Home Sale Relief

Ben Jones, in his the housingbubbleblog.com article Bringing The Market Into Reality, as usual, has a superb article discussing foreclosures and the new reality of homeownership.

My wife and I were eating dinner with good friends who live in Louden County, which is billed as the fastest growing county in the USA. Which means a lot of homebuilding.

Sitting in our friends billion square foot house, we remarked that we had seen a for-sale sign on their street. “Oh, there are three houses for sale on this street alone,” our friend said.

That’s 3 out of 14 houses on the street.

Oh, and did I mention there are *no* buyers. That is what the agents say. So many houses for sale are stealthily listed in the MLS but don’t have signs out.

So anyway, Ben’s article…

The Hook reports from Virginia. “Unloading inventory in a strong buyer’s market has many of builders resorting to techniques not seen in the last half dozen years: slashing prices, offering incentives, even converting for-sale to for-lease. ‘Our revenues are down 50 percent from last year,’ says Mike Gaffney, president of Gaffney Homes. ‘Every builder in the market, maybe every builder in the country, has cut staff and lowered prices.’”

“Gaffney says the need to sell the houses quickly has led to deep discounts. In Huntley, Gaffney has lowered prices on houses by $80,000, from $549,000 to $469,000. Still, even such discounts haven’t led to rapid sales, and he believes that’s because people have tuned in to national news predicting ongoing doom and gloom in the housing market.”

“‘It’s almost like a paralysis with people that they don’t want to buy,’ he says.”

Exactly what our friends said. In Virginia, you have Louden County, Prince William County, and to a lesser extent Arlington County and Fairfax County, all afflicted with more and more inventory and fewer sales.

If it were me, I would do everything I could to sell my house right now. It is going to get worse next year and even worse the year after that.

Continuing with Ben’s article:

From NBC 4 in Virginia. “No one showed up to bid or buy in Prince William County Friday, but the auctioneer will stay busy due to the growing number of home foreclosures in the county that are causing a ripple effect in the county’s revenue stream.”

“There have been nearly 1,000 foreclosures since August, and the ‘for sale’ signs are springing up like weeds.”

“Despite the downturn in the housing market, new houses are still being built and sold, but not at the rate they were at the height of the housing boom.”

“‘I imagine that there are some builders and developers who had started their projects and then, of course, the market changed and they had these projects under way and they’re making their own business decision,’ said Chris Martino, the county’s director of finance.”

“The director of finance said there is a silver lining, however. ‘When the market does correct and turn, we’ll have a lot of product,’ he said.”

That may be a silver lining for some, but if you have a house you are trying to sell, you don’t want more “product” on the market.

The Daily Press from Viginia. “It continues to be a difficult time to sell a house and a great time to buy one in Hampton Roads and Williamsburg.”

“An oversupply led to a 22 percent sales decline, according to data from the Virginia Association of Realtors. Williamsburg sellers suffered through a median price drop of 15 percent to $269,450, and the number of homes sold declined by 39 percent.”

“The slowing market comes after years of unprecedented price increases. The median price in September 1999 in Hampton Roads was $107,400. Just eight years later, the median value has more than doubled to $235,000. The state median has increased 83 percent to $229,000 over the same period.”

“The region has also been dealing with growing rates of mortgage delinquencies and foreclosures. Subprime loans made up about 13.6 percent of the region’s outstanding loans as of June, according to First American LoanPerformance.”

Now is a good time to sell your house and get it sold. It is a poor time to buy. And if you are resetting and your mortgage is going up, you should sell now rather than wait for things to get better.

We know someone who purchased a home in Virginia about 3 years ago. They bought a house on a resetting ARM. The ARM reset now, and their payments are $9000 per month. They are each employees at low level jobs with the government. Not all government jobs pay $120,000 per year. And they are stuck now. They can’t sell their house. They can’t make the payments. Stuck.

Or, as the article spells out:

Money Magazine on Maryland. “With a six-figure household income and good prospects, Heather and Todd Wade are off to a decent start in realizing their financial goals. But a few years ago, the young couple tried to speed things up by dabbling in real estate.”

“‘I started messing around because everyone seemed to be doing it,’ says Todd.”

