Housing Doom

For the neophytes who’ve been thinking of getting into the world of foreclosures, I thought I would share this story:

About seven years ago, Mr. Twist and I were in the market for a home.  We looked at a home in southeast Chandler, in the Phoenix SE Valley.  It was a large home with about an acre and a half, built around 1980.  I thought it needed updating, but at the right price, I thought it would be perfect.  Mr. Twist did not share my sentiment.  His talents far exceed my own when it comes to remodeling, and he was of the opinion this place would be too much work. In addition to the cosmetic stuff, he didn’t like the look of the roof, the antiquated AC system, and it had no garage.  That was more work than he was in the mood for, so unless I wanted to re-roof myself and put his workshop in the house????  He talked me out of it.

About a month ago we were cruising the roads of southeast Chandler, and drove by the same property.  Bushes were growing over the driveway, there were a lot of flyers on the door, and the place had a definite air of neglect to it.  In front of the property was a "For Sale by Owner" sign.  Mr. Twist gave him a call.

The young man who had purchased the property in 2005 to flip it was anxious to talk.  He was asking around $830K, which was the amount of money he had in it, he said.  He had painted and changed the flooring, but didn’t have the funds to do more when the bottom dropped out of the market and he was stuck. 
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Hat tip to PhxRealtor for the early notice last night, and also to M for letting us know we’ve crossed the 50,000 line.  This is from M:

Total number of properties found
  

50,005

We reached the bottom last fall??  There has been a 25% increase in inventory in less than 90 days and sales are down 25% YOY in the  spring "buying season"!!  Wait till Q 3-4 when sellers really start to panic. 

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It’s Op-Ed Friday, and today’s headline was shamelessly stolen from as bearish an Inman News article as I have seen.  They were quoting the U.K. Telegraph which states:

America’s housing slump is more serious than widely believed and risks setting off a full-scale global crisis, Morgan Stanley has warned in a note to clients.

The US bank said the sudden deterioration in the sub-prime sector knocked away the "cornerstone" of US household consumption and threatened contagion to a broader nexus of complex derivatives.

"US sub-prime has the potential to turn into a real financial crisis. We do not make this assertion lightly," said Teun Draaisma and Graham Secker, the bank’s two chief equity strategists for Europe.

On that cheery note, we’d love to see your links, comments, quotes and insights on what has been a wild week for housing.

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I owe my friend D___ a lot. His piercing remark at a donut shop last summer got me thinking hard about the prospects of the non-conforming mortgage sector and resulted in a post that may be worth re-reading even today. The text below remains basically unchanged. Where noted some links have died or been changed. The loss of access to the Fitch release [9] and Lingling Wei’s excellent and important article [15] are especially unfortunate. New readers of Housing Doom may be under the impression that the subprime crisis sprang up overnight, but this vintage post demonstrates the signs were obvious to many long ago.

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You would think that with all I read on increasing foreclosures, stagnating home sales and subprime lenders in meltdown, it would be pretty tough to scare me.  At least that’s what I thought until I read this from Bankrate:

In the survey conducted by Gfk Roper, homeowners with mortgages were asked what type of mortgage they had. A stunning 34 percent of the homeowners had no idea.

Here is the survey breakdown:

57% Fixed-Rate
6%  ARM
3% Interest Only
34% Don’t know

Compare this with the following information from Global Insight:
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We talk a lot about the Phoenix housing market, but we rarely mention the market for the dirt underneath.  I thought Doomers would appreciate this update from M:

Here’s a quick update on land parcels.  It’s a disaster…worse than housing.  Ever since the builders started "dumping" all their land and options, prices and volume have "fallen off a cliff".

 
SOLDS (LAST 30 DAYS)   247
ACTIVES                      10,982
 
Absorption ratio measured in YEARS!!!  Three years and eight months….in case you were  wondering.  As you would expect, most commercial and infill residential lots are doing OK,  the glut of inventory is in the outlying areas.

M

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From the "You can’t say you weren’t warned department":

I ran across this September 2005 article by Les Christie article on CNN Money entitled Housing Prices Can Go Down.  I rarely use articles of this vintage, but this one has material worth revisiting:

"I think Americans are not well aware that many markets are risky," says Ingo Winzer, president of Local Market Monitor, which sells real-estate market analysis to corporate and consumer clients.

Those investors should realize that price reversals do happen, even if only locally rather than nation-wide. A look at the not so distant past reveals numerous examples of cities that went through housing busts — followed by years of falling prices. Some have never fully recovered.

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The New Home Sales Report was released this morning by the Commerce Department:

According to Reuters:

New single-family home sales fell to an annual rate of 848,000 units from a downwardly revised rate of 882,000 in January, the Commerce Department said. Analysts polled by Reuters were expecting February sales to rise to 985,000 from the previously reported rate of 937,000 units in January

The monthly decline was the second straight and the volume of sales fell to their lowest level since June 2000, when they hit 793,000.

This represents a 3.9% decline month-over-month and 18.3% year-over-year.

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John has escaped Doom castle this morning in pursuit of real life activities.  John is generally in charge of Igor’s care and feeding in the morning, so don’t worry if your comments take a little longer to post today.  When I can get Igor to stop chewing on them, I’ll dust off your comments and stick them up.

The New Home Sales Report is out today- and as of Sunday evening, pundits were already declaring that February’s report will be a positive indicator for the market.  According to Bloomberg:

Sales of new homes in the U.S. probably rebounded last month from a three-year low, a sign the worst of the real estate rout has passed.

Expect my take on the numbers later in the morning.  :  )

In the meantime, we’d love your links and observations.  John will be checking in, and I’m sure will be anxious to see what Doomers have found.
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Thank you M  for the latest Phoenix update!:

Total inventory as of this morning:  49,533

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