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Monday, May 15, 2006

Cable TV Arrives Late To Party

This is rich. A little blurb in the Seattle Times on Saturday pointed out that the cable network HGTV is adding three (or maybe four) new shows focusing on—you guessed it—real estate. Check out the sidebar:

A new HGTV show called "My House is Worth What?" is coming to Seattle to find folks who'd like a free home evaluation — and a TV appearance. Here's what they're looking for:

Energetic homeowners who are:
  • Planning to move or refinance.
  • Wondering how much value a recent renovation has added.
  • Willing to submit a photo of their families, along with their home's exterior and interior.
  • Considering using equity to finance a wedding, college education or other milestones.
  • Considering major renovations.
Way to be late to the party, guys. It's no wonder they're looking in Seattle, since we've got to be one of the few places left that you can find "energetic homeowners" that are excited about the prospect of "using equity to finance...milestones." I predict that if these shows even last on season, they definitely don't make it past 2007.

(Sandy Dunham, Seattle Times, 05.13.2006)

29 comments:

Anonymous said...

What kind of numbskull would pull equity out of their home to finance a wedding?

I've got a problem with the whole idea of borrowing against your home. It's just too risky.

In the long run, I'd rather keep my home than gamble it on other things.

Major problems down the road if this kind of thing has become common. A lot of people will be losing their homes and having to bring money to the table.

seattle price drop said...

Time to stop pulling equity from your home.

The NAR released it's 1st quarter '06 numbers today.

National median fell 3.3%.
Chicago down 0.8%
LA down 0.8%
DC down 2.4%

First quarter '06 sales down:
CA 19.2%
AZ 22.2%
DC 18.2%
FLA 15.7%

Sales up 15% in these formerly lagging states: NM, LA, MT, MI.

This spring season has been unusually slow. It will be interesting to see the 2nd quarter numbers.

Anonymous said...

Two media related stories -
1) I saw a show for the first time yestereay on A&E called "Sell This House!" whose lead-in was "is you house suffering from sluggish sales syndrome?". The point of this show was that some homes are not selling (surprise! the new trend is becomming mainstream). Thier solution? In one example of a $1.3M house in Key West, they spent maybe $500 on paint etc, rearranged the furniture, cleaned up clutter, and brought in a few plants from the yard and expected that to justify a rediculous price in a bubble market! By the end of the show people were amazed how much better the house looked but they didn't show it sell.

2) There was an absolutely sickening display on CNN this morning on a segment called 30/40/50 where they bring in "adviosors" to counsel people on what they should be doing in different life stages financially. One of the "advisors" was the author of the book "The Automatic Millionaire Homeowner". He was advising people at all costs to buy a home, even if they didn't think they could afford it, "because you can now get zero down, zero interest loans even if you have bad credit". When questioned on whether this is wise, he went on "I advised one of my friends with large credit card debt in NY to do this, and when his house went up $500K, he paid off all his debts"! I can't believe they're putting trash like that on TV.

Dukes said...

As I have said before I have a friend in the lending industry. He tells me stories that would curl the hairs on your neck.

The ones that especially bother me are the "family" stories. Father thinks he is a local real estate magnet because he has 3 houses, looking to add a fourth.

He is operating completely on debt and robbing Peter to pay Paul. This wouldn't be so bad if it was some single jackass who will learn a lesson. This is a father with wife/kids/dog, you know that American Dream financed on cheap credit. Sickening.

Dukes said...

Today's #'s for King Co. 24Hour Market stats:

New Listings 110
Back on Market 7
Price Increases 10
Price Reductions 37
Contingents 1
Pendings 87
Solds 60
Expireds 11
Inactives 14

Averaging over 30% Reductions to New Listings each time I check.

Tim Dunn, Realtor said...

http://money.cnn.com/2006/05/15/real_estate/NAR_firstQ2005_home_prices/index.htm?cnn=yes

Gives a national rundown of the latest stats, broken down by region and area.

craig said...

Interesting that CNN would have a show touting suicide loans just when the really bad stories of what these loans are doing to people are finally coming out:

Record numbers of foreclosures, people underwater on properties they bought just last year, etc.

Does it seem to anyone that the banks are trying for one last burst of loan folly before the collapse? The 40 and 50 year loans come to mind.

Maybe CNN is trying to make up for the story it ran last week advising people to get out of the housing market NOW!!

The next few months shoud be very interesting.

Oh and re. those house selling shows, they've been on for a long time now- another symptom of the house-mania. Lately, however, the houses have been a hard sell or a no sell so I guess they're starting to leave that part of the show out!

I predict the infomercials touting RE investing will be winding WAY down soon. Same with the stupid RE investing seminars.

Thanks for the numbers Dukes.

craig said...

