From the L.A. Times:
Housing Expert: ‘Soft Landing’ Off Mark
Leslie Appleton-Young is at a loss for words.
The chief economist of the California Assn. of Realtors has stopped using the term “soft landing” to describe the state’s real estate market, saying she no longer feels comfortable with that mild label.
“Maybe we need something new. That’s all I’m prepared to say,” Appleton-Young said Thursday.
The shift in language comes as debate over the real estate market is intensifying. The long-awaited drop-off is happening, but there’s little agreement about how brutal the landing will be.
…
For real estate optimists, the phrase “soft landing” conveyed the soothing notion that the run-up in values over the last few years would be permanent. It wasn’t a bubble, it was a new plateau.The Realtors association last month lowered its 2006 sales prediction from a 2% slip to a 16.8% drop. That was when Appleton-Young first told the San Diego Union-Tribune that she didn’t feel comfortable any longer using “soft landing.”
“I’m sorry I ever made that comment,” she said Thursday. “When I get my new term, I’ll let you know.”
…
Appleton-Young had no qualms about predicting a hard landing here: “We’re expecting a fairly significant shakeout.”
I’ve been following Appleton-Young for quite some time now. She has been a housing cheerleader since the beginning. This piece came as an incredible shock to me. I would have never expected her to say anything like this.
grim
how far ahead would you say the california market is to nj?
HAHAHAHHAHAHAHA!!!!!!!!
Lereah and Appleton 2 Bubbleheads now running for cover!
Why is she saying this?
Cuz things are really bad really BAD!
Just that the entire industry fights and squirms and spins the news. From what I am hearing things are bad. For example one builder in florida had 8 crews working at all times……now 1. Hehehehehe. Florida is going to blowup!
So again, if you have strong finances and sacrificed for a down payment then you are in the driver seat to DICTATE TERMS OF YOUR HOUSE PURCHASE….NOT SOME SLICK REALTOR OR GRUBBING JOHNNY COME LATELY SELLER.
BUST!
Bob
HOUSING BUST
Clearance racks are filling up with inventory.
BOOOOOOOOOYAAAAAAAAA
Bob
Starving realtors are shifting strategy of one of ripping off homebuyers to one where they convinve Greedy money grubbing johnny come letely sellers to start lower prices dramatically.
Watch the snakes as they are desperate to survive and make commish dollars that now buyers won’t pay these insulting prices.
Hehehehhe
BOOOOOOOOOOOYcott Houses
Bob
“John Nelson, Modesto branch manager for a mortgage bank that funds home loans, advocates dropping all home prices by 10 percent to make them more affordable. Craig Lewis, president of the Modesto-based Prudential California Realty, agreed houses are too expensive. ‘What we have is an affordability crisis,’ Lewis said. ‘There’s a gap between the average sales price and the average income.’”
“Lewis said demand is still there for homes, but buyers won’t buy what they can’t afford. He said sales are off so much that times are getting tough for real estate agents. Last Friday, ReMax of Oakdale shut its doors. ‘We were given no notice,’ said Tom Van Ruiten, who was one of eight agents at the office.”
“Van Ruiten has been selling real estate for more than 25 years, so the current market slump doesn’t surprise him. ‘With home prices going up 20 percent a year and wages going up 3 percent a year, what did you think was going to happen?’ Van Ruiten asked. ‘Give me a break.’”
10%????????
How about 40%!!!!!!!
“QUALIFIED”, WITH GOOD FINANNCES AND A DOWN PAYMENT OF 20%, Buyers now dictate terms of the house sale NOONE else.
BOOOOOOOOOOYAAAAAAAAAA
Bob
This is really interesting. i had sent my realtor an email to see how much the prices had dropped by etc. here’s the response i got:
Dear **************
I am away until Monday attending a meeting with 3000 of the most productive agents in North America. We are going to be looking for ways to improve our customer service, improve the quality of the work we do with you individually and how to be better salespeople while we represent you.
I am anxious to share these ideas with you when I return.
Love to talk to you both! Now is a great time to buy, before interest rates go up. Have you figured out the tax implications of owning and that your asset will appreciate!
Hope all’s well.
