to its aid.
Merrill Lynch & Co., which pumped $300 million into LTCM, said no and seized $850 million of bonds held as collateral for loans it had made to the funds. Lehman Brothers Holdings Inc., JPMorgan Chase & Co. and Cantor Fitzgerald LP also pulled out, leaving Bear Stearns to sort through the wreckage of bad bets on subprime mortgage bonds and collateralized debt obligations.
“There is a good analogy to Long-Term Capital,” said Anthony Sanders, a former director of mortgage-bond research at Deutsche Bank AG who starts next month as a professor of finance and real estate at Arizona State University’s W.P. Carey School of Business in Tempe, Arizona. “They were all friends with Bear Stearns when they thought the spreads were huge. Now that the market has turned, Bear’s standing there like the lone grizzly.”
Without assistance from his Wall Street peers, Bear Stearns Chief Executive Officer James E. “Jimmy” Cayne, 73, was forced to salvage the healthier of the two funds, offering to put $3.2 billion of capital at risk in the biggest bailout since LTCM. Bear Stearns may dissolve the second fund after more than $600 million of investors’ money dwindled to less than $200 million.
more: http://www.bloomberg.com/apps/news?pid=20601109&sid=a2mbR8rPyzto&refer=news
From Bloomberg:
New-Home Sales in U.S. Probably Fell in May After April Surge
Purchases of new homes in the U.S. probably dropped last month, ending speculation that a jump in April sales signaled a recovery in demand, economists said before a government report today.
Sales fell 6 percent to an annual pace of 922,000 in May from a 981,000 rate the previous month, according to the median of 71 economists’ forecasts in a Bloomberg News survey. Purchases unexpectedly surged 16 percent in April, the most in 14 years.
A jump in mortgage rates this month and a glut of unsold properties on the market will continue to discourage home buying and construction, economists said. The housing slump, already the worst since 1991, will restrain the economy for the rest of the year and potentially into next.
“Builders are continuing to be quite cautious and are taking actions to bring the supply of homes more in line with the demand,” said Drew Matus, a senior economist at Lehman Brothers Holdings Inc. in New York.
The Commerce Department is scheduled to issue the new-home sales report in Washington at 10 a.m. Estimates ranged from 850,000 to 990,000.
From the WSJ:
EASY MONEY
Behind Buyout Surge,
A Debt Market Booms
CLOs Spark Worries
Of Volatility and Risk;
Loan Standards Loosen
By SERENA NG and HENNY SENDER
June 26, 2007; Page A1
The corporate buyout boom of the 1980s was funded in large part by high-yield “junk” bonds. This time around, another financial product is supplying much of the fuel — collateralized loan obligations.
CLOs, as they’re called, are giant pools of bank loans bundled together by Wall Street and sold off to investors in slices. They aim to spread default risk an inch deep and a mile wide. Last year, more than half of the loans behind the record wave of buyouts were parceled out to investors as CLOs, bankers say.
As corporate borrowing soars, however, concerns are growing that CLOs have made it too easy for shaky or debt-laden companies to borrow money. If economic conditions deteriorate, those loans could sour and investors in the riskiest CLO slices could face large losses. That, in turn, could make it harder for buyout firms to borrow money.
“We are witnessing a loan market rife with liquidity and disproportionate power in the hands of borrowers, arrangers and financial sponsors,” said credit-rating firm Standard & Poor’s Corp. in a June 13 report. S&P expressed concern that loans without strong covenants to protect lenders are showing up in CLOs. The rating company urged investors to “drill down” while researching the investments and to “hold CLO managers accountable” for questionable loans.
The past decade has seen headlong growth in markets for various complex financial products, from derivatives to mortgage-backed securities to CLOs. These booming markets are mostly opaque: Investment offerings are private and largely unregulated, trading is sometimes thin, and the securities can be hard to value. That makes it especially difficult to predict what will happen if market conditions rapidly turn unfavorable. Among CLOs, for example, modest moves in loan-default rates can lead to big swings in value for investors in the riskiest slices.
At the moment, default rates on corporate loans are very low, and CLOs are producing juicy returns for investors. Nevertheless, there are signs that nervousness is creeping into the market. In April, investors began demanding higher returns to hold the riskier CLO pieces, a sign that they were growing more worried. An index tied to non-investment-grade corporate loans fell all last week, according to Markit Group, its administrator. The index, LCDX, was launched one month ago and reached its lowest point yesterday.
The market for mortgage-backed securities — which are similar to CLOs but are backed by home mortgages rather than corporate loans — is providing CLO investors with a case study in how quickly values can tumble. Troubles in the housing market have driven down the value of securities backed by risky “subprime” mortgages. Last week, two Bear Stearns Cos. hedge funds with substantial holdings of illiquid securities backed by subprime-mortgage bonds had to scramble to stave off collapse after their assets lost much of their value. Bear pledged up to $3.2 billion to bail out one of the funds.
In late April, a Bank of England report noted parallels between the markets for subprime mortgages and for poorly rated corporate credit, heightening concern about the CLO market. CLOs are a form of collateralized debt obligation, or CDO. Besides corporate loans, CDOs often hold mortgage bonds and junk bonds.
