NYSUN: 'For Real Estate Brokers, Business ‘Has Dropped Dead'"

The New York Sun reports that For Real Estate Brokers, Business ‘Has Dropped Dead' .

Veteran real estate broker Deanne Esses, who plies her trade as a senior vice president at one of the city's biggest firms, Bellmarc Realty, said eight people in her Upper East Side office on Madison Avenue are leaving their jobs for alternative careers. Those eight represent 20% of the office's sales staff of 40.

That's only the beginning. Ms. Esses said she thinks more New York City brokers will be leaving the scene. "Business here is just not quiet; it has dropped dead over the past few weeks," she said. "At the same time, there's a flood of inventory on the market. We run open houses, we run advertisements, but nothing works. There are no buyers, and without buyers, there are no sales."

Now read about the newbie real estate agent who quickly went from almost 200K a year to flipping sandwiches in Queens. Wow!

Early in 2004, Mark Clemente left his uncle's dry-cleaning plant in Detroit to go east and, hopefully, make his fortune in real estate. Shortly thereafter, he became a broker at E&G Realty, a small firm in Newark, N.J., where he earned a respectable $195,000 in his first year.

But it has been downhill ever since. The housing slump and fierce brokerage competition led to the demise of E&G. Mr. Clemente's income collapsed, and over the past six months he has held a number of part-time jobs, including one making sandwiches at a Queens delicatessen that paid him $100 a week. "I'm going home; my real estate career is over," he said the other day.

Now as the market continues to decline there will be many more people leaving the housing industry for other prospects. The bubble was unsustainable and the wreckage will leave the US economy in a state of recession in 2007.

Housing Cheerleader Ad in Washington Post

"There is no such thing as a real estate bubble, it's called growth." - Creig Northrop

The full ad can be seen here (pdf). Hattip to the reader who dound the link to the ad.

What Type of Landing?

The housing boom has clearly ended in the vast majority of the bubble markets. We are now seeing some price depreciation. Last summer there were four basic opinions as to what will happen in the bubble markets going forward. The housing head argument that the boom will continue has proven false. So which of the remaining three options are we likely to see in the bubble markets? How much will prices fall in real dollars (inflation adjusted)?

• Boom Continues
  
• Soft Landing (0 to 20% real dollar price decline (peak price to bottom))
  
• Hard Landing (20 to 40% real dollar price decline (peak price to bottom))
• Crash Landing (40% + real dollar price decline (peak price to bottom))

I see a hard landing happening in many bubble markets, with some bubble markets experiencing a crash landing. The time period between peak real dollar price and bottom real dollar price will probably be between 4 - 8 years.

You Tube

BubbleSphere Roundup

SacramentoLand(ing) reports about Sacramento Region Median Prices - August 2006. Median sales price in Placer County again leads the way down with a double-digit decline. Yikes!

Keith says HP message to the REIC - kiss my blogger butt. For those who don't know REIC = is the Real Estate Industrial Complex.

Mortgage & Loan: Focused Like A Lazear @ Housing.com Blog.

The most informative Paper Money report that Home prices are being SLASHED! In Massachusetts. Perhaps a bit dramatic, but the blogger blogs "Ouch! You can chalk another mark up in the column of total housing collapse in Massachusetts."

Banks more exposed to residential real estate. Oh my!

To Buy or Not To Buy That is The Question

The housing market has changed dramatically in the bubble markets over the last year. Back in the summer of 2005 bidding wars were common and inventory was very low in the bubble markets across the USA. Those days are a sweet memory to the legions of stuck flippers.

Today, a new reality faces both buyers and sellers. Its the Inventory Stupid! Inventory has increased dramatically in most bubble markets in the past 12 months. In Phoenix, inventory rose from 10,748 on 7/20/05 to 54,441 on 9/23/06 according ZipRealty and Bubble Markets Tracking Inventory. The inventory of houses for sale in the San Fernando Valley (the Los Angeles area) has more than doubled since August 2005 (DataQuick).

At the same time the number of housing units sold has fallen dramatically in the bubble markets compare with a year ago. The California Association of Realtors reported that housing sales decreased 30.1 percent in August 2006 compared to August 2005.

