Monday, August 4, 2008

Mid-Year Market Retort

We suffered whiplash throughout July as our attention was directed from one bit of bad financial news to the next. Whew! We're glad we're heading into the Dog Days of August. We'll be getting back to fresh listings soon.

First, though, an overdue post, as we review what's sold and what's been "adjusted," revisiting houses we've recently covered on Real C'ville - The Bubble Blog. If RE was our career, instead of merely our obsession, our Market Report--which is more a "Market Retort"--would have appeared shortly after the beginning of July. It would have covered June as well as the First Half of 2008.

But our tardiness, we think, has worked to our advantage. We have careers, families, lives and, well, we got busy. You see how long this thing is? Took a while!

Because even as this post kept getting delayed, the US Economy actually started crashing before our eyes in July's second week. We, amateurs, knew on Friday, July 11 that a Fannie/Freddie Bailout was imminent; it came the following Monday.

By the time we've gotten around to discussing the first half of 2008, the Bubble's pop is beyond confirmed, even in what used to be the "protected market" of Charlottesville.

For anybody who
didn't believe there was a Bubble in Charlottesville before July, was still drinking the Kool-Aid of optimism, or was still living in their Own Private Idaho, the relentless onslaught of financial news this past month has given pause. It's bad out there.

To recap, we had IndyMac as the second largest bank failure ever, Fannie and Freddie needing Billions in Bailouts, the continued write-downs at the big WS Firms, Banks cutting Dividends, Wachovia ceasing its Wholesale Mortgage lending, to Merrill's own "Fire Sale" (the WSJ's term) of their CDOs. Etc etc etc.

So where are we now?

During the last week of July, Mr. Bush signed the Housing Bill. This will help perhaps a few hundred thousand troubled homeowners--or 15%, according to WSJ. The cap on our Fed Deficit has now been legally expanded to accomodate the losses and bailout that will be piled on by the F&F debacle, and Mr. Bush will leave office with the biggest Fed Deficit in history. Thanks, W.

The housing market--the entire economy--is at a historic low moment. On Thursday, July 31, 2008, Treasury Sect'y Hank I'm-Sorry-I-Ever-Said-Yes-To-W Paulson opined as to how the Economic Stimulus package seems to have "worked." But as the WSJ reports, Mr. Paulson said he expects foreclosures and existing home inventories to remain "substantially elevated" in 2008 and 2009. "And home prices are likely to decline further on a national basis," he said.

On the same day, former Federal Reserve Chairman Alan Greenspan said falling U.S. home prices are "nowhere near the bottom" and the resulting turmoil shows no signs of abating. A fine statement from the Deregulation Czar whom many blame for this mess.

The Bottom? We can't see it yet.

How could we?
  • With foreclosures up 120% from the past year, nationwide?
  • With 250,000 homes foreclosured in just the last Quarter?
  • With 10 million mortgageholders having negative equity?
  • With another 15 million houses now worth less than what their mortgageholders paid for them?
(Stats courtesy Larry King Live, Wed July 30, featuring Larry Krugman, Ben Stein, et al).

Princeton Economist Paul Krugman describes our economy as "L-ish"--stating that we'll have a long flat period of recovery before we see improvement. He notes, "....we’re in the process of deflating a huge housing bubble, and housing prices probably still have a long way to fall. Specifically, real home prices, that is, prices adjusted for inflation in the rest of the economy, went up more than 70% from 2000 to 2006. Since then they’ve come way down — but they’re still more than 30 percent above the 2000 level."

In a recent Op-Ed, he gave the example of past housing bubbles, their corrections, and speculated on unemployment and consumer prices. Then he wondered when it would all end, and said: "The answer is, probably not until 2010 or later."

And then there's the Alt-As that are starting to collapse: Homeowners with good credit are falling behind on their payments. The percentage in arrears quadrupled to 12 percent in April from a year earlier. Delinquencies among prime loans, which account for most of the $12 trillion market, doubled to 2.7 percent in that time.

Compounding the problem is that it's harder to get a mortgage. Percentages of mortgages for new purchases as well as refi's were at their lowest points since 2000 in the last week of July.

