Archive for the 'Real estate, no additives or antibiotics' Category
I posted last week that Frank Owens, a pivotal player in the Phoenix housing market, estimated that volumes for the major builders there would be halved next year compared to 2005 — and I later noted that it would actually be the third- and fourth-tier home builders who are going to be fighting for survival.
A proof to the theory surfaced this week. Turner Dunn Homes had filed for bankruptcy protection in the summer — after stranding a pipeline with hundreds of homes in various stages of completion. They’d promised buyers, sub-contractors and creditors they’d get their act together in four months. They failed. Instead, an auctioneer is now liquidating *FIVE* entire Turner Dunn subdivsions. The newspapers don’t seem to have picked up on this yet.
A local agent, Tracy Thompson, flagged this turn of events — and told me that she can’t recall a builder collapse of this magnitude in the region during two decades in the real estate business. The subdivisions are in the vast Maricopa-Casa Grande “green field” south of the city of Phoenix. The tragic fallout of the saga is that home buyers who put down deposits, former company employees and tradesmen may end up with cents on the dollars that are owed to them — if anything.
This area, by the way, is where John Wayne famously owned two ranches — later purchased by Mike Ingram, our November, 2005 cover subject who made tens of millions dollars by banking raw land in Maricopa.
The Turner Dunn auction is scheduled for Dec. 14 in Phoenix’s bankruptcy court. Presumably the assets will also include Turner Dunn’s domain name, which the trustee has apparently parked to collect pennies from type-in traffic.
Original post by noemail@noemail.org (noemail@noemail.org (Paul Kaihla)
What is the difference between these 2 properties, other than $200,000? More than the Bay Bridge, which connects San Francisco and Oakland. It reflects a cultural divide, or more accurately, a metro branding issue.
In real estate terms, San Francisco has a luxury brand — Oakland don’t. Compare these two listings.
In this follow-up to my morning post, I managed to find another detached in Oakland for under $400K, i.e. within qualifying range for our hypothetical creative-class worker. 1346 East 26th Street = $399,000.
A comparable in San Francisco, 86 Blair Terrace, is up at $598,000. The listing optimistically claims
I think it’s fair to say that both of these properties are in transitional neighborhoods in their respective cities, and they’re both 2 bedrooms with garages and roughly the same square footage. Let’s add $50K to the cost of the one in Oakland to give it some of the bells and whistles already present in the SF home, and award a $50K premium to the latter for its bucolic yard.
That still leaves a yawning $100K differential in the asking prices, and trust me, this is a generous comparison. The one in Oakland is a stand-alone house; the SF property is a townhouse.
"Between you and me, I’m surprised that (the Oakland) property hasn’t moved," says Jeff Banks, the Coldwell Banker agent who is repping the listing. "It isn’t a high crime neighborhood. My client is a widow whose husband died. They lived there for 40 years and never had a single incident."
Jeff says that before he takes any listing in Oakland, he walks the neighborhood and nearby parks or rec centers to check for gangs. While he says this neighborhood is clean, he acknowledges Oakland’s branding problem.
"A lot of agents won’t go there. A lot of homebuyers won’t look there. But once you get out and explore some of these places in Oakland it’s not as bad as the media makes it out to be." Point taken.
Original post by noemail@noemail.org (noemail@noemail.org (Paul Kaihla)
A couple of weeks ago I made a little model around a creative-class worker earning $100K in San Francisco, and asked how far would he or she have to drive to afford a detached house based on their pre-approved mortgage? The answer was Pittsburg, CA, 40 miles deep into the East Bay.
I’m surprised someone hasn’t popped up and called me on that one because there’s an exception to the rule: Oakland. Every now and then a listing appears in Oakland for under $400,000, like the Victorian in the aerial shot after the jump once occupied by novelist Jack London.
"Jack London’s Queen Anne Victorian Home circa 1890 designated as an
historic landmark in 1979. This 2 story home has an eat in kitchen w/new cabinetry,
refinished softwood floors, soaring ceiling & 25′x140′lot. A developed loft-like basement and charming rear yard with a family orchard of fruit trees & EZ parking potential at the rear of the lot. Own an affordable piece of history."
But when I pointed out the listing to friends who already lived in Oakland, they weren’t interested. One of them, who covers some of the worst Oakland hoods for the local Fox affiliate, commented "a house for under $400k on Foothill Blvd in Oakland!?!?! No thanks.. could be shoot ‘em up ally."