Some real estate agents are claiming that is now a 'buyer's market' due to the increased inventory, lack of bidding wars and the small reductions in prices. Blanche Evans , Editor of Realty Times thinks it is a good time to buy. “You can get a better price on a better home that will pay off when the slump ends.”

So is it a good time to buy in the bubble markets?

In many bubble markets, the peak price was reached late summer 2005. Real prices will continue to decline in the bubble markets for many more years. Prices declines in the bubble markets are very likely to vary between 20% - 65 in real dollars (inflation adjusted) from peak to bottom (it may take up to 8 years). Most of the real dollar price decline will occur in the first 3 years of the housing bust. Indeed, the huge price appreciation that occurred in the bubble markets over the past 5 years or so was a speculative episode.

Just as importantly, monthly rents are generally cheap compared to buying in the bubble markets. Buying in the bubble markets generally costs 1.25 to 2.5 times the cost of renting ( for a similar property; assuming 30yr fixed, solid credit, property taxes, and typical interest rate tax deduction). Each month hundreds if not thousands of dollars can be saved and invested if one chooses to rent as opposed to owning.

Buying now in a bubble market does not make financial sense. As housing inventory continues to rise and prices decline there will be lots of buying opportunities in the future. Additionally, an economic recession in very likely to occur in the US within the next 9 months. If you earn a reasonable income it is an absolute fallacy that you need to "Buy now or be priced out forever." This is not a small temporary 3 months dip like Mr. Lereah suggested. In the bubble markets, this is a multiyear housing market bust. In the Bubble Markets, renting and waiting is fiscally prudent. Don't be fooled.

What happens if I just walk away

On the AllForeclosure Message Board, there is this message posted about a condo in San Diego:

We made an extremely bad investment 4 years ago when we bought our condo. There are several foreclosed units in our community, making it impossible to sale. We're asking 30% less than we paid and can't even get buyers to look at our property. The neighborhood is going downhill fast. I have personally witnessed drug deals, gang activity and people fornicating in park cars outside our house.

We want out, right now we have good credit and are current on all bills. But I am willing to throw it away to get out.

As a last resort we are considering buying a new house while our credit is still good and waling away from the condo. Anyone have any thoughts? What would happen if we just cut our loses now and let the bank take it back.

In their subsequent post the desperate seller writes:

I forgot to mention a few more key points that are leading us to explore this idea.

The property is in colorado, the builder walked away from the property 6 months ago with 3 buildings left to build. The builder ran out of money to pay his subs so the subs posted leins againt the entire community. It think that about sums it up

Thanks for your input

Looks like they bought a newly built condo in a marginal neighborhood. Despite buying 4 years ago and listing it at a 30% less then they paid, they still are having trouble selling. This condo project must have been an absolute disaster. Yikes!

ARM Adjusting on Condo, owe more than it's worth

On the AllForeclosure Message Board, there is this message posted about a condo in San Diego:

I bought a condo in April of 2005 in San Diego with zero down, we got a 2 year ARM loan, so in April of next year it will adjust. We also have a heloc on the 2nd that started at 8%, but has gone up to over 10%. My neighbor is trying to sell for roughly the same price we bought ours and is having no luck. I enjoy the place, but really don't care if I lose it. I am married, but I am the only one on the loan. My credit was good, so it gave us a better rate to just have me on the loan. When our loan adjusts, I will still be able to pay the loan, but almost all of our income would be going to it. What happens if I just walk away. I don't even care that much if my credit is screwed up, because we can just go rent a place using my wifes credit. Will I owe the difference on the loan if I just walk away and have the bank sell it?

People are hurting. The housing bubble, which is a speculative episode, is causing hardship across the United States.

Housing Inventory in Northern Virginia Down Slightly in Past 3 Months

Housing Inventory For Loudoun County (part of Northern Virginia)

In Northern Virginia (Alexandria City, Arlington County, Fairfax City, Fairfax County, Falls Church City, Loudoun County, Manassas City, Manassas Park City, Prince William County) the active inventory has declined slightly during the past few months. On September 25th the inventory stood at 20,064 which is a 6% decline from July 1st, 2006, when active inventory was at 21,336. Source: VirginiaMLS.com

Housing Bubble Continues To Go Mainstream