Friday, August 31, 2007

Peer Pressure Not to Buy?

From the Sacramento Business Journal:

Rather than drop prices to entice buyers in less time, John Leonard slashed prices on 22 new homes he built in West Sacramento to sell them in a day -- he hopes in less than an hour. Leonard is owner of Leonard Development Co. Inc. of Sacramento, and he's hired a public auction company to sell homes in his River's Side at Washington Square project quickly.

He's not being forced to sell. The project is still current with its loans. But people simply are not buying them. "There isn't permission for people to buy a house. People's peers, parents and family won't let them feel good about buying. Everyone says, 'Wait a little longer and the prices will come down,' " Leonard said. "The carry cost on the project is not insignificant. We decided on the auction to expedite the sales."
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Hundreds of people have toured the homes, but no one is willing to pull the trigger and buy one. Leonard chose to go the auction route to force the issue. "I wanted to take an aggressive approach to make people come out of the woodwork," he said.
From the Modesto Bee:
Sellers are eager to make deals, and buyers are in control, but there's nary a real estate sign in sight.

Welcome to the new and used vehicle market, where many Northern San Joaquin Valley dealers are experiencing the same slowdown seen in housing. What happens in auto sales often follows housing markets, dealers said. And that's especially true now, they said, because fewer people can refinance their home loans and use the money to buy a car or truck. "That was driving the market," said David Hillier, who owns Hillier Ford in Escalon.
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When housing prices were soaring, many homeowners took equity out of their homes, by refinancing or getting a second mortgage. They often would use the money, which is tax deductible, for vehicles and other big-ticket items.
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Edmunds.com spokesman Chintan Talati said consumers are taking a break on buying vehicles, just as they're stepping back on buying houses. "Housing is such a large part of everything," said Talati, adding that vehicle sales have slumped the most in places where housing has slumped the most -- such as California.
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[Jorge] Elizalde [owner of El Tio Auto Sales] said he's also noticed that -- perhaps because so many housing loans have failed -- banks are hesitant to give car loans. So he's financing more loans himself.
Also from the Modesto Bee:
Home sellers are not automatically turning up their noses at offers that come in far below their asking price these days as prices stagnate and the inventory of homes for sale remains elevated. Realtors and other experts in the Northern San Joaquin Valley said they're seeing more offers these days that come in well below the asking price. Sometimes, sellers are accepting them.
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There's a real risk the offer will insult the seller to the point that they'll refuse to counter, Realtors say, and the seller easily could make the assumption that the buyer isn't committed to making a deal..."When you're making the offer, if you justify that offer with outside data, then it's much less likely to be perceived as being an insult or (the buyer) not as serious," he [Jon Boyd, president of the National Association of Exclusive Buyer Agents] added.
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Buyers even may write a letter to the sellers to make their point, as they did when the market was hot and they aimed to stand out from the crowd, [Dick] Gaylord [president-elect of the National Association of Realtors] said. That way, they can detail what they like about the house but express their fear of future dropping values.
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But sellers shouldn't take a low bid as the equivalent of a slap in the face, said Chad Costa, a Modesto Realtor. "The first reaction is to say, 'how insulting,' and I say that it's just how the market is right now," said Costa, with Re-Max Executive.
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Stan Lynam, who recently retired as a Realtor after 22 years, including 10 in Modesto, said sellers who receive several low bids may opt to pull their house off the market. He said a client recently reduced the asking price by as much as 15 percent, and still got few nibbles. So the client decided to wait it out.
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Valley realty experts...acknowledged that what's a low offer now could be right in line six months from now if prices keep falling.
From the Sacramento Bee:
Never mind that many people will be on a final summer road trip or making eggs and bacon at mountain campgrounds this weekend. Real estate agents will be holding open houses over Labor Day weekend, even if foot traffic is less than a regular weekend. Over the three-day Memorial Day weekend in May, agents hoped high gas prices might keep people closer to home and cruising open houses. With gas prices lower now, agents like Mona Gergen, a specialist in Sacramento's Pocket neighborhoods, just hope it's not awfully hot Sunday for traditional 2-4 p.m. showings.
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What's definitely not hot this summer is home prices here (especially if you're selling a house). The nation's gold standard for measuring rising and falling prices lists five Central Valley metro areas and Reno among 10 regions with the most depreciation. The report for April, May and June was released Thursday by the Office of Federal Housing Enterprise Oversight. It measures sales prices of the same houses over time. Once-booming El Dorado, Placer, Sacramento and Yolo counties ranked ninth nationally with a 6 percent decline in home prices from the same time in 2006. Bigger decreases were seen in Yuba and Sutter counties, Modesto, Stockton and Merced, which led the country with an 8.65 percent decline.