We're nowhere near the bottom, in our humble opinion as Bubble marketwatchers, American consumers, and people blessed with the tools we learned in Logic 101 at UVa. We're thinking that 2010 will start to see CAAR's ideal of 2000-2500 properties on the market.

For now, inventory just remains too high--and pricey. The "imported" buyers--those who are freshly moved here--will be shocked at the luxurious prices that go hand-in-hand with solidly "middle-class houses" in Charlottesville/Albemarle--especially for existing houses (why does everybody think their 1962 3bd 1.5 bath ranch is "worth" $350K?). And the new construction? Often too big, not green, aesthetically challenged--or in a development whose builder m ay or may not be going bankrupt (it's that damn rumor mill).

It's clear that Charlottesville/Albemarle is no longer a "protected market." UVa is experiencing budget constraints, along with the entire Commonwealth of Virginia. And buyers are impacted by national trends, including higher prices for energy, food, and consumer goods.

CAAR numbers show a slow troubling market:

For July, the numbers read:

Active Listing Inventory: 3,688
Number of Listings Sold: 274
Median price of List
ings Sold: $269,152
Average Days on Market
for Listings Sold: 122

274 properties equals about 7.43% of the inventory sold in the CAAR areas.

As of August 1, the "live" numbers on CAAR read:

Active Listing Inventory: 3,660
Number of Listings Sold: 4 (yes, it's the 1st day of the month)
Median price of Listings S
old: $252,400
Average Days on Market for List
ings Sold: 163

It will be interesting to see what happens to the numbers. Many consider the housing market tied to school years: around these parts, k-12 begins August 20, as does UVa. Most people who are relocating from outside the city will already have closed, or moved.

CAAR has posted its mid-year report, and you can access it here as a pdf. For more hard numbers in our area, and a view to the unfortunate downward trending of our market, REALCentralVA's Jim Duncan has done an excellent analysis. This is his 2nd Quarter Market Update, and it has all sorts of good info, plus interesting external links.

So What's Going To Happen?

At some point, there will be sanity--a return to house prices that aren't "fake" or nausea-inducing. At some point, we'll go back to the "realistic" idea that a large investment--a house-- should generates a 3-ish% profit per year. At some point, we'll be near the original American house ideal of income to price ratio--1 to 4. We think this will happen in our area no earlier than 2Q 2010. Unless something dramatic happens with the new presidency--and we don't mean printing an additional Four Trillion Dollars of "money" backed by nothing, which has happened during the Reign of W.

Meanwhile, we've still got Bubbles....

The Houses

If you've browsed this blog for about one minute, you know that we think Bullmont--er, Belmont--is the most overpriced and overhyped area of Our Fair City. The inanity continues:

935 Belmon t Avenue - $275K + $125K = $400K. Price "Reduced." Sort Of.

MLS #453087, 3 Bed, 1 Bath, 1,332 Sq. Ft., .09 acre, 1925.

935 Belmont Avenue has been on the market since Fall 2007. Throughout the Winter, Spring and into the Summer the house was listed for $375K, minus the "lot," which "cost" an additional $125 K.

Now it's offered--"Price Reduced"--for $275K. The house alone.

Hello? That's not a "LOT" for an additional $125K, it's the YARD. Reasonable people know this.

Here's a Tip: Price this at $250K for the house and the yard. THEN take $225K, and get it off the market. (This is $25K than our original valuation; we're feeling generous. ) Seller? You don't even have to give us the 3% Commission for finally bringing sanity, and closure, to this charade.

It's 2008. The Bubble is Burst. Belmont has gangs.

More nearby:

702 Belmont Avenue - $519,000.00 to $499,900.00 - Unpublicized Price Change

This Frank Bergland Flip has been on the market since Late May, and already has a $20K Price Reduction. No, there's no sign announcing this: it was just done quietly.

3 Bedro
om, 21/2 Bath
Year Built: 1930
Sq Ft: 2,000

You know why there's no announcement? Because a "Price Reduced!" sign says several things to buyers:
  • The seller doesn't know what the house is actually "worth."
  • Nothing's moving in the neighborhood.
  • The property has been on the market too long.
#1 and 2 may be accurate in this case. A $20K price reduction, however, still leaves this house at a Half Million Dollars. It's gotten some free publicity recently, which will make more people wonder, Is it "worth" it?