Over the next few months, the market for non-investment-grade corporate debt will be tested by the sale of roughly $200 billion of new loans and billions more in bonds. In several loan and bond sales in recent weeks, including one to fund the buyout of Thomson Corp.’s Thomson Learning unit, investors have demanded higher interest rates or more protections to compensate for the risk.
From Reuters:
Lennar posts quarterly loss
Lennar Corp., the second largest U.S. home builder, on Tuesday reported a quarterly loss, citing charges related to land values and declining demand related to the subprime-mortgage meltdown.
Lennar posted a net loss of $244.2 million, or $1.55 a share for the fiscal second quarter that ended April 30, compared with net earnings of $324.7 million, or $2 a share, a year earlier.
From CNN/Money:
Lennar reports unexpected loss
In another sign of trouble for the battered housing and home building market, No. 1 home builder Lennar reported an unexpected loss in its second quarter and warned of more losses and possibly tougher times ahead.
Lennar, the largest builder by revenue in 2006, reported a net loss of $244.2 million, or $1.55 a share, down from net income of $324.7 million, or $2.00.
Even excluding $1.33 a share charge related to valuation adjustments, write-offs of option deposits and pre-acquisition costs, the company would have lost money, and it’s not clear that analysts would exclude those charges when comparing results to their forecasts. Earnings tracker First Call had forecast a 5 cent a share profit for Lennar.
The company’s statement talked of worse than expected weakness in the housing market, which it said made it impossible to give specific guidance going forward. But it does now expect a loss in the third quarter, when analysts had been forecasting a 25 cent a share profit according to First Call.
“The housing market has continued to deteriorate throughout the second quarter,” said CEO Stuart Miller in the company’s statement. “The supply of new and existing homes has continued to increase resulting in declining home prices across our markets. As we look to our third quarter and the remainder of 2007, we continue to see weak, and perhaps deteriorating, market conditions.”
Emphasis added
jb
50% OFF HOME PRICES needed to avoid Housing Crashes in New Jersey !!!
I think 50% off would be a crash.
What happened to Otteau’s prediction of a “near bottom” in January??
http://njrereport.com/index.php/2007/01/27/1900/
Otteau talks about “right pricing”. Does “right pricing” mean 2005 prices? Otteau’s forecast is targeted towards his client base [Realtors?]. I hope he provides a more complete and honest analysis during his workshop and unlike last time doesn’t back away from what he said because of NAR pressure.
That’s just my opinion.
Otteu says:
“From the buyer’s perspective, rising mortgage rates and increasing seller flexibility will present significant opportunities during the 2nd half of the year that will likely disappear in 2008.”
Antitrump scared if he don’t run out and buy now, he may miss opportunity of lifetime. Antitrump must will no longer be able to buy the 2Br 1 Batch cape for 500K. He must pay 700K after 2008.
Mr Otteu.
That light you see in 2008 is the oncoming train. Save your comments until you see prices adjust to the new inventory levels & decreased buyer pool due to subprime and meltdown and lack of urgency on buyers part to run out and pay the fools asking prices.
Not to mention the avg 500 bps increase in mortgate rates.
Given the current pace, I can’t see this cycle playing out any faster than prior cycles have.
Thoughts that the RE downturn, and subsequent upturn would be accelerated by the immediacy and relevancy of information (media, blogs, internet, etc) are turning out to be incorrect.
If this cycle follows the pattern seen during the last bust, it could be 2010 or later before we see signs of a recovery.
jb
Thoughts that the RE downturn, and subsequent upturn would be accelerated by the immediacy and relevancy of information (media, blogs, internet, etc) are turning out to be incorrect.
JB,
Even with all that info at your fingertips, the problem is you still have to want to know. I am shocked but I guess not surprised at the fight against knowing.
KL
JB [33],
I stick with my very first post on this site, regarding declines. 30-40% decline, peak to trough, in a 5-7 year time frame. Throw the msm, internet, cheerleaders and gloom and doom out with the unions. They are of no consequence. It all comes down to price patterns and time cycles. It’s easy, just run a Monte Carlo simulation. However, make sure that blackbox includes pattern/trend recognition.
From the Boston Globe:
Housing market continues to slump
May brought no relief to the slumping Massachusetts housing market as the volume of single-family homes sold took its biggest hit so far this year and prices fell 4.6 percent from $330,000 to $315,000, a new report said.
The report, from the Warren Group of Boston, the publisher of Banker & Tradesman and a provider of real estate data, noted that the number of single family homes sold in May fell 9.1 percent to 4,765 from 5,242 in May 2006.
May 2007’s drop was the largest since November 2006, when sales dropped 13.5 percent on a year-to-year basis.
Home sales started off 2007 with a healthy increase of more than 5 percent in January but have fallen every month since, the Warren Group said.
In May, the median price of a single-family home in Massachusetts was $315,000, down 4.6 percent from a year ago, the Warren Group said.
On the condominium front, the number of units sold in May fell 2.1 percent to 2,981 from a year ago, the group said, and the median price for a condo fell 3.5 percent from $285,000 in May 2006 to $275,000 in May 2007.