He’s referring to Oakland’s notorious violent crime, and a murder rate 3x the national average. That’s not a problem in neighborhoods in the north part of Oakland like Piedmont but it could be in areas near the above listing.
Local real estate pros also told me that properties like this are discounted because another huge segment of buyers won’t touch that market: couples with young kids. They want to live near above-average schools, and here again parts of Oakland have a sketchy record. Money magazine’s latest stats on student performance:
| Test scores, reading (% +/- state average) |
-28.6% | 13.3% |
| Test scores, math (% +/- state average) |
-25.4% | 16.9% |
| % students attending public/private schools |
88.4/11.59 |
Even with those downsides, this Jack London listing was too good to be true. It was pulled off the market last week. I have no idea why, the listing agent wouldn’t pick up the phone or return my calls. But I did find this recent story from a Sacramento TV station tying the agent in question to eight grow-houses busted in dope seizures. Coincidence? 
Here’s a related comment posted this a.m. by Jim, in a thread below. In his case, ‘drive til you qualify’ meant Rochester, NY:
"We
were renting a house in San Francisco’s Sunset district for $2,000 a
month: 900 sq. feet, 2 bd./1 ba. and a tiny garage. No updates or
improvements. The owner decided to put it on the market and gave us the
opportunity to buy. Asking price? $979,000! Even if we could qualify, I
would never be able to pay it off. We relocated to Rochester, NY and
bought a ranch house in the burbs for the staggering price of $108,000.
No regrets here, other than wondering why we didn’t get the hell out of
CA earlier."
Original post by noemail@noemail.org (noemail@noemail.org (Paul Kaihla)
There’s a debate raging in the forum below about the housing and lifestyle merits of Phoenix versus Buffalo. The two are inverse mirrors of each other: the city of Buffalo has lost almost half of its 600,000 residents in the post-war period. The Buffalo-Niagara region as a whole, which is 1.2 million people today, was one of only two major metros in the U.S. that lost population during the booming 1990s. Meanwhile, Phoenix has more than doubled in the past two decades.
You know something’s off when the scary-sounding National Vacant Properties Campaign (NVPC) decides to make your city its poster-child, and that is what’s happening tomorrow with Buffalo. NVPC is actually a coalition of private foundations like Ford and non-profits that estimates 15 percent of Buffalo’s structures are vacant and that more than 40 percent of them are outright abandoned — a higher rate than in any other Rustbelt city. Talk about a vulture play — the NVPC’s slogan is “creating opportunity from abandonment.”
I just got off the phone with the lead author of the “Blueprint Buffalo” they’re releasing tomorrow, Joe Schilling of Virginia Tech’s Metropolitan Institute. The 100-page plan outlines the biggest revitalization program in the U.S. since the Bronx in the 1980s.
Schilling says that it will cost hundreds of millions of dollars over several years but a lot of that money can be re-directed from existing programs. “What struck me while doing this research is that there’s already a lot of funding available so why doesn’t anything get done? There are 120 agencies and programs in there, and it’s simply overwhelming for a policy maker.”
Schilling says the first priority is to “contain and clean up” the existing blight. Who wants to buy in areas that look like a dump? Over the past decade, the report says, Buffalo has already spent $30 million demolishing 4,500 vacant buildings. The state’s 2007 budget earmarks another $10 million to take out 3,000 more. Expect some serious federal fudning to kick in now that Democrats from New York have the strongest presence in the House and Senate in decades.
Here are some highlights from the Buffalo v. Phoenix debate from the comment thread below:
I moved from Phoenix back to Buffalo NY - while the summers have become warmer in Phoenix (global warming), the winters here are much milder - I couldn’t take the heat anymore, when I left it was 102 on Thanksgiving.
FYI - average home price in Buffalo is under 100k
- Patrick
I checked the National Weather Service keeping records since 1890, it has never been 102 in Phoenix on Thanksgiving. Avg temp is 78 and low 56 why fabricate. If you like upstate NY fine, but we lived in Denver where the elevation is 5,000 feet at 95 it feels 115 (July-Aug). i’ll take 105 in Phoenix and 8% humidity any day over summers in the East especially. Or FYI we are in our convertible last night in North Scottsdale 71 and the sunset is awesome did you ride in a conv LAST NIGHT???