—-EOM—-
This is awesome. I wonder what spin she’ll come back with and how shes going to sell us into buying as a “good investment” LOL
–BM
Donald R. Horton, Chairman of the Board, said, “Our people have worked very hard to achieve these results during a time when selling conditions are very difficult in the homebuilding industry. We have experienced a changing home sales environment since the beginning of the calendar year, which became more evident during our third quarter. As we indicated when we reported our net sales orders last week, the current home sales environment is characterized by an increase in both existing and new homes available for sale, higher than normal cancellation rates and an increase in the use of sales incentives in many of our markets
WAKEUP GRUBBERS BUYERS WANT SUBATANTIALLY LOWER PRICES. NOT 5-10% BUT 25-30% DROPS AT A MINIMUM!
how does it feel to be on the other side of the trade abused and no longer in control of house sale terms. Hehehehhe
BOOOOOOOOOOYAAAAAAAAA
Bob
BM
It’s time to sit down this slick fast talking realtor libing in the past and give’em a dose of reality and tell’em the truth about buying and prices. Meaning 30% lower prices or NOTTTT”””ING!
Bob
Along with a 50%%%% drop in price an a 20%%% downpayment required pay the realtor no more than 4%%% and the towns better get used to having a lot less tax money to spend on there bull sh*t projects and do nothing employees, notice I didn’t call them workers. End all the free perks given to everyone on the payroll sucking up our tax money.
Interesting day on the street.
CAT gains while DELL falls. CAT is one of the very few Dow 30 that I like. CAT has benefited from the RE bubble for sure, but most of its orders come from red China.
Wonder how treasurey and oil markets are going to view the events going into middle east, looks like they might send ground troops.
SAS
When has a bubble ever ended in a “soft landing?” That term was a prayer, not a forecast. No evidence whatsoever that prices would revert to the mean over a long period, rather than a short one.
http://www.cepro.com/news/editorial/14196.html
Seems like more californians has submitted to the bubble bursting
lives will be ruined because trusting people followed the advice of so-called experts like this woman.
realtors tout themselves as fiduciaries, but how many of them would tell a client that now is a bad time to buy?
If realtors tout themselves as fiduciaries, they should be held liable as fiduciaries if they give advice that is harmful to their clients.
I hate to be so blunt, and RE agents people might not like this…but…
RE agents are not the brightest bunnies in the forest. Most (not all) don’t have any formal education, and if they do, its for sure not in economics or anything of finacial value. They are just run of the mill sales people. Ok, if they have alot of experience, that helps them, but most (especially the younger foreigner RE agents) are just pitch and haggle jockies. Don’t need alot of education, you just have to pass the certification courses. Whoopee, big deal…. if you have good reading comprehension, anyone can do it.
I think Grim even did a piece of RE agents vs. hair stylists. Hair stylists have hell of alot more training.
So, these not so bright people try to call the shots and puff out there chest as experts, but they are not. Never have, never will be. Just sales jockies, with a fancey name and higher price tags.
Really worthless in my opinion, I have done alot of deals with out them. Matter of fact, I even get the sons of bitches calling me asking me if I am going to sell my townhouse on Riverside….
SAS
Hey Bob,
When you ask those sellers “How does it feel to be on the other side of the trade”, which particular people are you talking about?
The sellers who controlled the market at one time are gone (they sold), its different people now. Do these new sellers really deserve to be laughed at for trying to get the best price they can?
yes they do
-bm
Harder To Become A Hair Stylist In New Jersey
So the real estate market is about to fall off a cliff, however no one can predict when that will happen. Why don’t we give it a little push.
What about making very low offers on homes, 50% off asking. I’ve made a few offers on homes and after I’ve made my offer the sellers have started to reduce the price. I know that if I was selling a house for $500K and I had no offers for 3 months, then someone came in and offerred $250 it would kick me in the ass a little and make me rethink my asking price.
A house is only worth as much as someone is willing to pay, not what your asking price is. If the only offer I have is $250, maybe I should lower my price to see if $250 is really the value of the house. I wouldn’t lower asking to $275 right away, but maybe I’d go $450, then $400, then $350, etc. until some more interest came in and I got another offer.