21 comments:

Patient Renter said...
This comment has been removed by a blog administrator.
wimpyVO2max said...

Where was the Bush administration four years ago when lenders started handing out no doc loans, liar loans, negative amortization, etc.? The Bush administration is responsible for regulating lenders and banks. If the Bush admin had enforced regulations, this whole subprime mess never would have happened.

rocklin renter said...

You guys realize that any "plan" that he proposes has to pass through congress, right?

That pretty much means nothing will get done till the mess has already sorted itself out - as usual they will be a few years late and a whole lot of dollars short. This is nothing more than a political play to boost support for the -R- ticket in 08.

I do agree the current admin should have done more to enforce regulations. Just as the admin before that should have done more to enfore regulations during the dot-bomb.


Anyhow, new excuses are fun.

So, we have:

Media, the internet, and now peer pressure! Awesome! What is next? My dog told me not to buy?

Diggin Deeper said...
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Diggin Deeper said...

"If the Bush admin had enforced regulations, this whole subprime mess never would have happened"

Really? This whole subprime mess rests with the President of the US? Now that's a novel hunt for the guilty.

The Federal Reserve is non-partisan and dropped rates to their lowest levels since the Depression. The President can't just ring up Greenspan and say, "Al, we need a coupld hundred basis points this month".

To place the blame on any President and his/her Administration is ludicrous and ill-informed.

David said...

Yes, the FED is non-partisan, but the laws governing what can and can not be offered to consumers is enforced by the executive branch. The president and Congress didn't do crap for the last 6 years to protect consumers.
The president hasn't been enforcing and Congress keeps letting the industry rape the populous. Wasn't charging interest percentages in the high 20's and 30's considered predatory not that long ago! Not to mention the bankruptcy bill and other wonderful innovations of the last 6 years that all seem to be designed to fatten the wallets of the presidents supporters.
So I can't blame everything on the FED, just like I can't lay everything on the consumer either.

Diggin Deeper said...

Anybody else read the report that says you're going need good credit to get the help, and the projected number of households that could take advantage of this program was 160,000 max.? I believe that would proabably represent less than 10% of the affected households holding bad paper.

Remember Katrina...Our government was going to save the day but got bogged down in the paperwork and red tape. It's still a mess in New Orleans.

Bakersfield Bubble said...

"Really? This whole subprime mess rests with the President of the US?"

He could have "decided" to get rid of him (Greenspan). He is allowed to do that. Instead he "decided" to keep him.

Bakersfield Bubble said...

"To place the blame on any President and his/her Administration is ludicrous and ill-informed."

The President also had control over congress and he had control over the OCC and OTS (which regulate banks) and could have easily forced them to raise credit standards - instead he "Decided (since he is the decider)" to leave things alone and let the goldilocks and "great story never told" economy run its course?!?!

rocklin renter said...

And likewise we can blame the previous admin for the shortcomings of the dot-bomb, and the Enron type scandals that rocked us in the early 00's as they were mostly perpetrated under their watch.

IMO this problem would have happened no matter who was in office, short of a true blue businessman who was keenly interested in most aspects of the financial markets.

We don't elect those people. Too boring.

David said...

"We don't elect those people. Too boring."

Nobody has the b$lls to admit that our entire economy is a shame or if they do the media immediately ignores them. Most people don't even get the chance to be exposed to "those people."

