November 17, 2006

10:09 AM

For months the economists have been saying that housing sales and starts would pick up... But, that doesn't seem to be the case. While some of the downturn may be regional, my market up in Cleveland seems to be pretty soft these days, too. Besides what the pundits say, what is the housing market like in your area? If you are a seller - how has that been working out for you? If you're a buyer - have you been able to grab any excellent deals?
posted by tgrundke (32 comments total)

Lots of housing questions posted in Ask Mefi......
posted by CynicalKnight at 10:12 AM on November 17, 2006

Interesting article? No.
Interesting questions? Yes.
posted by blue_beetle at 10:14 AM on November 17, 2006

New housing starts were down 15% last month alone. That's enormously huge.
posted by talldean at 10:18 AM on November 17, 2006

Housing sales in the US always suck in the fall. They'll pick up again in the spring, like they always do. The question of course is the price.

The price of houses has to come down, because mortgage rates have gone up. Assume a family earning $X can afford a mortgage payment of $A per month, and $A is based on house price of $P and interest R%. Based on all available data, that family is still basically earning $X, and can still basically afford only $A. But the rates are now (R+e)%, so to keep $A essentailly the same (plus or minus a bit, but you get the pitcure) the house price has to change to $(P-d).

The problem (possibly epic disaster, but probably not) is if the family that now owns the house in question paid more than $(P-d) for it and structured their finances based on getting $P for it. Because they are going to have some problems.
posted by Pastabagel at 10:18 AM on November 17, 2006

Santa Clara Valley is off maybe 10% from 2005, but sellers are 'sticky' and the (smart) buyers are patient. This is 'entry-level' $400-$600k stuff. I've been watching one particular development near Milpitas for about 6 months now; prices are declining, not rising, that's for sure.

What's going to be putting the market's nuts in the vise is the $600B in ARM resets this year and the $1T in 2007 & 2008.

The question is just what year the market will bottom out at; in Silicon Valley it depends on hiring patterns.

Note that the industry's 'median price' number is completely bogus. $/sqft is much better. This blog lays it all out for the valley.

This blog is my favorite these days
posted by Heywood Mogroot at 10:22 AM on November 17, 2006

My parents are having a bitch of a time selling their place in Florida.

On the other side of the coin, my wife and I are looking for a first home in the St. Louis area (around St. Charles or Defiance or thereabouts) in the next couple years, and the prices are scary to a new buyer as well.
posted by Foosnark at 10:22 AM on November 17, 2006

It's been slow in DC, but I've assumed everyone was waiting for the election results to see if they need to move. The house two doors down from me has been on the market for months, and they've recently dropped the price.
posted by MrMoonPie at 10:31 AM on November 17, 2006

Pastabagel: psychology is also important in markets, not just numbers. The market turned on a dime late summer 2005 in most areas.

hmmm, people who 'structured their finances' on reselling their home in under 5 years are bleeding idiots who are to blame for this pricing run-up.

Plus what's going to affect prices more than moderate interest rate changes is the shutting off of the voodoo loan money spigot to these morons.

Not to mention the overall economy. For the past several years $500B/yr has been pumped into the economy via housing equity extraction; the total run up in mortgage debt went from $4.6T in 2002 to $9.xT today. That's $5T in liquidity pulsing around. If MEW falls back to 50% or less of its 2005 level, this is going to screw over the economy quite well, too.
posted by Heywood Mogroot at 10:31 AM on November 17, 2006

I'd been counting the number of "For sale" signs I see in the neighborhood. It's been rising (and not through flipping/ market churn) for a few months now. The same signs, for months and months now. I'm incredibly lucky that my wife was mercenary in getting our current mortgage rate of 5.5%, and figuring out that going any lower would put us into what I (in my naive way) call "Crazy stipulation mortgage land". We've managed to stay well below the Pastabagel panic point of "$(P-d)"
posted by boo_radley at 10:32 AM on November 17, 2006

Phoenix has been one of the many flipper paradises in the U.S. No more.

I'm not sufficiently knowledgeable to tell you why. Maybe the rising prices just rose too high at last. I'd love to get rid of the poorly built shack in which I live, but even with an inflated price on my current place and ten years of equity (which isn't much at all, of course), I'd only be able to make a lateral move. And of course that lateral move would at least double my mortgage payment.