Buyers aren’t bidding because the prices are too high and sellers aren’t lowering their prices because no one is telling/convincing them they have to. Maybe the realtor tells them they should knock off 5% to generate some interest, but that’s still not enough for the buyer to make a move.
This process could be sped up much quicker if people started acting. I hate to sound like a realtor, but interest rates are rising and if I’m stuck at a max monthly payment I can only offer so much and that offer drops every time interest rates rise. I can offer a higher price now then in 3 months when the interest rate is higher. This is better for seller, so they should be incentivized to sell now instead of later.
Who’s coming with me!
Go out this weekend and make an offer on a hosue you’ve been keeping an eye on at 50% off asking. If they’re asking $500, offer $250. If they’re asking $2M, offer $1M. Give them an opinion of why you think it is a reasonable price and also present it in writing. A phone call offer will be disregarded, but a paper offer shows you are actually interested in the house and not just going to every house and making a 50% off offer. Watch them drop their price next week.
If your realtor says making an offer like that is a waste of time, tell them you didn’t realize they were so busy with all of the closings happening (sarcasm) or how upbeat the market is and that you’ll find another realtor who will, or you’ll just go right to the sellers realtor. Once they realize they might miss out on their only 2.5% commish of the year, they’ll make the offer the same day.
Good luck, maybe one of us will be new homeowners on Monday at 50% off.
ok, WE know that most realtors are not “experts,” but does the average buyer or seller? No.
Moreover, it is not an accident that most people think of realtors as pros. They promote themselves this way. Their trade organization takes out ads touting their “strict code of ethics.” Realtors talk about how they cannot do certain things because they “owe fiduciary duties to their clients.”
Obviously, caveat emptor applies to real estate just like anything else, but since when is it ok for professionals to represent themselves as fiduciaries and then to work exactly AGAINST their clients’ best interests?
The fact that the head of the California realtors can just say “oops, I f*cked up” as if it’s not a big deal to me indicates how seriously these people take their claims that they are professionals. And if they don’t want to be professional, that’s fine, but they shouldn’t be allowed to represent themselves as such
Lewis said demand is still there for homes, but buyers won’t buy what they can’t afford
I guess it depends on your definition of afford. If you define affordability as making the minimum payment on an option ARM teaser, then I guess you are right. If “buyers won’t buy what they can’t afford” were really true, we wouldn’t be in this mess.
We are at the point where the only people left are those who don’t qualify to get even a subprime mortgage and those of who refuse to pay these prices.
balls to the wall guys. I’d go with the dude who suggested 50% off. Im planning to offer 30-35% off on the houses im seeing in PA.
Hey Pat, never did get those listings from you (if you are reading this)
–BM
Take it from me, 30-35% off is not enough. I bid on a house 27% off asking about 2 months ago, they rejected and then began dropping their price. They then came back to me and wanted to accept my offer. I realized that prices had dropped further and 27% wasn’t enough, I rejected their acceptance. The house is now listed 30% off and still no offers for a month. Thank God they rejected my offer the first time otherwise I’d be sitting here waiting to close on a house worth less (and dropping) than my offer. If 30-35% is off of current list, which has already been reduced 15-20%, that’s fine, but 30-35 off original list is not enough. Don’t bid like it’s a reasonable bid for today, bid as if it’s a reasonable bid at the bottom of the market next summer, summer ’08, whenver the bottom occurs.
I have seen inventory moving fast in Middlesex County.
I belive this would be because of people want to move to better School districts.
Once the Schools open , we should see a slump.
Please share your opinion.
KBR.
VERY WISE POST!!!
BergenBuyer said…
Take it from me, 30-35% off is not enough. I bid on a house 27% off asking about 2 months ago, they rejected and then began dropping their price. They then came back to me and wanted to accept my offer. I realized that prices had dropped further and 27% wasn’t enough, I rejected their acceptance. The house is now listed 30% off and still no offers for a month. Thank God they rejected my offer the first time otherwise I’d be sitting here waiting to close on a house worth less (and dropping) than my offer. If 30-35% is off of current list, which has already been reduced 15-20%, that’s fine, but 30-35 off original list is not enough. Don’t bid like it’s a reasonable bid for today, bid as if it’s a reasonable bid at the bottom of the market next summer, summer ’08, whenver the bottom occurs.