Or is it worth something else?
Is it "worth" the $335K that was paid for 710 Belmont in April of 2004--same flipper, similar house. Sure, 710 cost about $150K less to start with than 702. But this is 2008: which is closer financially to being 2004 than it is to 2006. And Belmont--did we mention it has gangs?--is not an area that can support Half Million Dollar houses. Even on this block.

We're wondering, though, if there's more to this story. In our original post we suggested that 730 Grove Avenue might be a better deal--though it wasn't on the market. We were being facetious, of course.

Now it's on the market.

MLS #455490
5 Beds, 2.
5 Baths
SqFt: 3,000
Acre: .30

Asking Price: $849,900.00

Driven by lately? Grove, which parallels Locust, is not a street of Million Dollar Houses. Sure, the only "esta
te" in the area is nearby; but this block has 1600 sq ft houses, give or take, some one-story aluminum siders, some two-story oldies.

730 Grove Avenue has a custom addition: a dance studio and bedroom over a garage/workshop. The builder made this with self in mind. Purchased in 1999 for $220,000.00, we're wondering: does this addition make the property "worth" 300% more nine years later? In this market?

Frank Bergland has at least two properties for sale. Is this a case of Be Do Have turning into Was Did Had? Or, as with speculation about local builders going under, is this just gossip? Maybe this guy is on to bigger things spiritual. Maybe he knows something. Otherwise, it's just sad.

Nearby, another rehab
bed house:

611 Avon Street - $494,000.00 to $468,000.00 - Unpublicized Price Change

MLS #453656

3 Beds, 2 Baths
Sq Ft: 2,000
Acreage: .19

If you stand on the back property line of 702 Belmont, you can toss a football over to 611 Avon Street. This house has had a "Price Reduction" of $26K. (What, and nobody's snapped it up?!?) Like 702 Belmont, there's no fanfare of signs announcing this initial acknowledgment that Hellmont--er , Belmont--is no place for a Half Million Dollar House. Get the football out and toss it again, this time an even shorter distance: the house is near the recent suspected gang slaying. (BTW, in our original post, linked above, we even commented on the gang tagging in the area.)

The memorial for the deceased Spanky Magruder is at the corner of 6th St SE and Monticello Avenue; you can see the memorial from the back deck of 611 Avon. (And the new construction behemoth at 606 Monticello (MLS #451219), one house from the memorial, has an asking of $599,000.00. Right.) It's all tragic.

But as with 702 Belmont, is there a backstory here? Because the dude who's hoping to unload 611 Avon (for $250+K more than it went for in June, 2007) is also hoping to sell:

1316 Oxford Place - $584,000.00 - No Price Change. Yet.

MLS #453654, 4 Bed s, 31/2 Baths, Acre: .57, 1952.

This is a cute house in the Oxford Road area, currently sitting empty and unloved...across the street from the "trouble house." Is this the same scenario as the Bergland extravaganza? A Must-sell? The Oxford Road neighborhood is established and fine. Hard to move from....

Yet 1316 is right next door to another empty house:

1318 Oxford Place - $429,900.00 - No Price Change. Yet.

MLS #451803, 4 Beds, 2 Baths, Sq. Ft.: 2,000, Acre: .31, 1952.

Again, across from "trouble." And similar houses in the Rugby area have gone for the mid-300's, including one on the 1500 block of Rugby Avenue, which had a basement "Mother-in-Law." It's asking was $375K, and it went quickly in June.

Higher priced houses are to be found nearby, too--unsold. For roughly the same amount of dough as 1316 Oxford, is

1332 Rugby Road - $605,000.00 - Unpublicized Price Change

MLS #451929 3Bed, 2Bath, Sq Ft: 2644, Acre: .25, 1950.

This property, which first appeared during the Fire Sale on Rugby Road, belongs to an owner/agent, who knows that a "Price Reduced" sign can be the kiss of death--open season for low-ball offers. The Asking dropped from $699K to $605K with no fanfare. But still no buyer. It's a beautiful house, a beautiful neighborhood.