Diggin Deeper said...
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Diggin Deeper said...

"Decided (since he is the decider)" to leave things alone and let the goldilocks and "great story never told" economy run its course?!?!"

Why not? What President wouldn't... Our Presidents are supposed to consult a crystal ball that gives them the foresight to predict future events? That an Administration willfully knew that the subprime mess would be what it is today?

Get serious...

Most every pundit who's reported on this debacle has called it wrong.

If every American citizen had the chance to put a set keys to a home in their hands, what President, of sound mind and regardless of party, would step in and say "Raise the lending standards so those on the margin won't be able to afford to buy"

This is typical of those who now have hindsight and must hunt for the guilty. Chew on the consumer, chew on the unscrupulous lender, and let the blame rest where it belongs

wimpyVO2max said...

[diggin deeper]"Why not? What President wouldn't... Our Presidents are supposed to consult a crystal ball that gives them the foresight to predict future events? That an Administration willfully knew that the subprime mess would be what it is today?"

Perhaps you don't understand how government really works. No, the President himself is not personally involved in the regulation of lending practices for mortgages. The President does, however, set the "general tone" of how he expects his executive branch agencies to behave.

Bush's leadership has been very pro-big business: tax cuts, deregulation, etc. If the big finance companies want a free reign to write bad mortgages to make more fees, then Bush's bureaucrats step out of the way. That's the way it has been with this administration: profit always comes first, whether or not it's in the nation's best interest.

So, yes, I do lay most of the blame for the subprime mess at Bush's doorstep. He set the tone of "let business do what business does," the regulators got out of the way, and the mortgage brokers, banks and realtors went nuts grabbing fees. The Decider decided to deregulate and now he's got to deal with the hangover.

Giacomo said...

Why didn't the Democratic party leadership speak out during all those YEARS when President Bush was failing to rein in those greedy lenders?
He musta hypnotized 'em. He's an evil genius. Or a fool. Oh, I can't decide.

Sippn said...

You forgot Clintons were in RE development (Whitewater)

smf said...

"If the Bush admin had enforced regulations, this whole subprime mess never would have happened."

BS. If the regulations had been enforced, we would have had the other side complaining about the lack of options available.

Fingerpointing after the fact does not serve a purpose, especially when there are sooooo many guilty parties out there.

norcaljeff said...

Pure BS. When has any kid listened to his/her parents or family when making a decision. Not for several generations. It's a cop out, this guy built crappy townhomes in a crappy location during a crappy housing market. Just admit it and move on, quit assigning blame.

Gwynster said...

There are so many places to lay blame when it comes to this housing mess, it hard to know where to start. This is what happens when brilliant people do not think holistically but then I would say that, I'm an ENTJ >; )

wimpyVO2max said...

smf:"Fingerpointing after the fact does not serve a purpose, especially when there are sooooo many guilty parties out there."

Pointing out the Bush administration's lack of regulation and lack of enforcement after the fact is important because it's the only way we're going to stop this sort of real estate wipeout from happening again.

Imagine if the government abolished speed limits on all Interstates. Speeds would go up, people would buy faster more powerful cars and inevitably there would be carnage. Fatalities would zoom upward.

The problem with no speed limits is that YOU can be a responsible driver but it's the OTHER GUY that takes you out. Same thing with mortgages. YOU can borrow responsibly but because there were no "mortgage speed limits" the OTHER GUY overborrowed. He defaults along with 800,000 other people. In the carnage YOUR equity goes down even though YOU borrowed responsibly.

Fact is, builders, real estate agents, mortgage brokers, bankers just proved they get carried away with greed and need some adult supervision. If we can get some adults in the White House, maybe we can get some reasonable mortgage regulations and actually enforce them.

wont said...

wimpyvo2max, the RE market today is much more efficient than before, thanks to the Internet. An average person can have access to almost all RE data which used to be exclusively reserved for RE agents before. But a transparent, efficient market doesn't necessarily lead to a rational market. I don't think the government should be responsible for (and is capable of) forcing rationality into people's head (both the lender's and borrowers).