Tim Dunn-

Is that NAR report for 2005 or 2006? It looks like it's 2005. Big difference!

emcityjill said...

Mr. Dunn's article has a link to another article that takes a less optimistic stance. I don't know how I missed this Fortune article given its catchy title Welcome to the Dead Zone.

mike said...

dukes, is there an easy way to find out the avg days on market when houses are price reduced? It seems like a common sell-side realtor tactic to put a house on the market for 5% more than comps would indicate and then reduce it within a week. I've seen this happen a few times in my neighborhood. This makes me think the reductions are not indicative of the market unless the DOM is high (> 30 days).

meshugy said...

I agree that "reductions" is a relative term. If an insanely overpriced house is "reduced," it can still sell for far above it's real market value. I've seen that happen many times here in Ballard....totally junkers get listed for 500K and eventually get reduced and sold at 450K...but are probably only worth 400K.

Dukes was posting all these "reductions" last month, yet there was a whopping 17.08%YOY appreciation in King County median prices (from 322K to 377K). The median King County price jumped MOM from 365K to 377K.

That tells me that these "reductions" don't really mean much in terms of real market value.

'm

Anonymous said...

OK, can someone help me?

I know only a little about housing/finances/etc; but have been believing in a housing bubble for about 3 years-- believing as ardently as my friends believe in their shocking equity gains (can you tell who's renting?)

Now my husband and I want to start a business. A financial advisor advised us at all costs to buy a house so, in an emergency, we can take out lines of credit for the biz. We *could* buy a house using the housekey loan program, which seems like a good deal (down payment assistance, lower-than market fixed interest rate).

I'm assuming you all are believing prices *will* drop? I believed that in 2002, but now it's hard to imagine they'll drop a full $100 K back to what they were even *then*. I fear we've just all made ourselves a bit poorer-- increased our property taxes, made housing less affordable, to the banks' advantage. And maybe we'll never get out... we'll all just run to 45 year mortgages.

Think of college tuition. They could never have charged as much as they do if so many people hadn't been willing to take on loans. But now they do, and so tuition will never drop back down to what it (proportionally) was when our parents went to school in the early 60s.

Any thoughts?

Anonymous said...

The next wave of housing shows on TV will all be about "Flip that Forclsure!" - ie, how to profit from the implosion.

For a peek at how soft markets are across the country check out Inman's recent blog entry polling local markets:

http://www.inman.com/blogger/2006/05/how-is-housing-market-in-your-area-is.aspx#links

Eleua said...

Think of college tuition. They could never have charged as much as they do if so many people hadn't been willing to take on loans. But now they do, and so tuition will never drop back down to what it (proportionally) was when our parents went to school in the early 60s.

Any thoughts?


Dead-on-balls-accurate

Anonymous said...

Anon 3:23:

It's the loan industry that pushes the price of everything up. Just imagine what a house would cost if there was no such thing as a loan! So the logic goes, the looser lending standards become, the more expensive things get. Before Fannie May was established, houses were much cheaper. Anyway, that's what a lot of economists say and it does make sense.

Think about how all the creative, suicide loans of the past few years have allowed people into the housing market that never, ever would have been able to buy at these prices if they had to use a traditional 20% down, 15 or 30 year fixed with income verification.

So it makes sense that if banks tighten standards, the price of homes will have to go down.

Just look at the Seattle Times article from yesterday. The advice given to young people wanting to buy was to take out a nutty ARM loan. A suicide loan is the only way to afford right now.

there has been talk lately of the banks tightening standards. a lot of properties are going into foreclosure all over the US. A lot of people are defaulting on their loans.

Fannie May has not isssued a quarterly report for, what is it? -6 quarters now? It appears that organization is in some deep sh#t.

So it seems that something has to give.
Either the lending industry tightens standards or people refuse to jeopardize themselves by buying into these terribly risky loans or the gov't. says enough- something.

the credit bubble can't go on forever. the situation now is very similar to the 1920's, which was also a credit bubble that burst leading to depression.

There was a good link to a lenders site dicussing the prevelance of toxic loans and how they will affect the RE market a couple threads back.

check out:

http://tinyurl.com/ho4k

If you read that thread and keep researching, you'll probably come to the conclusion that, because of toxic lending, this market is done for.

Dukes said...

I think Meshugy is having another one of those lapses of memory.

I believe it was explained to him umpteen times how the median price can go up while you have price reductions. But, still, he regurgitates the same tired old story.

Also, Meshugy, why - if this market is so wonderful are there any reductions at all? I am curious about that.

If we were to listen to your constant rhetoric you would have us believing that there are price/bidding wars on all houses. I mean, that is what happens in a HOT market...right? Why would anyone in their right mind reduce anything if things are so great. Why would there consistently be over 30% reductions as opposed to new listings?

Anonymous said...

