Monday, June 25, 2007

Building Homes or Building Spin?

From the Sacramento Bee (also video):

It's hardly on the scale of two years ago, but across the Sacramento region it's still easy to see entire neighborhoods of new houses rising. Selling them now has become the challenge for an estimated 84 home builders who work the capital region. The five-year housing boom that crested in July 2005 has given way to some of the slowest sales since the late 1990s.

Locally, as nationally, home builders are cutting costs, production and, in some cases, staff. Through May they closed escrow on 3,564 homes in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties, according to DataQuick Information Systems. That's 1,245 fewer than the same time last year, which was then considered a poor performance.
...
Sid Dunmore [Dunmore Homes]: The problem with trying to hit the bottom of the market is very few people are able to do that successfully. What you'll end up seeing happening is you'll hit a bottom, and it will bounce from the bottom. And it will come up, and you'll have a lot of customers come back in and say, "I want to buy because I saw, 60 days ago, 90 days ago, a certain price." And that's no longer available. And so I think right now we're probably bouncing around the bottom.
...
You have to understand most of the overhang was created by ourselves. And I hate to say it, but it was mostly the public builders, which couldn't seem to stop building. In light of no sales they just kept on building, and they created this huge overhang...When that does adjust, we think it will adjust somewhat quickly. Not overnight, but somewhat quickly. When the bounce happens, you'll see prices jump $10,000 or $20,000 very quickly.
...
As long as we have negative media, it's going to affect the buyers' mentality. If we have positive media, it affects them on the positive side. If you see things coming out that interest rates are low, job growth is good, income growth is good, all those things, buyers feel good about where they are today.

There are prospects for continued employment, advancements, raises, things like that. Then they feel more comfortable about going out to buy in the market. It's the insecurity that keeps them out. Right now, there's just a lot of buyer apathy. Once we get past that, we'll have a different market. It will balance itself out.

13 comments:

ralphk said...

I am so sick of the spin.

Message to Sid...WE CAN'T AFFORD TO BUY THEM! IT'S THE PRICE STUPID.

lexi said...

I second that....I cannot afford to pay the mortgage payment AND
the property tax on a over inflated
property. And even if I could..
why would I want to, when I can
rent for a thousand plus less a
month for the exact same property. Nothing will change untill prices come back down to affordable levels. Realtors think
we're waiting for the bottom...
that's not right. We're waiting for prices that make sense and when and if that happens people will enter the market. Untill then common sense is what is holding buyers from this crazy market.

EndUser said...

You are both so right. But there are definitely people out there who would buy now if they thought the market was turning around. What we need is an ad campaign, that encourages everyone to go out and buy a house...any house... that they can make a 30 year mortage payment on, and can put 20% down. People need to be comforted that it is ok to be financially responsible.

Perfect Storm said...

That they can make a 30 year mortage payment on, and can put 20% down.

Also say that if you do not finance a home in this way you cannot afford it.

Sippn said...

PS - sounds good. Please add to it that they should have all their credit cards paid with only 1 $2,000 limit available, 6 months pay in a savings account, 5 years on the job with health paid for, a retirement fund, a college savings fund, 1/4" of thread on all 4 tires, 2 suits, 3 pairs of shoes, clean underwear.....

Who made you boss, anyway?

lexi said...

It wouldn't be financially smart
to buy in this market. Unless
you really were going to stay in
that exact house with that exact
payment for twenty to thirty years
and you could easily afford that
payment. Does anyone do that anymore? It's financially responsible to be careful with your
money. Buying in this market is
being irresponsible unless you
are rich... then who cares about a
measley 50 or 100 thousand loss right? I'm not in either of those
catagories so I'm being responsible
and NOT buying.

Cmyst said...

This guy is obviously trying to spin the market, which is only the capitalist way. Enlightened consumers are really healthy for the economy, though.
It really, truly is the price. Do these industry people not see that?
You can wish, you can spin, you can blame whomever -- but it doesn't change the fact that most of the middle and working class can't afford to buy safe, attractive, decent housing any longer.
I'm not moving out of my gorgeously landscaped rental in a zero crime area to purchase a run-down home or one in a high-crime area. My rent on a 3bed/2.5 bath 1800 sf on a corner lot in EDH is $1600. The mortgage payment on the flipper's remodeled 2bed/1 bath 900 sf home on a small crabgrass lot in Del Paso Heights is $1600.
That says it all pretty much.

Perfect Storm said...

Sippin,

Those are all great points I am glad you brought them up. Yes people should have their financial house in order before buying a home. I knew you would come around Sippin.

Housing/Mortgage Doom 2007

Were right on track for a 50% decline by 2009.

It looks like Northighlands will be at 50% decline by the end of 2008. Way to go Northighlands for living near Sacramento's only XXX porno movie theater will get your housing crash faster than other areas. Rio Linda you are next expect fast sharp declines in the next year.

Perfect Storm said...

From the imploder meter,

Quote of the Week:

I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is now controlled by its system of credit.

We are no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.

—Woodrow Wilson, 1919 (Referring to the Federal Reserve and the transition to a debt-based economy)

God help us all, got popcorn?

aggiealum said...

Centex tried to create this "bounce" earlier this year. Last year, I was sort of interested in the homes at Willow Bend in Woodland's Spring Lake. When I first went, the asking price for the home we were interested in was $454K. We decided that with the mello roos, it wasn't reasonable to buy yet. I kept checking their website to see if they were going to reduce their asking. I was shocked when I saw that they had increased their asking to $459K! All the other sizes also increased by about $5K. So for a sec, I thought, hmmm... is this the bottom? But then we decided to keep renting and thought nothing of the "bounce." Anyway, fast foward 6 mos and now the asking is $425K! Combine this with full upgrades, closing costs, and interest buy downs, the "value" is probably in the mid $300K right now. Anyway, point is, beware of these false bounces from the builders. Check their "sales" around the end of their quarters when they really need to get homes off the books. That's when you'll really see how desperate they are to move these homes.

AgentBubble said...

aggiealum,

Excellent point. This is a common tactic by builders to scare unsuspecting buyers.

As ralphk pointed out, it's really as simple as affordability.

Patient Renter said...
This comment has been removed by the author.
Patient Renter said...

Sid, what scum.

The crap that Sid is spewing about bouncing up quickly from a bottom is equal to the "buy now or be priced out forever" crap that was going on during the boom.

Bottoms are LONG AND FLAT. Anything less than that is a dead cat bounce. End of story.