For those tracking cancellation rates as a leading indicator, LEN’s cancellation rate has been at 29% for the last two quarters..
jb
#17
I have to disagree with Otteau. That is the real story here…the trend. No matter how you slice the data, double or triple counting the same property, the number of homes going into foreclosure process or REO has increased significantly since Nov.
I understand Mr. Otteau is part of the real estate establishment, but blaming this on realty trac numbers market psychology and peoples skittishness re sub-prime is a stretch IMHO.
As far as people knowing, I would say most do not. The sellers are in denial, reflected by for the most part still jokish asking prices.
The homeowners who are not selling are in denial, as witnessed by the recent surveys on what would my house sell for.
Then there are the those of us here and others small in number though we are, who could buy but will not at these prices.
The only time buyers are finding out its a problem is when they go to get financing, and they are turned down.
So lets return to lax lending standards, so that the market can becoem robust again. Yes thats the answer.
bear (30)-
I haven’t noticed Otteau backing away from anything. Last fall, he stood in front of a group of agents and repeatedly used the word “crash”.
I wouldn’t be surprised to find Otteau isn’t a NAR member. He’s an appraiser.
I agree with Otteau that “double” or “triple” counting the numbers is going to overstate the absolute number of “foreclosures” (we’re really talking about foreclosure related events), but does it necessarily change the trend (yoy percent changes)?
For example:
NJ Foreclosures (RealtyTrac data)
Notice of Default
Q1 06 - 7,821
Q1 07 - 11,159
Mortgage defaults up 43%
Notice to Sell
Q1 06 - 1,704
Q1 07 - 2,445
NTS (Auction notice filings) up 43%
REO
Q1 06 - 935
Q1 07 - 568
Possessions down 40%
jb
“Home values in 20 U.S. metropolitan areas fell the most in at least six years, weakened by a record supply of properties for sale.”
“No region is immune to the weakening price returns,” said Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University in New Haven, Connecticut, said in a statement.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aDPbZ0uuxP6E&refer=home
Regarding #41.
REO isn’t a good indicator of foreclosure activity, simply because it only measures the number of homes that did not sell at auction, and were repossessed by the lender.
If a home sells at a foreclosure auction, it does not appear as a REO number.
Likewise, a NOD property that the lender allows to be sold “short” never makes it through to the REO data, but it is (or rather was) inventory.
jb
The most important bit of information today, the Case Shiller S&P Home Price Index.
S&P/Case-Shiller Home Prices Fell 2.1% in April, Index Shows
Home values in 20 U.S. metropolitan areas fell the most in at least six years, weakened by a record supply of properties for sale.
Home values declined 2.1 percent in April from the same month a year earlier, according to a report today by S&P/Case- Shiller. It was the fourth straight drop in the group’s index, which started in 2001.
The housing market continues to restrain the economy even as other areas, such as business spending and manufacturing, accelerate. Elevated inventories of unsold homes, reduced demand and stricter loan requirements will probably keep prices low the rest of this year, economists said.
“No region is immune to the weakening price returns,” said Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University in New Haven, Connecticut, said in a statement.
Home prices fell 0.2 percent in April from a month earlier, following a 0.3 percent drop in March, according to the index. The figures aren’t adjusted for seasonal effects, so economists prefer to focus on year-over-year changes.
Fourteen cities showed a year-over-year decrease in prices for the month, led by a 9.3 percent drop in Detroit and a 6.7 percent decline in San Diego.
“As we look to our third quarter and the remainder of 2007, we continue to see weak, and perhaps deteriorating, market conditions.”
Lennar # 28,
This amid falling prices, their avg price fell 7.5% and incentives rose 77% to an an avg of approx 43K per home. This must make existing home owners squirm. If they have any clue whatsoever.
S&P Case Shiller puts NY Area home prices down 1.5% year over year in April.
jb
Talk about a market moving headline.. From MarketWatch:
Home prices fall at fastest rate in 16 years
Home prices in 10 major U.S. cities dropped at the fastest pace in 16 years in the 12 months ending in April, according to Standard & Poor’s Case-Shiller home price index released Tuesday.
Home prices in 10 cities fell 2.7% year-over-year, the largest decline since September 1991.
Meanwhile prices in 20 cities dropped a record 2.1% year-over-year. The 20 city index is more comprehensive, but its history only goes back to 2001.
Price appreciation has slowed for 17 consecutive months.
I wonder why we pay so much attention to this Otteau guy. Warren Buffet says Never ask a Barber if you need a haircut - translated as never listen to Otteau about the state of housing.
BTW - I am looking at a 2015 recover in the housing market, at the latest.
I am new to this blog but I thought I would share that we put our house in one of the “top” towns (sorry, but it gives you an idea that we are in one of those train towns) on the market for sale by owner and sold it in 3 weeks with a 5% price reduction in the negotiation phase. We were planning on buying if we saw a good deal or renting but we bought at a 5% price reduction. Before you all chop me with that falling knife theory let me say that have you ever tried to pick the bottom of the stock market? Yes, inventory is up but in this town the homes with any market value are selling and the only “inventory” are the problem properties and price issues. And don’t forget that people buy homes when they need them, not everyone can “be patient.” Okay, there it is.