REREAD AGAIN
BOOOOOOOOOOOYAAAAAAAA
Bob
I agree with bergen. starting to see major price cuts in the areas I watch, and still nothing is moving. the market is dropping rapidly and no one wants to jump in right now— yet there are sellers who HAVE TO sell. Asking prices are meaningless
I have seen inventory moving fast in Middlesex County.
According to the Otteau Report, the sales pace in Middlesex County is the slowest in 5 years (1st qtr 2006). Although to be fair, probably still high be historic standards.
I haven’t seen houses starting to move, but if they are, I think it’s because people are idiots, both buyers and sellers. They don’t pay attention to anything but the newspaper, tv and their realtor. All 3 outlets have their own agenda and can’t necessarily be trusted as gospel. Perfect example, my father is trying to sell my deceased grandparents home. He started off high due to the high appraisals from realtors, now he’s dropped the price, but won’t budge a penny in negotiating with potential buyers. He views his decrease from original asking as more than enough of a price drop and the house is now a bargain. It’s not, it’s priced well for the current market, it will be overpriced in about a month.
I tried my best to convince him otherwise, but he just won’t listen. I don’t think he’s trying to be greedy, because selling this house is more of hassle to him than it’s worth, but he’s just not as informed as people on this blog. He doesn’t understand the economics and he’s not hearing it from the papers or tv that the market is going in the crapper and that he should sell NOW.
Until both sides start to fully understand the market, we’re going to be in this slowly depreciating market that is in a lull of no offers and no price drops.
Let’s kick this lull with 50% offers.
Oh man, I better tell my dad to accept the offer before we all tank the market…
Hey, BM
Grim has those Peak PA sales for you. On that thread you never listed your e-mail.
Pat
“Until both sides start to fully understand the market, we’re going to be in this slowly depreciating market that is in a lull of no offers and no price drops.”
the news is spreading rapidly, and some sellers are making what I would consider big cuts (10%+). I really think August is going to be a free for all as it starts to dawn on people that the summer is almost over and inventory is still going up rapidly.
this is all unraveling much faster and much more severely than almost anyone anticipated (even people on this blog).
BergenBuyer:
“Oh man, I better tell my dad to accept the offer before we all tank the market… ”
Why does he have to sell? If it is something that your grandparents left to him, that should be already paid off. Can he just rent it out? You know the rent is going to go up when the realstate value drop
I don’t think rents are going to go up as much as you may think.
If many people can’t sell, people will try to rent at least to bring in some money. You will also have rent wars going on….this shit is going to get ugly. There are alot of townhouses that can get rented out too. Rents may increase a little, but that will be short lived as tenants get wise to the game, this is going to play out over several years, and you are looking at one hell of a bear in housing.
Its all coming down. Rents, house prices, anything in RE.
Its going to get very ugly for awhile….if you are an owner.
But if you were smart, and waited out this market, you are the one who is really coming out on top.
Good things really do happen to those who wait.
SAS
more realtor BS scare tactics about rents.
hey, rents are barely back to where they were in 2000. rents went down in real terms over the past 5 yrs.
so I don’t think many people are panicking out there about rent.
in any case, rent would have to practically double to equal the cost of ownership, so I don’t think you’re going to get a lot of renters shopping for houses at this point
Anonymous said…
Hey, BM
Grim has those Peak PA sales for you. On that thread you never listed your e-mail.
Pat
7/21/2006 11:53:05 AM
Helloooooooooooooooooooooooo Pat
skep-tic said…
this is all unraveling much faster and much more severely than almost anyone anticipated (even people on this blog).
7/21/2006 11:58:28 AM
cross off 2006!
don’t catch a falling knife!
there will be a false bottom within the next 3 months!
SAS:
“Its all coming down. Rents, house prices, anything in RE.”
Housing price is going down, but I really can’t see how rent will drop, rent didn’t increase much for the last 10 years while the housing market was hot. Also, all those ppl who lost their houses have to live somewhere.