“After flipping an investment property near their Baltimore home in early 2006 for a tidy profit of $40,000, Todd and Heather got the bug. In April 2006 the Wades bought a run-down house in a questionable Baltimore neighborhood for $62,000.”

“So far the project has produced a lot of pain but no profits. ‘It just took us a little longer to get this house in order, and we missed the window,’ says Todd.”

“Now the Wades wonder if their error in timing the real estate market may have set their finances back just as they’re hoping to expand their family.”

If you go through my Mortgage Relief Formula home study course, you will learn how to get out of this type of jam. But my advice to you is to sell now, no matter what you have to do. It isn’t going to get better.

How do I know this? Because of two things. Experience and sentiment.

Experience: I went through a major housing boom and bust in Southern California. Our house doubled in two years, then fell to less than half of what we paid…from 1987 through to when we sold in 1995.

In 8 years, prime California real estate was worth less than what it started at. And it’s worse than that. Because inflation made those dollars in 1995 worth less than the dollars in 1987. Substantially less. So our “real” loss, that is, our loss in constant inflation-adjusted dollars, was far worse than it looks.

Okay. So the other thing that clues you in here is sentiment. How people feel about housing. What they are saying.

Sentiment may appear very bad in the press, but it is not as bad with sellers. There are still the majority of sellers in many places who are waiting for Spring, waiting for things to “turn around”. Believe me, when sentiment is at bottom, and the market is ready to turn, there will be no more home flipping shows, and everyone will say that real estate is the worst investment you can ever make.

So, more article:

“In September, the average price in the county was $340,478, down 7.7 percent from September 2006. ‘Prices are not dropping below what the homes are worth,’ Fox said.”

The York Dispatch from Pennsylvania. “Home sales dropped by double-digit numbers in nine out of the 16 school districts in York County for the first nine months of the year, compared to the same period a year ago.”

“Steve Snell, the Realtors association’s executive officer, said the cooling in the housing market is ‘perhaps a little bit more extensive than we really had anticipated. My concern is the public will misinterpret the numbers,’ he said. ‘It may not be the greatest time to be a seller, but it’s a perfect scenario for the home buyer.’”

“Blue Bell, Pa.-based Judd Builders is currently offering up to $30,000 in savings on closing costs, condo fees and upgrades to a townhouse through the end of November.”

We ain’t seen nothin’ yet, folks. Sorry to inform you. Even in New Yahk:

The New York Daily News. “The threat of foreclosure is worsening in the city — especially in Queens. In fact, in all the boroughs except Staten Island, more homeowners are struggling.”

“There were 2,790 foreclosure filings against homeowners in Queens in the third quarter, up 69% from summer 2006, according to RealtyTrac. Across the city, there were 7,314 foreclosure filings during the third quarter, up 37%.”

“The number of third-quarter foreclosure filings in the Bronx, 1,011, was 43% higher than a year earlier. Foreclosure filings in Brooklyn totaled 2,498, up 31%. Manhattan cases rose by 14% to 402.”

The New York Times. “Kenny Timmons has spent three long weekends in New York City since 2003, catching up with friends he knew in Ireland, visiting ground zero, restocking his wardrobe at Armani and Niketown and chatting about real estate with a bartender in an Irish pub in Midtown Manhattan.”

“That was enough of a glimpse of New York for Mr. Timmons, a 32-year-old carpenter from County Meath, Ireland. Last summer, he put down 10 percent on a $760,000 studio under construction at 75 Wall Street.”

“Mr. Timmons has never seen the apartment and does not plan to live there. Instead, he hopes to rent it out for $3,000 a month when it’s finished next year and eventually to sell it at a profit.”

How many people can pay rent of $3,000 per month, even in New York? And this guy who is renting, how much is he able to lose every month? Because, at $760,000 cost, he has a payment of $5,000 per month for the mortgage, probably. And maybe $800 per month in fees. And $1,000 per month in taxes and insurance. So he is able to collect $3,000 per month in rent (maybe, but what about vacancy factor?) and lose $4,000 each month?

And if the asset is falling in value…say the market turns even in Manhattan and the apartment starts losing value. Why would he want to stay in? Why wouldn’t he want to just give the keys back to the
lender and move on?

And millions of people will be making those same decisions.

It’s a *great* time to sell if you can. Don’t wait for it to get better unless you can wait, oh, 8 or 10 years.

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