But what's it "worth" in these difficult times? Can the buyer who falls in love with the house actually get a jumbo mortgage? 1332 Rugby has some distinguished (even famous, in the real world) UVa professors for neighbors. But they've owned their houses for decades. A current professor would have to make a hefty salary to get into this baby: the days of nothing down, no income documentation, and loans to 115% of purchase price are loooong gone.

Meanwhile, a post that generated a lot of comments on this blog concerned a property whose backyard abuts 1332 Rugby Road:

1705 Rugby Circle - $695,000.00 - No Price Change

New MLS #455062

Old MLS #448010

The post asked Why 1705 Rugby Circle had a new MLS #. The comments ranged from the basic explanation--the old listing expired after six months, and a new agent was on board--to suggestions that this was CDOM (Continuous Days On Market) fraud, an attempt to mislead buyers, immoral, chicanery, etc. Lively!

The facts persist that 1705 Rugby Circle has now been on the market for at least seven months, with no price change. Hello? One can only speculate about the sellers' mindset:

  • They're wed to the idea of their property as a Home, not viewing it as a large material object they need to unload. They're emotionally attached and see "worth" where others don't.
  • They're in no hurry to sell: they're on the two-year plan to disentangle themselves from The Hook.
  • The house isn't really for sale; they just like the periodic open houses to show off the lovely interior.
Across the city, we have another property, of much different quality, with a New MLS #:

903 Rougemont Avenue - $174,900.00 - "Reduced." Again.

"2290-oh no"

Old MLS #451157
New MLS #455282
2 Bedrooms, 1 Bath
Sq. Ft.: 720 ($250 Sq. Ft)

903 Rougemont
continues to be re-posted on Craigslist every week. The Bubble Blog has watched this price "drop" since January--$10K, and now an additional $4,500. Really? Is this property owned by people who live on another planet? Who don't know what's going on in the US right now? Perhaps...part of the "Equitysaver" description says that the house is located in "the heart of Downtown Charlottesville." Huh?

903 Rougemont had an openhouse on Sunday, August 3. Hope it helped! Beause while this thing remains unsold, it confuses buyers with its mind-boggling price, drives up CAAR/MLS stats, and perpetuates the Bubble, in our humble opinion.

But perhaps the above "starter home" could be considered "palatial" when compared with:

626 Booker Street - $147,900.00 No Price Change. LOL.

MLS #454183 Sq.
Ft: 700 ( $211.00 per square feet)

Acre: .09

This shack showed up as a new listing on Friday the 13th of June--but we immediately had several readers email us with the info that it's been "on the market" "several times." New MLS #, etc. The listing cautions Property being Sold "AS IS." Does this mean that the place is riddled with mold, mildew, and vermin? Sagging floor boards? Cracks that let in the daylight? But the listing is also optimistic in suggesting "Great Lot, you can tear down house and rebuild if more space is need." But isn't the need for "more space" than 700 sq. ft just downright piggish in the days of Global Warming and high energy costs? The Seller is missing a golden opportunity here--marketing the place as a Greenie paradise.

We also sincerely appreciate the optimism that goes along with leaving the price As Is. It doesn't cost anything to leave a sign posted in the front yard, though, does it? And you never know....

We have to contrast the insult of 626 Booker Street, of course, with

Seven Oaks - $12,500,000.00 - No Price Change. Yet.

MLS #448948 "Seven Oaks," Greenwood, 4 beds, 4.5 baths, sq. ft.: 6870, many amenities, other buildings incl. tenant structures, 100 Acres, ca. 1847.

Seven Oaks is languishing on the market because it's bad out there at every price point. And this particular price point is extreme...and the run-up in supposed "appreciation" is more emblematic of the Los Angeles/So. Cal. Bubble than our local floater. Coran Capshaw purchased Seven Oaks in 2000 for $2.5 Million. And this is the asking? A 400% increase? Hmmm.

Speaking of big percentage increases over a short amount of time:

833 Locust Avenue - $549,900.00 - No Price Change. (Yet?)

MLS #454312

5 Bedrooms, 2 Bathrooms
Sq. Ft.: 2,200
Acre: .49


With a successful sale, 833 Locust Avenue will change hands four times since 1997. We did the math in our original post, listing the selling prices:

1997: $123,000
2000: $187,500
= a difference from yr. 1997 of $64,000
increase of 52%

2005: $420,000
= a difference from yr. 2000 of $232,500
increase of 124%

Between 1997 and 2005--eight years--833 Locust Avenue gained 241% in "value."