JLB,
Welcome to the blog. One thing that hopefully will become clear to you is that the purpose of this blog is not to affect the market by conspiring to “not buy” until seller capitulate. If anything, the bears on this board are pretty sure this market was/is not for them and some of the data out there continue to point this out. If someone HAS to buy then let them buy. It is really not up to anyone of us to make your decisions for you.
IMHO, the bears on the board are probably some of the most patient folks out there. Personally for me, I am waiting to find the house where the owners have to sell. I can wait. I congratuate you on your sell and buy.
good luck,
afe
I’ve got to agree with Clot, I can’t imagine why you are labeling this guy a “shill”.
Here are some of the notes that I took from the workshop I attended last Fall. These are *his* words, not mine.
Keep in mind this was from last fall.
——
“18 month to 3 year cycle depending on how economic variables play out over the coming months
“Prices are now declining, the bottom has not been hit, prices will fall further”
“Worst part of the housing market is the luxury market…will see the deepest declines in this cycle…will be the last to recover…may never recover from the slump”
“most reports on home prices are either wrong or misleading”
This is in reference to the NAR data pointing that home prices were increasing during this time. Otteau was indicating price declines were already in the process of taking place. Also…
“Statistics being published are dead wrong”
“I can tell you that prices are falling and will continue to fall”
“Job creation in NJ out of balance, creating low paying jobs”
“First time buyers are most critical…priced out of the market”
“For every first time buyer that doesn’t purchase, 5 more sales don’t take place”
“Home prices down approximately 10%”
“Speculators will rush to the exits”
“High speculative demand at the Jersey Shore”
“In 2005, speculators accounted for 28% of all home sales in New Jersey”
“2010 prices were reached by 2005″
recomends that agents “Set initial asking prices lower”
“Entire market now in a complete stall”
“Deepest declines:
Luxury Market
Vertical urban condo
Vacation Homes”
“50% of demand on Gold Coast midrise condos was speculator demand”
———-
Make no mistake, Otteau is not a “shill”. Don’t label him as such because he isn’t rooting for total economic collapse.
jb
#49
I agree that most of the homes that are sitting are overpriced junk. People seem to be pricing more based on what their neighbor is asking than what will sell. Not everyone is so stupid, however, and you have proved it by selling FSBO in a tough market. I’m sure some might say you could’ve gotten more, blah, blah, blah, but the bottom line is you sold quickly with minimal hassle and found a new house at a price you can afford. nice work
“Make no mistake, Otteau is not a “shill”. Don’t label him as such because he isn’t rooting for total economic collapse”
JB, How much did you $pay$ to attend this workshop last Fall, or is it open to a Joe 6 pack like myself?
SAS
JLB,
How dare you sell on your own? Don’t you know a licensed “professional” could’ve gotten you more money on top of their 6% fleecing fee?
“Lennar reports unexpected loss”
What’s with the ‘unexpected’ insert in the headline? Wasn’t it pretty obvious from earlier that these guys are going to bleed red ink for many quarters?
btw–
I will be going to that bike shop in Ft. Lee, might buy me a Fuji.
I want to start riding my bike to work. My small part to reduce greenhouse gases & not give my money to these middle east OPEC fruitcakes.
No, I aint no burn out hippie either.
SAS
JB on #51 - Otteau might be saying the current facts about the housing the market, but where he falters in in his prediction on a recovery. Most of RE pundits are overly optimistic on their timing of recovery (ie end of 2007, or fall of 2007) and they create a sense of urgency among buyers by saying that they will miss the boat etc etc. He will obviously say this because its in his best interest. While I agree that nobody can predict the recovery of housing, historically, it has taken several years, even decades (source: Mania & Panics by Charles Kindleberger ISBN# 0471161713 ). So to simply come out and say that the housing will recover by the end of this year classifies Otteau as a Shill.
From MarketWatch:
New home sales fall in May to 915,000 units
U.S. new home sales fell 1.6% in May after surging in April to a seasonally adjusted annual rate of 915,000 units, the Commerce Department said Tuesday. Economists expected sales to fall to 930,000 units. At the same time, sales in February, March and April were revised down by 84,000 units. April’s sales pace was revised to 930,000 units from the 981,000 units initially reported, a 12.5% rise from March’s downwardly revised 827,000 annual pace. This is still the largest sales increase since September 1993. New home sales are down 15.8% in the past year. Inventories of unsold homes fell 1.1% to 536,000, representing a 7.1-month supply at the May sales pace. The supply of inventory peaked at 8.3 months in March. Inventories of unsold homes are down 5% in the past year. The median sales prices fell 0.9% in the past year to $236,100.
Bear is becoming a grizzly.