- Tom
LETS SEE, IF I WIN THE LOTTO THE FIRST PLACE I WANT TO MOVE IS BUFFALO NY??? BTW, i also checked the record books and the all time high ever in Phoenix was 89 in Nov. and the avg is 71, so why not tell the truth?
Posted by: Kathy F
I moved to Phoenix from Buffalo about 2 years ago. While they both have their advantages and disadvantages, I have to say I do miss Buffalo. I had a three bedroom house with a pool for $87,000 in the village of Kenmore. I now have a one bedroom condo that I paid $168,000 for last year. Plus I can’t even get the Sunday paper, because my neighbors keep stealing it. In Buffalo, yes there is a lot of snow, but dealing with it brought us together as a community. There would be many mornings that I wake up and my sidewalk was already shoveled by one of my many wonderful neighbors. I have yet to find that many wonderful people in such a big city as Phoenix.
- Chuck
Original post by noemail@noemail.org (noemail@noemail.org (Paul Kaihla)
UBS Securities joined Economy.com and others today in forecasting that in 2007 the U.S. will likely experience the first decline since the Great Depression in nominal national house prices. The UBS analysts are worth listening to — they came reasonably close in estimating the last quarter’s GDP number, for example. In their forecast today, housing analyst Maury Harris uses the inventory of vacant homes sitting on the market as a leading indicator for sales volume and price.
He concludes that the peak-to-trough decline in existing home sales will be 10 percent. Then . . .
The actual vacancy rate has risen to 2.5 percent from a range of 1.4 percent to 1.8 percent over the last two decades. The chart shows the four-quarter rate of change, which has reached 32 percent, near the 33.3 percent peak reached in 1958.
Harris says that in the past, excess housing inventories have been cleared as home prices increase more slowly than the rate of inflation. That may not be enough to do the job in the current environment, with consumer price inflation outside of shelter costs rising at about a 2 percent annual rate, Harris writes. “Low inflation means nominal home prices must decline more to achieve the real price cuts necessary to eventually clear excess inventories.”
Original post by noemail@noemail.org (noemail@noemail.org (Paul Kaihla)
I was struck by the quote by National Association of Realtor’s (NAR) economist David Lerah last Friday that housing sales in 2005 constituted an "unsustainable frenzy." Funny, I didn’t hear him making that kind of assessment at any time last year. Google the record and you’ll find more anti-Lerah sites and online Scuds than Christian puritans have launched against Madonna.
Lerah is routinely tagged a "back-pedaller," liar — and on the blog, David Lerah Watch, an untrustworthy "paid shill" and "discredited chief economist propagandist." It’s hard to imagine that volume of public vitriole around any other industry economist — say, the National Association of Manufacturer’s respected David Heuther. Actually, it’s a remarkable feat for any economist to inspire any kind of passion about anything — ever.
So Lerah’s and NAR’s forecast last week that "the bad news is just about behind us" was duly reported but simply irked a lot of people. It says that housing starts and single-family home sales will bottom over the next two quarters and recover by the end of 2007. If NAR looks more and more comprised every day that it tries to talk down this macro trend, it doesn’t help itself by juxtaposing these releases with their recently launched "Buy Now" ad campaign, currently featured on their home page with these rather transparent talking points:
- Conditions are now ideal for buyers. Interest rates are comparable
to 40-year lows, and inventories are higher than they have been in
decades. Consumers have exceptional choice. But these conditions may
not last. August pending home sales rose 4.5 percent, and prices are
expected to rise again next year. Even the vice chairman of the Federal
Reserve says that the housing market outlook is improving. - Real estate is an outstanding investment. House values rose 88
percent on a national average over the past decade. The number of U.S.
households is expected to increase 15 percent during the next decade,
creating a continued high demand for housing. - Conditions are improving for sellers. This year will be the
third-best on record, and prices are expected to rise modestly next
year. - The campaign opens on Friday, November 3, 2006, with full-page advertisements in the Wall Street Journal and USA Today, and will run Sunday, November 5 in the New York Times, Washington Post, Los Angeles Times, and Chicago Tribune. It will run in the same six newspapers again on the weekend of November 12.
Original post by noemail@noemail.org (noemail@noemail.org (Paul Kaihla)
I don’t have a Phoenix fetish, honest — I write about the place because I see the metro as the capital of the home-building industry. Here I’m betting that it was a major contributor to the job losses I posted about on Monday, and that what came out in last Friday’s Bureau of Labor Statistic report is going to snowball.