What I was trying to say to Bergenbuyer was, if the house is already paid for, why bother trying to compete with other sellers on a down market. As long as the rent can cover the tax and the maintanence, it is going to be another source of income for his dad.
It’s news reports like this that are ruining the RE market. If they would just shut up, things would be fine.
Just kidding. The negative tone of RE stories will hopefully accelerate the sellers return to reality. The market psychology has certainly changed…
JAY
SAS: Reality is much stranger than science fiction?
Remember in the old Star Trek when Captain Kirk would (in his really cool manner) flip open his communicator? Why do you think flip phones are the most popular today?
And the episode of Twilight Zone where the woman is sick and it is getting colder and colder outside, but at the end, it’s her fever and the earth is really burning up? Global warming.
How about this? A country where states close all their mental hospitals, stick those people on buses to other cities, prisons decay, and millions of immigrants suddenly become legal.
A huge number of Baby Boomers die.
Many McMansions are empty; no buyers.
So the states pull eminent domain, take over the McMansions, and put the mentally ill, immigrants and some prisoners in them. After all, group homes are effective.
How would that be? Pretty funny, huh?
Ha. Ha. Ha.
Hi, Chicago.
I really think August is going to be a free for all as it starts to dawn on people that the summer is almost over and inventory is still going up rapidl
September normally sees a pickup. If I were selling, I would wait till September/Oct at least
And the episode of Twilirght Zone where the woman is sick and it is getting colder and colder outside, but at the end, it’s her fever and the earth is really burning up?
its the other way around. She is dreaming that its unbearably hot but actually its cold because the earth is pulling away from the sun.
Same story with my friend who is trying to sell her house. Her RE agent suggest a listing price of $350K and after a couple of weeks, asked my friend to lower it down to $320K in order to sell it quickly. My friend refuse to lower the price a bit, insisting that’s the current market value.
Luckily, she has a 30yr fixed mortgage, and that’s why she is not in a hurry to sell and starting paying $2000 rent for a one-bedroom apartment.
I think most of the sellers are in denial right now, not acknowledging the declining market, but this will take time.
-God, please give me (and all of us) patience
Its all coming down. Rents, house prices, anything in RE.
It makes sense. There are bound to be people who end up consolidating households, rather than creating them. Those who lose their shirts are going to be in way over their heads, with few options.
jw
Anon 12:04,
The house is split between four siblings in 4 diff states. They all want their lump sum cash now.
space ghost…thanks for that fix.
I loved that show.
Hi Pat, dropped Grim an email. Thanks for the info. Do keep me posted if you have had any luck in Bucks County
–BM
Too many houses on markets…the “scarcity” value is no longer an issue. Rule #1 in economics.
But it is true about that persons Dad to rent, unless, people undermine him with their rents….who knows…its hard to see how the rental market will really play out, but rest assured, it will come down.
Yee…I remeber that Twilight Zone
think it was called “THE MIDNIGHT SUN”, that was a great one, love that twist at the end and those camera shots of those melting pictures…classic.
One of my favs was “THE HOWLING MAN”….scarey as hell.
Yup, they don’t make em like they use too…now we got the god dam reality TV polluting Americas minds…
Looks like Bush will meet the Saudis over the weekend, anyone wanna place bets. Israel sends in ground toops into Lebannon.
Let me tell you something about israel defense forces….they are VERY good at what they do. When I was in the service, we trained with these guys, now my son (Army Ranger) trains with them too.
Word to the wise, if you are ever in the middle east, never walk up to these guys, and its always “yes sir” or “no, sir” when you talk to them.
SAS
All I know is, as a prospective buyer in the near-term, this Harper’s Magazine article (PDF format) scared the crap out of me:
“The New Road to Serfdom – an illustrated guide to the coming real estate collapse”
http://www.shloky.com/files/housing%20boom.pdf
Shorter link:
http://tinyurl.com/f47xb
“Major meltdown” would be the replacement term for “soft landing.”
I would go with “Slow Motion Crash” to keep the aviation theme.
If you must sell, and can’t sell at your “bottom line” price and can’t afford to rent out with a major monthly negative cash flow, what are the options for these sellers? It seems to me they are
1. Let the lender take the property
2. Drop sale price further if any equity left
Any other options?