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-06-26T125817Z_01_N26242189_RTRIDST_0_EVERQUEST-IPO-UPDATE-1.XML&pageNumber=0&imageid=&cap=&sz=13&WTModLoc=InvArt-C1-ArticlePage2
From MarketWatch:
Consumer confidence falls to 10-month low in June
U.S. consumers are “subdued” about the economy and the job market, the Conference Board said Tuesday. The consumer confidence index fell to 103.9 in June from 108.5 in May. It’s the lowest since August. Economists were expecting a pullback to 105. The present situation index fell to 127.9 from 136.1; it’s the lowest since November. The expectations index fell to 87.9 from 90.1, matching March’s low. “Looking ahead, consumers remain rather subdued about short-term economic prospects,” said Lynn Franco, director of the research group’s consumer research center. The number of Americans who say jobs are plentiful fell to 27% from 29.1%, while the number who said jobs are hard to get rose to 21.1% from 19.7%.
From Bloomberg:
U.S. New-Home Sales Decreased 1.6% to a 915,000 Pace
Purchases of new homes in the U.S. dropped in May, signaling demand is still faltering in the second year of the housing slowdown.
Sales fell 1.6 percent to an annual pace of 915,000 last month from a revised 930,000 rate the prior month that was lower than previously estimated, the Commerce Department said today in Washington. The supply of unsold homes at the current sales pace rose.
A jump in mortgage rates this month and a glut of unsold properties on the market will continue to discourage home construction, economists said. The housing slump, already the worst since 1991, will restrain the economy for the rest of the year and potentially into next.
…
Economists forecast new home sales would decline to a 924,000 annual pace from an originally reported 981,000 rate the prior month, according to the median estimate in a Bloomberg survey of 72 economists. Forecasts ranged from 850,000 to 990,000.
The increase in April sales was revised down to 13 percent, the biggest since September 1993, from 16 percent.
Purchases dropped in three of four regions. They fell 11 percent in the Northeast, 7.3 percent in the South and 1.9 percent in the West. Sales jumped 31 percent in the Midwest.
I’m interested more in hearing this ‘High Speculative Demand at the Jersey Shore’. As a resident of this area and a potential FHB who is sitting back and ‘waiting’, what are the specifics surrounding this speculative demand? Specific area, range, lot size, sq. ft, etc.
In my case, for ’starter homes’ (and condos), I just don’t see that demand. I see lots of inventory and lots of prices that are slowly coming down in the direction of becoming reasonable.
The quick buy, teardown, rebuild market is almost non-existant anymore; the flips are turning into flops more and more; the McMansions are going vacant and sitting; even the higher end property on the water is going for some considerably reduced prices.
grim: RE Otteau
1. What is your impression relative to his economic view?
I say that in the NYC-area we are more likely than not [greater than 50%, but close to that level] going to have a recession due to financial services related layoffs within the next 24 months. Will this impact his forecast?
I reviewed your commentary, as well as notes from his seminar. I just get the feeling he is focusing on RE dynamics, and leaving the more troublesome “economy” issue constant. I think it is understandable [in fact professionally responsible], because ultimately he needs to speak from his expertise, but additionally, it gives a huge positive spin that effectively trumps EVERYTHING else.
2. If you were a cynic, you could argue that he bled all the red ink last fall knowing full well what we are staring down. In this sense, he builds public credibility and reputation. To the extent he believes he can influence NNJ given his past forecast, he can now “talk up the market”. You have to be cynical of course ;)
jlb - Congratulations on your sale. Your house must be lovely. My town as a 12+ month absorption rate because most of the homes for sale have not been updated since the 50s and are insanely overpriced. However, one house recently sold at asking price in two days - the buyers didn’t even consider offering any less. It was a beautiful home, on a great street, wonderful landscaping, completely updated inside and price reasonably… under $600K. They would have gotten close to $700K two years ago.
#50 I didn’t mean to indicate there is a “not buy” conspiracy, but I did want to point out there are buyers out there that aren’t looking for the lowest price, just a lower price
#52 thanks for your words, believe it or not I don’t think we could have got more for our house in that I believe “the only price that matters is the one a buyer is willing to pay.” oh and of course I add that 40k of commission we didn’t pay to our ROI
#54 haha I do think there will be a change in the way real estate transactions happen. We had open houses and we had quite a bit of traffic and the majority were smart young couples not working with agents but they were serious qualified buyers(there are buyers out there!), these “starter” home people are shopping the internet and not waiting for a realtor to call them or drive them around looking at crap so they can be sold what the realtor wants at a higher price point.
JLB #66,
Exactly! Good for you!
Pimco’s Gross says subprime crisis not isolated
Gross said the subprime crisis “may be just what the Fed has been looking for: easy credit becoming less easy; excessive liquidity returning to more rational levels.” Nonetheless, Gross said he expects the Fed to issue an “insurance” policy in the form of lower short-term interest rates in fed funds over the next six months…Gross added the subprime crisis will reduce consumption and new home building in the next 12-18 months.
http://www.reuters.com/article/fundsFundsNews/idUSN2635126420070626
Yahoo Finance is running a poll on whether housing prices will continue to fall in June.
Current results: 89% say yes
everyone agrees that prices of houses are falling, they just don’t think it’s their own particular house
Zacks Analyst Interview Highlights: D. R. Horton
With so many difficulties facing the housing sector, do you really think a 2008 recovery will happen? Why or why not?
