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Old 01-05-2009, 10:53 AM
 
132 posts, read 346,684 times
Reputation: 63

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Quote:
Originally Posted by cohdane View Post
FMV "And no one is argueing that SALES are down. Doesn't mean prices are and will continue to be down."



I think stosh is referring to basic, Econ 101, premise of supply and demand. If sales drop and stay down, prices invariably also come down to respond to the lack of buyers.

Sales drop....inventory goes up....competition increases....prices drop.

There are lots of markets out there that hit a wall in sales just before the prices tanked. Eventually someone gives in and drops their price, resetting the comps and fair market value at a lower level. And where there was panic buying on the way up, there will be panic selling on the way down.
Thanks Professor.

You could not have explained basic Econ 101 any more clearly.

I hope others can figure it out as it's not rocket science...
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Old 01-05-2009, 11:08 AM
 
5,458 posts, read 6,703,039 times
Reputation: 1814
Quote:
Originally Posted by chet everett View Post
FMV and I are not talking about counties -- specific SUBURBS.
He was saying that "Most ALL" of the suburbs went against the trend. If that's true, it should show up with the outlying counties showing different behavior than the city itself. I'm just not seeing it. Within the large margin of error for median price measurement, all of those stats look pretty similar.

Quote:
In some towns there is STILL competition from "tear down builders", which sets a floor. Sure, in some cases that floor is lower, but it has not disappeared.
How effective is this floor if it keeps going down? It sounds like every other area - relatively gradual price declines based on lack of demand. It's not like tear-down builders have a totally separate set of clients totally insulated from the rest of the RE market - they've got to deal with supply and demand just like anyone else. Price too high and the value afforded by a new house in a specific location is overshadowed by a less expensive house a bit further away or a bit older.
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Old 01-05-2009, 11:53 AM
 
945 posts, read 1,984,915 times
Reputation: 361
Quote:
Originally Posted by chet everett View Post
I have no idea what a "natural level" is.

As I pointed out, when you look at areas that have data showing that the median price is not behaving inline with the general trend, the reasons behind that behavior are hard to pin down without knowledge of the gory details.

Suppose that you do live in a neighborhood where values are far in excess of the region's median. It is also a good bet that incomes are far higher than the region's median. Let us further suppose that one neighbor does "need" to sell for what ever reason -- its reasonable to assume that the most likely buyer will also have a income inline with the remaining neighbors.

They are a variety of reasons to believe that the further an area is out on the "high tail" above the medians in terms of housing value and income the better insulated they may be from shifts that drag down the low end and even middle.

Bingo, but then you have the people like the ones on this forum who think that if they are approved for say, a home that's 300,000, they'll just go house hunting in a neighborhood that sells for 500,000, because some delusional assumptions have been put into place that they can and will, eventually be able to. What they fail to realize is that they are completely wrong. And your next post hits the nail right on the head!! It's impossible to get someone from North Carolina or California to understand this. I've tried, countless times. It's also not the first time NC has posted numbers from IL counties. Interesting how she ignores that the price drops are much less than all have claimed them to be. I have always conceeded that we did see drops since peak, more like 10-12% in most counties, but that they will likely not go down anymore and if so, VERY LITTLE. This unrealistic "forcast" for real estate is nothing but foreclosure bargain hunters thinking that our entire nation's real estate will turn that direction. It is simply a clear case of misinformed folk who take all data as biblical, leaving our all the variations involved. It's actually laughable that one poster thinks that he'll get a home for 50% OFF of CURRENT list. But gosh, maybe I should put mine on the market and go see if one of those high-end builders with a 5,000sq. ft., custom, custom EVERYTHING, 1.5mil. puppies in my community would take $750,000- Please!
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Old 01-05-2009, 12:33 PM
 
1,989 posts, read 4,458,258 times
Reputation: 1401
Quote:
Originally Posted by chet everett View Post
in many Illinois suburbs there a specific school attendance areas that are more desirable, even then you rule out some streets (too close to the commercial district, too far from a park). There are limited numbers of homes to consider in the desirable areas.

In some towns there is STILL competition from "tear down builders", which sets a floor. Sure, in some cases that floor is lower, but it has not disappeared. In such towns basically any buildable lot is going to have some competition to snap it up. These lots in desirable towns will ALWAYS be more in demand than the lots sold by builders in some far flung suburb of tract homes. If the tract builder is selling lots at $75K and sells completed home and lots for $250K or something while the custom builder is selling the lots in a mature community for more than $250K and the homes for $800K how the heck are prices across the board going to compress?

Buyers would flock in from the hinterlands to cut their commute times, get into a superior school system, reduce their property tax rate. It would be a "land rush".
All boats sink and rise together. Even in the "high end" areas.

