http://realestateandhousing2.blogspo...cane-gets.html
Mike's got some strong opinions - perhaps even more extreme than I.
For example, he think Roubini is smart but an ivory tower copout.
But I never question his real estate, man on the ground data.
Mike's got some strong opinions - perhaps even more extreme than I.
For example, he think Roubini is smart but an ivory tower copout.
But I never question his real estate, man on the ground data.
Million Dollar Plus Homes - Here’s something you haven’t read about. For the past two weeks I had two of the most interesting residential clients I have ever worked with. This was a husband and wife team that is involved in international investing at a level very few people are exposed to. They were here shopping for a vacation home, purchasing 60 hours of my time in a block.
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I don’t work with "lookers" unless they are prepared to shell out a minimum of $7,500 for 30 hours. So when I spend 60 hours with buyers looking at homes, they are real buyers . . . or they are sharp enough to gather information to make an intelligent decision about buying or renting. And that is exactly what happened here.
After two weeks of looking at homes in the $1.5 to $3M range, my clients decided NOT to purchase a vacation home, but instead to rent this coming season, and wait for prices to come down further. Very smart decision from the sharpest buyers I have worked with in several years. Here’s what’s interesting.
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Second, Third and Fourth Homes - The market that we were looking at consists of homes that start at $1.5M and run all the way up to $10M. In the communities we toured, these are second, third and fourth homes for many people. Two years ago, there were a handful of these homes on the resale market. Today, the numbers of these homes on the market is staggering. Why? A little research into who the sellers are, spells a picture we have yet to grasp as a nation. Many of the sellers are financial executives that have lost their jobs. Some sellers are high net worth individuals that have purchased several of these homes to flip when the average Joe was buying condos in Miami or single family homes in Cape Coral. And some of the sellers are people that have simply overextended the good life to the point of breaking. Overall, it is the same story we hear at the lower end . . . just a different flavor.
The only difference between this market and the lower end, is the number of foreclosures and short sales. Oh . . . but wait. This is a very stubborn market. These are people that still believe the value of their homes can’t go down 20, 30, 40, 50%. So a solid one half of these puffed up sellers are priced in the stratosphere. The folks, for the most part, will resist reality, because they are so out of touch with reality. And here’s the catch. Even the sellers priced below the "market" are not getting bids. Once again, we have more homes than we have people to live in them. Moreover, when it comes to the level of home, the supply is even more staggering by percentages.
My clients decided not to buy right now, because they believe the global markets have not finished punishing those that are sucking on helium balloons and sipping the Kool-Aid being served up by Bob Toll, Cramer, Paulson, Bernanke, Roubini et al. So my clients will rent this season, and come back after a market crash forces these puffed up sellers to face reality.
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I don’t work with "lookers" unless they are prepared to shell out a minimum of $7,500 for 30 hours. So when I spend 60 hours with buyers looking at homes, they are real buyers . . . or they are sharp enough to gather information to make an intelligent decision about buying or renting. And that is exactly what happened here.
After two weeks of looking at homes in the $1.5 to $3M range, my clients decided NOT to purchase a vacation home, but instead to rent this coming season, and wait for prices to come down further. Very smart decision from the sharpest buyers I have worked with in several years. Here’s what’s interesting.
...
Second, Third and Fourth Homes - The market that we were looking at consists of homes that start at $1.5M and run all the way up to $10M. In the communities we toured, these are second, third and fourth homes for many people. Two years ago, there were a handful of these homes on the resale market. Today, the numbers of these homes on the market is staggering. Why? A little research into who the sellers are, spells a picture we have yet to grasp as a nation. Many of the sellers are financial executives that have lost their jobs. Some sellers are high net worth individuals that have purchased several of these homes to flip when the average Joe was buying condos in Miami or single family homes in Cape Coral. And some of the sellers are people that have simply overextended the good life to the point of breaking. Overall, it is the same story we hear at the lower end . . . just a different flavor.
The only difference between this market and the lower end, is the number of foreclosures and short sales. Oh . . . but wait. This is a very stubborn market. These are people that still believe the value of their homes can’t go down 20, 30, 40, 50%. So a solid one half of these puffed up sellers are priced in the stratosphere. The folks, for the most part, will resist reality, because they are so out of touch with reality. And here’s the catch. Even the sellers priced below the "market" are not getting bids. Once again, we have more homes than we have people to live in them. Moreover, when it comes to the level of home, the supply is even more staggering by percentages.
My clients decided not to buy right now, because they believe the global markets have not finished punishing those that are sucking on helium balloons and sipping the Kool-Aid being served up by Bob Toll, Cramer, Paulson, Bernanke, Roubini et al. So my clients will rent this season, and come back after a market crash forces these puffed up sellers to face reality.
LENDER COLLAPSE - Over the last two weeks I have noticed a decisive shift in how lenders are handling foreclosed properties (REOs), or maybe I should say mishandling. There are three issues bubbling out of the Ooze of Incompetence at these lenders. First, they can’t get deals done. The ship is headed for the rocks, and the captain has abandoned ship. He’s sitting comfy on his own private island sipping cocktails with the Fat Lady in the thong. This is a very severe crisis in operations. Lenders are not responding to offers, and when they do respond, they make the process so convoluted, that the buyers often walk away and buy another property . . . at a lower price. Instead of jumping on contract and moving them through the system, the lenders have stalled the process to an agonizingly painful stand-still.
Second, over the last two weeks we have seen another leg down in pricing from some lenders. And the pricing makes no sense, because if they managed the sale process properly, there would be no need to slash prices. These two events are disturbing. We are essentially seeing a total collapse in the housing market. Unless someone sprinkles these guys with Smart Dust, they are going to destroy themselves. When you look at this, you don’t think it can get any worse, but it keeps getting worse.
The third issue is financing. Its tough to put a deal together, and when you do, usually FHA is involved. The 3% down payment is a myth. Either the seller or the builder pays it, so you still have folks getting into homes with zero down. And the moment they close, they are into negative equity. Thirty days later, they could be 10-15% negative when you consider a falling market and the costs of a buy/sell transaction. When things go bad, as they are, it is the Fed that is eating the 10-15% plus another 50-60K in expenses to unload foreclosed properties . . . at a very minimum. If you want to hear more, you need to be a client. This is a very complicated subject, but it is at the heart of our crumbling economy.
Second, over the last two weeks we have seen another leg down in pricing from some lenders. And the pricing makes no sense, because if they managed the sale process properly, there would be no need to slash prices. These two events are disturbing. We are essentially seeing a total collapse in the housing market. Unless someone sprinkles these guys with Smart Dust, they are going to destroy themselves. When you look at this, you don’t think it can get any worse, but it keeps getting worse.
The third issue is financing. Its tough to put a deal together, and when you do, usually FHA is involved. The 3% down payment is a myth. Either the seller or the builder pays it, so you still have folks getting into homes with zero down. And the moment they close, they are into negative equity. Thirty days later, they could be 10-15% negative when you consider a falling market and the costs of a buy/sell transaction. When things go bad, as they are, it is the Fed that is eating the 10-15% plus another 50-60K in expenses to unload foreclosed properties . . . at a very minimum. If you want to hear more, you need to be a client. This is a very complicated subject, but it is at the heart of our crumbling economy.