We do not see a housing recovery in 2008. There are a few factors behind our pessimism on the housing market. Overwhelmingly, the biggest problem continues to be the lack of home affordability, which was caused by several years’ of home price appreciation outpacing the general rise in the median (personal) income.
On top of the issues tied to affordability and tightening credit conditions, the housing market has lost a key buyer of real estate—that of the speculator…Among the publicly-traded builders, such as a D. R. Horton (NYSE: DHI), the cancellation rate has spiked above 30% compared to historical levels of 10%-15%. This has important implications for the housing market and most certainly delays a recovery until 2009.
http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20070625005237&newsLang=en
New piece by Gross up at Pimco:
Looking for Contagion in All the Wrong Places
JLB (66)-
1. I have yet to sell somone a home they don’t want.
2. If you did so well selling in a non-competitive bidding environment…how well could you have done with the benefit of a competitive bidding environment?
Did you buy FSBO, too?
“everyone agrees that prices of houses are falling, they just don’t think it’s their own particular house”
BINGO!
SAS
#73 Yikes, I wasn’t prepared for a realtor to comment but I do understand the defensive stance in regards to you having “yet to sell someone a home they don’t want.” The problem with the way it used to work is the realtor worked much like a “censor,” in determining what a buyer knows about or sees and because of that had more power in influencing what choices they could choose from and the internet is changing that—oh and for every realtor that thinks people don’t know how to search on gsmls, oh please! And did I say it was a non-competitive bidding environment? We did cooperate with brokers but isn’t it odd our serious buyers came by themselves, hmmmm. As far as buying, the seller pays the listing realtor, right?
Grim (72)-
Wow. What an eye-opener.
I agree with Gross…this slop can be priced at par and peddled under any sunny day assumption these clowns care to generate. The bottom line is: those CDOs and MBS are backed by thousands of delinquent and soon-to-be-defaulted loans.
The margin call always sounds the same, whether your collateral has the veneer of quality or sports a thin coat of smelly sludge.
Interesting article….the below statement is probably as accurate a statement I have seen. The whole Bear Stearns saga needs to be watched closely because it wouldn’t just affect Bear but others as well.
Mortgage Meltdown!
“A sale would give banks, brokerages and investors the one thing they want to avoid: a real price on the bonds in the fund that could serve as a benchmark…
http://www.moneyandmarkets.com/issues/MaM633_4.html
From Reuters:
Benchmark ABX at lows as subprime woes mount
Benchmark ABX indexes fell to fresh lows on Tuesday, driving the cost of insuring subprime mortgage securities against default sharply higher, investors and analysts said.
The ABX 07-1 “BBB-” series, which are tied to subprime loans made in last year’s second half, sank to 55.70 on Tuesday from 56.18 at Monday’s close. The index has fallen 42 percent since it was launched in January.
The ABX 06-2 “BBB-” index, which references loans from the first half of 2006, also traded at a new low of 61.78 after closing at 62.16 on Monday. The index has fallen 38 percent this year.
“This is a continued selloff from last week coupled with the weak remittance reports from Monday,” said one investor.
JLB (75)-
I don’t feel defensive about anything. I’m simply stating the fact that I’m not persuasive or sharp enough to sell someone something they don’t really want.
As far as your lack of preparation for a Realtor response, it shows. The Realtor-as-”censor” model began dying in about 1996, and I’d say the corpse was stiff by about 2002. Remember back then how so many people were saying that the internet would be the death of the Realtor? So far, about the only thing I’ve seen is the death of fly-by-night internet schemes, such as YHD/Foxtons and some of the flat-fee scams.
The fact that none of your prospective buyers came with an agent shouldn’t be surprising to you. You offered cooperation to agents, but the essential fact was that your buyer pool- just like you- wasn’t interested in Realtor cooperation. The FSBO buyer sees an agent as wasted money just as much- if not more- than you do. They’re doing the legwork on their own in order to do that agent’s work and “save” the potential fee. Otherwise, there’s no real benefit to buying a FSBO. Technically, a seller pays the commission, but it’s with money that’s come out of the buyer’s pocket…that fee is baked into the price.
By dint of lack of marketing reach and exposure to the full pool of ready, able, qualified buyers, FSBOs are categorically offered in a non-competitive environment.
“Make no mistake, Otteau is not a “shill”. Don’t label him as such because he isn’t rooting for total economic collapse.”
To be fair, I read your seminar notes and changed my opinion of Otteau somewhat. But at the same time, it seems to me that everything he says that gets reported in the mainstream media (MSM) says that the time to buy is always NOW (including in the article quoted above.
From this here blog, referring to Otteau in January ‘07: “His report also puts the housing market at “near bottom,” but he predicts first-time buyers reentering the market this year and affordable homes leading a recovery.”
Quoting from the article above:
“From the buyer’s perspective, rising mortgage rates and increasing seller flexibility will present significant opportunities during the 2nd half of the year that will likely disappear in 2008.” [i.e., "you better buy in 2007 or you'll get left behind!!"]