In any case, the flippers and boom builders in Phoenix are still insisting that they can make a profit, so their prices remain outrageous. But since no one is buying, that can't go on forever.
posted by bshock at 10:35 AM on November 17, 2006

Inventory in the Fairfield County, CT ("Gold Coast") area is at a 5 year high, according to friends that are trying to sell their house. Prices have not come down much - they rarely do around here, even in the worst of market recessions - but nothing seems to be moving at all.
posted by psmealey at 10:42 AM on November 17, 2006

The market's gone soft in Toronto. I haven't been able to sell my condo though it's been on the market since June and I've reduced the price twice.
posted by orange swan at 10:44 AM on November 17, 2006

The Santa Cruz Sentinel recently said that house sales in the county are down but prices are up - and up especially in the hill towns like Scotts Valley.

There's a house "that was only underwater once" down the road for sale. A flipper bought that and has had no bites. It might be way overpriced to begin with, I'm not so sure - but it's kind of hard for me to feel sorry for a speculator. Many local houses have been for sale since May.
posted by jet_silver at 10:45 AM on November 17, 2006

Ultimately it might be the deflating of the housing bubble that keeps inflation (and thus interest rates) in check. Good if you have a variable-rate mortgage, but sucky if you're trying to sell.
posted by clevershark at 10:45 AM on November 17, 2006

My sister-in-law is in the process of selling her house in Pittsburgh. The people buying it are leveraged to the hilt -- nothing-down mortgage, two separate loans. They're actually jacking up the sale price of the house artificially above the asking price in order to get a bigger loan so that they'll have immediate money to live on.

Homebuyers like that aren't just screwing themselves, they're screwing all of us.
posted by gurple at 10:45 AM on November 17, 2006

jet_silver opines "There's a house 'that was only underwater once' down the road for sale."

Is that a new financial term? :-)
posted by clevershark at 10:46 AM on November 17, 2006

A couple of points here:

1) The housing market varies wildly from region to region.

2) St. Louis Fed Prez William Poole pointed out on Tuesday that there's a good chance that housing prices could very well be worse than we suspect because of the widespread use substantial builder incentives such as paying the mortgage the first few months, throwing in thousands of dollars worth of furniture and appliances etc. (I've heard tales of builder incentives upwards of 30-50K on $300,000 houses - that's huge)

3) Much of our housing data sucks in that it requires a lot of self-reporting by builders/real estate agents. So when market is good, data is fairly accurate. But when there's a downturn in the market they have strong incentives to lie in an attempt to keep public perceptions from affecting the housing market.

4) Historically housing downturns run about 18-24 months. It's sort of widely acknowledged things peaked in Q4 of '05 - so don't look for things to get much better before the summer of '07.

5) Because of the exuberance surrounding non-traditional mortgage products (no money down, interest only etc) something insane like 10% of all mortgages in the country are set to reprice in the next year. While most people think the effect of this will be far from cataclysmic, we can safely say it won't be good for the market as many people will be bounced from homes, unable to make payments on a house they couldn't afford in the first place.

6) This guy has been doing some pretty terrific coverage of the housing market (and economics in general):

http://bigpicture.typepad.com/comments/
posted by Heminator at 10:47 AM on November 17, 2006 [1 favorite]

Really, orange swan? Do you live downtown? Over in newly "trendy" Leslieville, my s/o and I went to a condo showroom a few weeks ago, less than a day after it had opened, and it was a feeding frenzy...two thirds of the lots sold already, people rushing around with pre-approved mortgages. And the price of non-condos are still, if you'll pardon the expression, through the damn roof.
posted by The Card Cheat at 10:47 AM on November 17, 2006

gurple opines "Homebuyers like that aren't just screwing themselves, they're screwing all of us."

Don't forget the monstrosity that is "interest-only mortgage lending". I wonder what idiot ever thought this could be a positive thing.
posted by clevershark at 10:47 AM on November 17, 2006

I should be clear that I don't really think it's the strapped homebuyers' fault. It's the financial vehicles that are available that allow them to put themselves squarely under a mound of horrendous debt.

We bought our house in Seattle three years ago. Pretty much immediately after we bought, things started going up, and up, and up. The area mostly seems to be leveling a bit now, but we would have a hell of a time affording our current house, now. I might find it attractive to leverage myself to the hilt, too, if I were trying to get into this market now.
posted by gurple at 10:51 AM on November 17, 2006

I live close to the oil sands. 'Nuff said.
posted by No Robots at 10:52 AM on November 17, 2006

Pastabagel:

Apparently, housing starts (adjusted for season) are down 27ish% from 2005 to 2006.
posted by talldean at 10:52 AM on November 17, 2006

Our (seemingly) responsible mortgage agent tried to get us to do an interest-only loan, speculating that housing prices would rise so much that any equity we built up would pale in comparison to our profit. We didn't bite, and are now much happier for it. We're not planning on moving any time soon, but it's nice to see the equity, however small, building.
posted by MrMoonPie at 10:53 AM on November 17, 2006

Well, I'm not seeing it.