JAY
unrealtor that Harper’s link is a good article. Not a good feeling if you bought recently. We have 10 months remaining on our rental and am looking forward to shopping in a better RE market.
I wonder…
If you lowball 40% to 50% because either that’s what you think houses are worth, or will ultimately come down to; then isn’t it more likely that one of the following will happen long before you get a house:
1. any house that you like will be purchased by a person more foolish than you who now qualifies to buy a reduced price house, but at a price higher than you’re willing to pay.
2. or, if the economy tanks so bad that there are no such people, what makes you think you’ll still have a job and be able to buy a house.
To anon. at 3:46:
Whoever thinks like you already had bought a house in the past (70% home ownership), easy lending is being tightened so that those low income class really can not buy anymore (a good 20% percent of the population?), flippers disappeared because house doesn’t seem to appreciate at 10,20,30% per year;so what was all the above left us?
only the few percent of the population (wise ones?) can realize what is asset, what is liability.
Really never heard of majority of the population can make a killing in certain group exercises, just like winners are usually loners.
It will be interesting to see where the mortgage rate is going to go when the banks see more and more foreclosures. They got to make their money back somehow.
SHOULD I SELL MY HOUSE FOR $30,000 less then market value? OHHHH someone will buy it i bet! Wait… if i sell at that price, how can I afford a new house? I’ll have to move my kids into a tiny apartment for $1500 a month. DAMNIT.. Maybe I’ll just wait a couple years and see how things pan out. Yeah… I’m glad I didn’t do anything rash like this website says…. WHEW.
anon,
you know very well (if you have a brain) that not eveyone has the option to “stick it out.”
plus, you have many (the majority) of homeowners who bought well before the recent runup and can still make a healthy profit at 2002 prices.
Only the fools who bit off more than can chew during the past few years are going to get burned by this price collapse.
they were only able to buy by virtue of a BS loan. take away the play money and you’re left with those with real money, which is who is driving the market right now.
Anonymous said…
“It will be interesting to see where the mortgage rate is going to go when the banks see more and more foreclosures. They got to make their money back somehow.”
7/21/2006 04:10:00 PM
Fannie and Freddie are going to look for the hedge funds/investment banks to make good on the derivative contracts they have bought from them over the last 5 years…comical, we have had quasi government empti-suit types at Fannie and Freddie trading with Wall street heavy since late 00’…who do you think has come out ahead on these trades? Hilarious we have had 30 something wunderkinds selling these “government sponsored enterprises” what will be proven to be WORTHLESS paper…these yoyos at the gse’s actually think they are hedged. If you have $1, how do you guarantee $100, $200 or $300 worth of paper?
Let me tell you something about israel defense forces….they are VERY good at what they do. When I was in the service, we trained with these guys, now my son (Army Ranger) trains with them too.
No question, guys like this coulda taught Delta Force a thing or two.. (And probably did…)
ObBubble: glad to be renting for the foreseeable future.. Used to think it was throwing money away, but only when renting cost more or the same as owning…
grim said…
Harder To Become A Hair Stylist In New Jersey
7/21/2006 10:12:45 AM
I read that post Grim. Very nice. I’m a new agent, but I’ve been doing property management with my pops since I can remember. It’s sad that I have to compete with all these agents that are just good salesmen when I’m that rare agent genuinely interested in helping people out with real estate.
It’s probably the greatest source of wealth anyone can have. My dad has the equivalent of about 8th grade education from Portugal, and he has $5 million under management all by himself. He never cheated anyone, and that’s how he raised me.
I agree, requirements should be raised for agents. I happen to work with some alright ones. That would certainly reduce the chances of getting a bad agent, and increase the barriers to entry.
Still, I’m sure we’ve all dealt with or known someone who has dealth with doctors, lawyers, dentists, etc. that have no idea what they’re doing. And those people spend years and hundreds of thousands of dollars on training and education.
For starters, lobby Trenton to do away with that law saying we can’t refund part of our commissions to our clients. Change that law and see how many true agents refund their commissions and force the bogus agents to do the same or leave the industry.