Here’s the Toms River Times, in April, 2007:
“Otteau expects the market to continue to improve over the next two years. “Inventory is up, so there is a lot to choose from. Prices are softer and interest rates remain at a 40 year low. Housing is more affordable. Those who wait to buy will not see prices go down, but instead will see interest rates begin to creep up.” ”
From the NY Times on March 11, 2007:
“The analyst, Jeffrey G. Otteau, who heads the Otteau Appraisal Group and issues the monthly Otteau Report to subscribing brokers, offered this current reading on the overall market: “It is just beginning to recover.””
Further, I would note that my RE agent constantly quotes Otteau as advising at seminars at the beginning of this year that the right price for housing is the 2005 price (height of the bubble in 10/05).
It sure seems that Otteau ALWAYS believes that the right time to buy is RIGHT NOW, or that the recovery is about to begin. Perhaps the MSM are cherry picking his quotes, or perhaps, given your notes, it’s the case that he can’t really decide what he believes, or perhaps it’s that what comes out of his mouth depends on who he is talking to at the time.
[72],
Very Scary. I would imagine the best possible outcome is “only” a housing bust. Other scenarios seem to be much more frightening.
“If a home sells at a foreclosure auction, it does not appear as a REO number.”
JB, some properties I watch were bought at auction, and listed through the REO channel.
I believe original lenders “won” the auctions, though, and not other parties.
Clot #79
“Technically, a seller pays the commission, but it’s with money that’s come out of the buyer’s pocket…that fee is baked into the price.”
I agree that it’s baked in, but are you saying that the result of the baking is that the seller gets less money or that the buyer had to pay more?
[81]
Agreed, BC Bob.
Clot, #79
“are categorically offered in a non-competitive environment”
I have to disagree. You can make the argument that “lack of marketing reach and exposure to the full pool of ready, able, qualified buyers” means a FSBO is offered in a LESS competitive environment (I’d certainly agree), but it is most certainly not “non-competitive.” There can be more than one bidder (whether or not there actually is) - this is not the US gov’t and Halliburton.
The great thing about FSBO sales is that, if you find you aren’t getting enough feet through the door at a price that makes you ecstatic, you can always call an agent. The other way around, not so much.
JLB #49, the key isn’t to “time the bottom” but instead to avoid the top:
http://graphics.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
But since you also sold at bubble peak prices, you won’t feel much of a hit.
But at the same time, it seems to me that everything he says that gets reported in the mainstream media (MSM) says that the time to buy is always NOW (including in the article quoted above.
Is that all he said or simply the quotes that the writer chose to use? We can’t know what he said during the conversation.
jb
Heck, I’ve had my own quotes used out of context by the press.
jb
SAS (re: #56) Definitely mention my name — Jamey, the guy with the green BikeFriday folder and the old-school SOMEC. Nelson’s a really good guy, who won’t oversell.
(He is, however, the leading US retailer of Orbea CF frames, and a top-ten retailer of Lightspeed Ti frames, so you might find yourself tempted to move into the “and up” category… Then there’s the FUJI SL-1 United that he rides — 14.75 lbs and $7000 worth of obscure componentry-festooned fury.)
The shop is always packed with racers and triathletes, who congregate there before and after pack rides up 9-W, so be prepared to wait a few moments to be served.
Good luck. Hope to see you on the road–I commute daily, from Leonia to Midtown. Thirteen hilly, sweaty miles (which are, by far, the best part of my day). Just be sure to get — and WEAR — a decent helmet.
Speaking of quotes out of context. This is one hell of a headline. From Bloomberg:
CDOs in `6-Inch Hooker Heels’ Fooled Moody’s, S&P, Gross Says
Bike into midtown? Got to respect that.
jb
Clotpoll Says:
June 26th, 2007 at 10:55 am
JLB (66)-
1. I have yet to sell somone a home they don’t want.
2. If you did so well selling in a non-competitive bidding environment…how well could you have done with the benefit of a competitive bidding environment?
Did you buy FSBO, too?
clot: I think people confuse a smooth real estate transaction and maximizing proceeds. While maximizing proceeds is always possible, a smooth FSBO in this environment implies that money was left on the table. JMHO
I say that in the NYC-area we are more likely than not [greater than 50%, but close to that level] going to have a recession due to financial services related layoffs within the next 24 months. Will this impact his forecast?
Just as I don’t believe that Wall Street played a major role in home price increases (outside of some very specific neighborhoods. i.e. Manhattan, some “Gold Coast” locations & some desirable homes on the Midtown Direct line), I don’t believe that a “crash” on Wall Street would cause housing prices to significantly drop.
The truth is that too few people in the big picture work on Wall Street to move the entire housing market. Also, looking at the post dot com bust, home prices increased swiftly, despite significant Wall Street layoffs and bonus reductions. There really is no correlation.
“There can be more than one bidder (whether or not there actually is) - this is not the US gov’t and Halliburton.”
Indeed, FSBO is definitely not like Halliburton, which has been on US Govt retainer since the mid-1990s (note the date) via LOGCAP (Logistics Civil Augmentation Program).
Jamey #89, after 13 miles by bike, aren’t you a little “ripe” when you arrive at work?