When I say that Phoenix is ‘Housing Central’ I don’t mean it in the same sense that Hollywood is the capital of the movie industry because the six major studios are based there, or in the way that Manhattan is a capital of finance because the big banks and brokerages are headquartered there. The head offices of the major U.S. home-builders are literally all over the map — Pulte/Del Webb (PHM) is outside of Detroit, Continental/Deitz-Crane (DHI) is in Fort Worth, TX.
Stubborn sellers in Phoenix
But Phoenix is the industry’s number one […]
Original post by noemail@noemail.org (noemail@noemail.org (Paul Kaihla) and software by Elliott Back
I just noticed that the daily paper in Bakersfield slapped me on the wrist for highlighting Califonia’s central valley as a region due for one of the sharpest, short-term corrections in the country: “City called real estate risk.”
They’re referring to the story headlined “Where not to buy (at least for the next year or so)” in our November issue. I zeroed in on the central valley because a handful of its cities crowd the top of a ranking done for us by Economy.com that projects percentage declines in median house prices over the next year. The same names show up at the top of Global Insight’s Over-Valuation Index. (Bakersfield is respectively 7 and 16 on the lists, which each include more than 300 metros).
Next to rust-belt metros in the Midwest, this is the last place you’d expect to find a housing bubble. But many watched in amazement as house prices […]
Original post by noemail@noemail.org (noemail@noemail.org (Paul Kaihla) and software by Elliott Back
There’s a couple of posts in the thread below about “the nerve” of
“greedy” sellers in greater Phoenix. The phrase I’ve used is
“high-balling” — that is, volumes are down not because buyers are
low-balling sellers with their bids. Instead, it’s the owners who are
high-balling the market.
Tell me if you think this is an example. Look at the current listings in DMB’s Verrado in Buckeye, 25
miles west of downtown Phoenix on I-10. DMB is one of the top boutique brands in
the Arizona market, creator of the highly successful DC Ranch.
It was a gamble for them to try an upscale development so far from the
Scottsdale-Phoenix core — they sunk $150 million into bulldozing the
desert out there, and $11 million on the freeway interchange alone at
“Verrado Way.” The 8,800-acre plan is permitted for 14,000 homes. This
is a starter:
Those entry-level, Spanish Monterey-style homes, built by Ashton Woods, sold for about $180,000 in January, 2004. […]
Original post by noemail@noemail.org (noemail@noemail.org (Paul Kaihla) and software by Elliott Back
Here are some responses to the great comments under the last post, "Housing and the Jobs Economy: Phoenix points the way" . . .
Sam and Bob, you’re right — as the builders dump inventory and reduce their pipeline of new units, the Pinel and Maricopa markets will once again find an equilibrium. Interesting projection in that mammoth (and expensive) study that Moody’s Economy.com released last month, "Housing at the Tipping Point": their model has Phoenix MSA peaking in the first quarter of this year, and predicts that it won’t bottom until Q2 of 2008. The price-drop for a median home from peak-to-trough is projected at 9.3 percent. A lot of that has already been absorbed by the market.
DD, interesting point about the building industry. Right, the most vulnerable actors on the supply-side are the tier 3 and 4 builders. Click on this thumbnail:
Sadie, AA, Ryan, Jennifer, Tweety and PT […]
Original post by noemail@noemail.org (noemail@noemail.org (Paul Kaihla) and software by Elliott Back
check out the A Tech Swicki swicki at eurekster.com
- August 2008 (1928)
- July 2008 (2325)
- June 2008 (2255)
- May 2008 (2160)
- April 2008 (2371)
- March 2008 (2341)
- February 2008 (2302)
- January 2008 (2527)
- December 2007 (2025)
- November 2007 (2396)
- October 2007 (2670)
- September 2007 (2155)
- August 2007 (595)
- July 2007 (13)
- June 2007 (3)
- May 2007 (1)
- March 2007 (1)
- January 2007 (954)
- December 2006 (1644)
- November 2006 (907)
- October 2006 (11)
- September 2006 (2)
- August 2006 (1)
- June 2006 (1)
- March 2005 (19)
- October 2004 (1)
- July 2004 (1)
- June 2004 (4)