Around here, house prices and rent are up to 150-200% of their values a year ago. If you can even find a house or apartment. And if you want to sell, if your price is at all reasonable it's unlikely you'll need more than a week to find a buyer. And it's that way over the entire region, in every city of any size for several hundred miles.

Of course, "here" is New Orleans...
posted by localroger at 10:55 AM on November 17, 2006

Pastabagel: psychology is also important in markets, not just numbers. The market turned on a dime late summer 2005 in most areas.

Here's the fed rate hike chart. Mortages are pegged to fed rates, so there's a time delay from when the fed moves to when that change works it's way through the debt system.

Also, there was some indication by the fed in early 2005 that the rate hikes weren't going to stop (and they didn't) because the fed basically had to raise the rates high enough to give the fed enough room to cut in the future if the economy slowed. So your mid-05 number makes sense.

Also, a lot of consumer debt, like car loans and credit cards, and some variable rate home loans are tied to the prime, which in turn is related to the fed funds rate. As fed funds increases, prime increases, and so do car loan rates, credit cards, variable home equity etc.

At some point some family is out there with $A per month at the rate R%, which they though was low because it was a 5 year variable rate loan. But holy cow between mid 04 and mid 05 the fed jacks up the rate 3 and a half points, which means that super low R% is now (R+3)%. and so are the credit card bills and car payments. This family could be shelling out many more hundreds of dollars per month without changing anything.

So now the family has to sell because they house they used to be able to afford they can't anymore. Unlike, boo_radley's prudent wife, who probably locked in that rate as a fixed 5.5% and can sit comfortable in that house for decades knowing the monthly payment will never change, the family in my example is hurting and has to bail out of this house.

This is bad for financial reasons but also the psychological reasons Heywood mentions as well. Even if they get back into a stable situation in a few months, the awfulness of the experience will linger with them for years.
posted by Pastabagel at 10:55 AM on November 17, 2006

Vancouver housing is still insane, although not as bad as Calgary. Also, all 2 million of us have no water today.
posted by mock at 10:59 AM on November 17, 2006

Indianapolis home prices haven't really experienced the huge price increases that other areas of the country have dealt with. In fact, I read recently that sellers were beginning to offer bigger incentives (new appliances, big screen TVs, etc) to help sell their property.
posted by wabashbdw at 11:00 AM on November 17, 2006

Oh, yeah, it's a fixed rate mortgage. Forgot to mention that, Pastabagel.
posted by boo_radley at 11:02 AM on November 17, 2006

Seattle is one of those markets that is buoyed by it's odd geography. The density in the city is limited by water and highways. It's both bad and good for the market.

We recently sold our house that was just outside the city limits - in West Seattle - and moved back to a condo downtown; the Capitol Hill neighborhood.

In order to afford a first home (median price: $350-$400K) people only had a few options to remain even remotely close to the city. West Seattle is one of those options. We took advantage of the trend to get BACK into the city. We had to downsize significantly. Now we have no commute and can walk to work again and live in a neighbor hood where the median home price is 800K and climbing still.

My worry is there a lots of new condos coming up nearby. Ours was a conversion and so was a great deal that sold overnight. But the glut of condos could be bad for us eventhough the average price is 200-300K MORE than ours was.
posted by tkchrist at 11:04 AM on November 17, 2006

"Hey, gang, let's talk about the housing market! What do you think??" = bad post. Since there's no "bad post" flag and it's not worth taking to MetaTalk, I'm bitching about it here. Suck it.
posted by languagehat at 11:08 AM on November 17, 2006

This bubble is regional. Markets like Rochester/Buffalo are dismal, and good for a buyer since there are no jobs while markets in California and Phoenix are or were booming because of the jobs and locale.

My area, Raleigh-Durham, prices have been steadily rising - as one would expect. None of this speculation going on as in the wild markets. If I sit on my house for the next 5 years, I will stand to make a decent 40% profit or so, at least. This is probably the norm for those who don't live in Cali, Phoenix, Boston, parts of Florida, and Manhattan.

The bubble is regional.
posted by premortem at 11:09 AM on November 17, 2006

I have no evidence of this, but I wonder if the housing boom/real estate boom was just a way to continue the dot-com boom. The stocks crashed because people sold them, so where did the sellers put that money? REIT's maybe, maybe commodities, maybe overseas, all of those things took off in 2000 when the market imploded.

Furthermore around that time China as a manufacturing supermarket really took off, basically depressing the prices of manufactured goods and clothing. Dunno.
posted by Pastabagel at 11:10 AM on November 17, 2006