Clot #79 Interesting how you take my words and jump to conclusions, is that how you treat buyers and maybe the way you limit them in a “censor” like way? I do believe realtors have value but I do think the internet is creating more savvy buyers and sellers. Our ultimate buyer had been working with a realtor but was also doing the “leg work”, I think the take away from that is if today’s realtor does the work and provides the buyer with the property they want they will earn their commission but you don’t just get paid for showing up these days. It is retro thinking to believe that today’s buyer doesn’t understand the fee structure or that a FSBO can’t get exposure in a competitive environment. If as a realtor you want to sell against the FSBO option you might want to suggest you need to put your ego to the side in dealing with your neighbors, your potential buyers and the local realtors. Putting ego aside might be easier for a homeowner than a realtor.
JLB #96, you’re talking to a wall.
Un (# 95) I work in a sweatshop.
Actually, I’m in the book biz, which is like being in a sweatshop, only without the glamour. My employers are somewhat progressively-inclined: they have shower facilities on-site. This means, really, that I can hole up in my office, towel off after the ride, comb back my sweat-dampened hair, and LOOK like I’ve showered…
Key(s) to not being stinky: drink plenty of water at all times, and, more important, wear woolen cycling clothes, which, thanks to the magical properties of the fibre, do not reek.
JLB Says:
June 26th, 2007 at 12:10 pm
I do believe realtors have value but I do think the internet is creating more savvy buyers and sellers. Our ultimate buyer had been working with a realtor but was also doing the “leg work”, I think the take away from that is if today’s realtor does the work and provides the buyer with the property they want they will earn their commission but you don’t just get paid for showing up these days. It is retro thinking to believe that today’s buyer doesn’t understand the fee structure or that a FSBO can’t get exposure in a competitive environment.
JLB: the way to maximize proceeds is to deal with an “uninformed” buyer who “doesn’t do the legwork”. Transcend your circumstances and thinking. It’s heartless, cruel and ……capitalism….. :)
BTW - I’m not taking clot’s side here. What I am doing is using logic…..
Interesting move on the 10Y this afternoon, currently at 5.111%.
jb 87
“Is that all he said or simply the quotes that the writer chose to use? We can’t know what he said during the conversation.”
Is what I was getting at, but it got kind of lost in that long comment. It may be that the MSM are always zeroing in on his most optimistic comments. If so, they are doing it repeatedly (although the MSM capacity to fail in any basic understanding of what they’re covering never ceases to amaze - or perhaps it’s simply mendacity).
Troll #92 maximizing profits is like catching the bottom–good luck! Leaving money on the table with the full transparency of a FSBO is less likely than through an obscured realtor transaction. In our situation, we actually had our buyer in days and negotiated for weeks, if you call that smooth.
People sell their used cars to a private party. Trading in at a dealership usually involves your brains getting buffeted by the dealership. Either transaction does not guarantee less or more money; it is the perceived benefit of not involving a third party while doing a private party transaction.
SImilarly, some people will do FSBO. They may or may not leave money on the table. But if it means not bringing bungling buffoons into the transaction, I say why not?
#103
seems to me the allure of “maximizing profits” has doomed the majority of homes to sitting on the market with no end in sight.
a bird in the hand.
troll #99 we should all agree that doing leg work and being fully informed are two different things and maximizing profits, if it’s possible, can be done with an informed buyer too since it all comes down to motivation and negotiation, right?
Grim: (#91) “Respect?” Would you please pass that message along to the motorists I encounter en route?
Actually, it’s a lot of fun, and, thanks to the GWB bike paths, not all that dangerous. I wish more Jerseans would bike to NYC, and that NJ were, in general, more bike friendly, or at least less bike-hostile.
I wouldn’t call Ottau a shill. He does provide relevant data for the industry.
I just consider his call that buyers won’t get bargains after 2007 rather optimistic.
Here’s an interesting anecdote:
A two-family house in my neighborhood sold 1 yr. ago. Tenants were all moved out before the close. House has stood empty for the ensuing year. That’s no income.
Buyer had grand tear-down plans. Worked on permits for the year to subdivide the lot in two and shoehorn two new constructions onto the property.
This week I drive by and notice a FSBO posted on the front lawn, advertising two buildable lots. I’m wondering if the buyers are hitting a reset and the financing for their speculative, non-owner occupied deal is running dry. Either way, you buy in 6/06 and turn around and try to sell in 7/07? After a year of no income? The more I see of residential RE the bigger can of worms the whole business becomes.
everyone agrees that prices of houses are falling, they just don’t think it’s their own particular house
The RE industry has done a reasonably effective job of playing-up the “real estate is local” theme. Despite the fact that we have pretty much seen a nearly simultaneous world-wide price boom, many people don’t make the connection between their home’s value and the rest of the world.
Their little slice of heaven is somehow different. It must just be coincidence that everybody else’s home doubled in price along with their home. After all, their house is extra nice, close to the train, in a town with good schools, close to a major city, in prestigious Haughty County, in an area with great weather…go ahead and pick your reason. The owner is a savvy decision maker, entitled to their price for making such a good investment decision.
Go to any open house in the country…tell the realtor that you are concerned about this whole “bubble thing”…you will hear the answer above…The bubble is someplace else…There is no bubble in ________. This area (or home) is special because ________.