I've been looking for the past year in a neighborhood with top schools, multi-million dollar homes, amenities galore, etc, etc, etc. According to the map that you posted from the Chicago Trib, prices are down 29% in the last year.

The $1.2 million dollar homes have become $1 million or less homes. Some are foreclosing. So the 800k houses have become 6-700k houses. The 400k houses have become 300k houses. And so on and so on and so on.

The buildable lots are not being sold because there is already (last I checked) 46+ months supply of $million and up homes. I can't count the number of vacant new construction homes. Thieves have begun stealing the copper downspouts of them.

There is no "land rush" here. Not even close.

And by the way, you need to read up on the Alt-A and Option ARM resets and recasts that will start hitting bigtime this year. Apparently, they're forecast to do to the high end market what subprime did to the low end market:

First Hangover of the Year: 'Alt-A' Loans - WSJ.com

"For those unfamiliar with this piece of the mortgage rout, Alt-A home loans typically went to borrowers with otherwise fine credit scores, but some other underwriting risk, such as lack of verifiable income."

Alt-A Loans Spiraling Downward - Seeking Alpha

"This may well signal the beginning of a move up the scale in terms of foreclosures. We aren’t to a large degree talking about first time homebuyer types of homes now. The upper end is starting to get hit and that has a whole new host of implications. These homes are not particularly attractive to investors as the price generally is too high for the property to pencil out as a viable rental. Additionally, the dispossessed homeowners are not likely to adapt well to a much lower standard of living. Moving from granite counter tops in a 4000 square foot house to Corian in a tract home is not an easy adjustment."


Alt-A - Wikipedia, the free encyclopedia

"Because Alt-A loans are also the financing of choice for most non-owner occupied, investment properties, as a class they represent a far greater likelihood of borrower default than conventional, conforming mortgages, since people are more likely to abandon a property in which they do not live than they are to risk losing their primary homes."


Mr. Mortgage’s Guide to the TRUTH! » Moody’s Ominous Alt-A Warning - Mortgage Implosion Round 2

"Alt-A loans cut across all socio-economic boundaries and can be found littering some of the most affluent areas in the nation. For those of you who think that higher priced regions are ‘isolated’ from price declines just because they have not been beaten as badly as Subprime epicenters yet, this should be a wake up call."
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Old 01-05-2009, 12:41 PM
 
Location: Los Angeles Area
3,306 posts, read 4,143,978 times
Reputation: 592
Quote:
Originally Posted by fairmarketvalue View Post
What they fail to realize is that they are completely wrong.
Why are they wrong? You seem to believe by stating something again and again you make it true.

Quote:
Originally Posted by fairmarketvalue View Post
It's impossible to get someone from North Carolina or California to understand this.
Why it is impossible to get someone from North Carolina or California to understand this? And is it just these two states, or are you mentioning this for particular reasons...perhaps because a certain group of people that doesn't agree with your hubris is from them?


Quote:
Originally Posted by fairmarketvalue View Post
I've tried, countless times.
You've tried what exactly? Ranting and telling people they are "completely wrong"? Why not instead try justifying your point of view...you know with actual data? Of course the problem with that is...the data may not conform to your point of view and you won't be able to pretend that all is well.

Quote:
Originally Posted by fairmarketvalue View Post
This unrealistic "forcast" for real estate is nothing but foreclosure bargain hunters thinking that our entire nation's real estate will turn that direction.
Oh yeah? You're going to have trouble explaining the discounts in mortgage related bonds, what is going on with futures and projections from all the major financial institutions.

If you believe its so unrealistic you can make a lot of money betting against it as the vast majority of people/institutions are betting for it. I would suggest buying up some mortgage back securities, get in on the future markets (e.g., case shiller futures), among other things. Put your money where your month is...

Quote:
Originally Posted by fairmarketvalue View Post
It is simply a clear case of misinformed folk who take all data as biblical
As opposed to misinformed folk who ignore all data and put their head in the sand? Data is just data, they are facts. It is the interpretations of the data that are up for debate.

Quote:
Originally Posted by fairmarketvalue View Post
It's actually laughable that one poster thinks that he'll get a home for 50% OFF of CURRENT list.
Why? I can think of a number of areas where this isn't unrealistic.
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Old 01-05-2009, 01:50 PM
 
28,455 posts, read 85,157,040 times
Reputation: 18726
There are plenty of custom builders with a fortress of cash, honestly I think most of the guys that I've met that have been active in West Cook Co and Eastern DuPage used no financing for the vacant lots they hold, No financing costs means their needs for some cash for property taxes are modest. For the folks that have good crews they have cash flow from doing remodeling and such.
They are not going to increase the supply of unsold houses, but they do continue to buy when homes that met their requirement come to their attention.