Correction!!

That lender blog is:

http://tinyurl.com/ho4kp

Read it! It's illuminating as heck as to what this country's up against.

Anonymous said...

Anon 3:23:

While a devastating economic collapse is a distant possibility, most economists predict a reversion back to the mean home price. So, to answer your question, home prices probably won't go back to what they were then, but rather, they'll revert to whatever is reasonable for now.

That said, there are a lot of people who believe that homes are illiquid, and therefore, the market will simply stagnate for 5 years, 10 years, or even longer, until the unreasonable prices of today become the reasonable prices of tomorrow.

I don't think that will happen. Too many people have "invested" in property they can't afford using high-risk loans. Those people are going to get burned, starting in 2007 (when the first batches of ARMS start to adjust). I think we'll see a combination of the above: some people will go bust, others will hole up and wait for the sun.

No matter what, things are going to slow down. The fundamentals are screwy. It's just a question of how much it hurts....

Anonymous said...

Meshugy:

1 2 3 4 5 6 7 8 9 10 <- median = 5.5

1 1 1 2 4 7 7 8 9 10 <- median = 5.5

Voila.

This is a contrived example. It is much harder to detect this sort of thing in real data, but it happens all of the time.

Anonymous said...

Here's another suggestion from yesterday's Seattle Times article on how professionals can afford a home in un-affordable Seattle:

Tip #4:

"Less Space: If you bite off the maximum you can borrow, rent out a room to help pay the mortgage".

Sounds like "the maximum you can borrow" = MORE than the maximum you SHOULD be borrowing".

mike said...

One database that I haven't seen anyone talk about is RealQuest. Apparently, appraisers have access to loan information about all homes and use this info in comps. I would be very interested to know what % of homes in a given zip code are in 3/1, 5/1, 7/1, 15-year 30-year mortgages and how much equity was put in. I believe these equity and mortgage stats would directly correlate with the risk of price drops in a given area.

mike said...

Add interest-only and 1-yr ARMS to my list too. I think everyone gets the point...

Anonymous said...

Anon 3:23-
I've felt for years that homes were too expensive. I thought that other people were somehow making WAY more money than myself and therefore the high prices. I thought the homes were affordable to many people, just not me.

So I was not looking for a correction in prices.

Then last Fall I discovered, to my amazement. that these homes are affordable to practically NOBODY and everyone is simply in over their heads. Furthermore the bad loan situation has gotten worse and worse for the past 3 years.

If you look at all that information, you'll see that this has got to end. I now believe that the past 2-3 years of appreciation will get lopped off the top.

I won't be at all surprised if houses go back to 2003 prices, and then keep right on falling from there.

Who knows how far.

Anonymous said...

The defaulted loan meltdown is starting in San Diego. Foreclosures are shooting up. Even the chief economist of Fannie May is surprised! (I know i know, if he's surprised then how in the world does he qualify as chief economist? sounds bad for Fannie...)

Isn't this what a lot of people wait for to kill the PNW market?

read the top thread on today's (May 15) "housingbubbleblog"- link provided on front page of this blog

BN said...

As pointed out here, houses are illiquid and I highly doubt the
prices would go down heavily
even with the looming adjustment of ARMs etc. Psychologically, most
wont sell at a loss.

What will probably happen is price
stagnation and possibly more choices
for buyers.

My $0.02 :)

Anonymous said...

When sby. in your neighborhood has to sell cheap just to save their hide, it brings the comps down. If TWO people in your neighborhood need to do that, watch out.

Also, the price hikes of the past several years have happened because people were "scared". The get in now or you'll be left behind mentality.

Once people percieve RE as a home to live in, nothing more, not an "investment" or equity cow for the fiture, that in itself could cause prices to plummet.

This was a major psychological break that caused these prices.

It is simply not worth it to go into debt for the rest of your life just to put a roof over your head. Once people snap back to reality on this issue, the prices will come down. And they could come down hard.

meshugy said...

What will probably happen is price
stagnation and possibly more choices
for buyers.


That makes sense to me....

'm

Dukes said...

"What will probably happen is price
stagnation and possibly more choices for buyers"

I don't buy this quote, not for a minute. People are in WAY over their heads. Do you think job growth will stay where it is? Do you really think we will escape anohter recession? Of course not, we have debt levels that will need to be purged.

Manias, and this is what is going on, reverse. Trends end, they exhaust themselves. Anyone with money in tech stocks a few years ago knows this to be true. The housing mania, I would argue, is much bigger and will be much more damaging in the end.

You sound nervous Meshugy.

seattle price drop said...

So the people who want to participate in this show have to be "willing to show a photo of their family"?

I predict that if this show ever DOES go to air, the people who participated are going to want to be hiding under a rock somewhere.

Talk about embarassing mistakes.