Like in every other business there some guys that fall on their faces, but the smart builders did not just avoid 'exotic' mortgages they often had ZERO exposure to credit risk by acquiring run down homes for cash and "banking 'em" until a buyer approached them for a project. This is still a factor.

Granted the towns I'm talking about are not a majority of any county, heck they don't even make up all the residential property in any zip code, as there are condos and townhomes that behave in a more erratic way in just about every town...
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Old 01-05-2009, 02:22 PM
 
Location: Humboldt Park, Chicago
2,686 posts, read 7,855,417 times
Reputation: 1196
Default Chet and FMV

I agree with Chet that the smart, established builders will survive. Many other marginal and newer builders will not.

I believe most markets in the Chicagoland area will continue to decline over the next year. Itasca is a very similar market to Wheaton (good schools, train station, perhaps slightly better interstate and city access, but inferior downtown amenities). In Itasca, many single family homes that were going for $1MM are now going for $800M. I suspect by middle of next year you will be able to buy a 2006 $1MM house for $700K if the seller is really wanting to sell (not even a foreclosure or short sale).

I think certain markets in Chicago will fare better than others due to train access and interstate access along with proximity to downtown and schools, but I have not seen any markets that have not seen declines in prices over the past 1-2 years and expect most if not all of the Chicagoland market to see continued declines for the next year or so.

I think now is a great time to buy if you can find the right deal but feel in the next 6-12 months there will be even more opportunities for opportunistic buyers. I am looking to be one of those buyers, but continue putting my purchase date further and further back. I was originally looking to buy in mid to late 2008 but am now looking at early 2010, maybe even later if the market continues to decline and I don't run into the right opportunity. Of course if I found the right property today priced right I would pounce (already have down payment of 20 percent in bank awaiting perfect opportunity). I just haven't found that perfect opportunity, though I continue to look for it.
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Old 01-05-2009, 03:22 PM
 
Location: 92656, the OC
88 posts, read 318,785 times
Reputation: 82
Default how sad

Quote:
Originally Posted by fairmarketvalue View Post
Whatever! Didn't anybody ever tell you not EVERYONE should be a homeowner? Please, get your head out of the clouds! Our society has a housing cycle for a reason. There is also a rental market for a reason. So what do you suppose would happen to all of those rental properties if everyone was able to "afford" a home? Just wondering.
you dont know squat about business 101 or the gross national product etc and how it works. you know yourself the housing was over inflated and needs to come down and until it does we will still have these problems. the bubble must burst.
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Old 01-05-2009, 03:28 PM
 
Location: Humboldt Park, Chicago
2,686 posts, read 7,855,417 times
Reputation: 1196
Default FMV, Smart Guy Whether I agree with them 100% or not

I may not agree with FMV but they are clearly educated on economics and business, being the owner of an accounting firm. I think people should refrain from gross personal attacks on people they do not agree with.

FMV believes housing prices have bottomed and will not be going down (in the western Chicago suburbs, particularly Wheaton). I believe they will drop further in the Western Chicago Suburbs, Chicagoland as a whole, and the nation as a whole. Some areas will experience bigger declines than others but I believe almost all areas will continue to experience price declines, with a bottom occurring in Chicago in early to mid 2010 and mid to late 2010 nationally.
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Old 01-05-2009, 03:46 PM
 
Location: Los Angeles Area
3,306 posts, read 4,143,978 times
Reputation: 592
Quote:
Originally Posted by Humboldt1 View Post
I may not agree with FMV but they are clearly educated on economics and business, being the owner of an accounting firm. I think people should refrain from gross personal attacks on people they do not agree with.
How does being an owner of a small accounting business imply that they are educated in economics? It doesn't and given that they say so many things that appear to be rather hmm....inaccurate economically speaking one naturally concludes they don't know much about the subject. Now, as far as refraining from personal attacks please feel free to give your pal FMV, the same advice would ya?

Quote:
Originally Posted by Humboldt1 View Post
FMV believes housing prices have bottomed and will not be going down (in the western Chicago suburbs, particularly Wheaton).
Yes they believe that and tell anybody that disagrees with this that they are "complete wrong", calls them names, distort their positions and rants endlessly about it. Did you know that people from North Carolina and California can't understand their deep logic for some reason? About the only thing they don't do.....is actually justify their position.

Its fine to believe something without any rational justification, the majority of the country does after all, but in this case you should refrain from endless diatribes against those that disagree. There is only one way to revolve disagreements about matters of fact - rational discourse.

But you can continue to support this sort of behavior...
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