That the OFHEO had already declared Charlottesville overvalued by 25% in 2004 is entirely irrelevant here.

The current asking is 30% higher than the last sale. With FHA jumbos capped? With the recent F & F Bailout? The price was eyebrowraising in May; with the events of mid-July, the price makes the top of one's head feel like it might blow off. We're interested in seeing what this gal fetches, and when....

And just a few more properties before we get to SOLD!

513 Dice Street - $369,000.00 - No Further Reduction; Yard Not Included

LS #450371
3 bedroom, 2 bath
Sq. Ft.: 2472
Acre: .10

If possible, Fifeville is a bigger fairytale than even Belmont; it's just that Belmont has been "happening" longer as a rehabbed neighborhood. This poor old house at 513 Dice Street has been nicely rehabbed, but it's trapped in an infelicitous area, and who knows for how much longer? Unfortunate.

1614 Oakleaf Lane - $349,900.00 - No Price Change

MLS #443460, 3 Beds, 2 Baths, Sq. Ft.: 2,8000, Acre: 0.28, 1947.

We think this is The Biggest Mystery in Charlottesville. We're starting to suspect that 1614 Oakleaf Lane hasn't actually been for sale for more than a year. We think that that RE-III sign in front of it is just a decorative flag. We've seen other places on the surrounding streets, also in the Greenleaf Neighborhood, move and move quickly. What's up here?

Finally, we must of course mention the cluster of "cottages" for sale in Belmont. It's no Fire Sale, though. These babies, all eight of them (nine, if you include the nearby, same-owner cottage across Avon) range between $190K and $220K. Come on.

804 Meridian Street - $ 205,000.00 - No Price Change. Yet.

MLS #455035
2 Bed, 1 Bath
Sq. Ft: 728

$260.00 - $300.00 per square foot (avg. 730 sq ft.).

912 Bolling Avenue - $193, 200.00 - No Price Change. Yet.

MLS #45 5034
2 Bed, 1 Bath

Sq. Ft: 728


These prices, these prices per square foot--in this market? It's difficult enough for anybody to get a mortgage, especially since mid-July. But for somebody for whom a shack like this would be "Affordable Again"--? They'd be sorely taken advantage of, in our humble opinion. Because when we did the math for these places in our original post, it looked like this:

Loan amount - $213,400.00 (97% LTV mortgages are still available and many C'ville RE blogs mention! this! often!)
Term of loan - 30 years
Interest rate - 6.4 % (typical this week)
Monthly payment - $1,334.83
Total interest - $267,138.10 (More than price of house)
Total payments - $480,538.10 (In other words, A Half Million Dollars)

And just a few weeks later, mortgages cost more.


1. Drop the prices to $100K Each. These will go "like hotcakes" to folk who've wanted to live in Belmont for ages. Which, mystifyingly, are still many.


2. Habitat for Humanity needs to step in. (Except at these prices, Habitat can't afford them. Read over the front page of Habitat's C'ville Website. It's Enlightening.)


3. ArtInPlace, the nonprofit foundation, should purchase these eight abodes, which share a back yard, and turn them into houses for ArtistsInPlace. Think of it: there could be one or two residents in each house, responsible for developing their own material and upgrading/beautifying the quarters--and enriching the community. There could be painters, sculptors, some dancers, actors, writers, some digital wizards, and, of course, one or two filmmakers to document the process. The residents would have to be committed not only to their work, but also to a "Green" lifestyle, which includes turning the yard into a giant kitchen garden. Residencies could last one to two years. Charlottesville is known not only as a place that keeps its students long after they graduate--but also as a thriving arts community. We need more places like the original Biscuit Run with its Wednesday night "salons." And an arts community right in the city? Priceless.



708 PARK STREET - Asking Dropped from $852K to $529K

It was a long time coming, but 708 Park Street was finally picked off the market.


The Original Asking of $852,000.00 still makes us smile when we're in one of our Dark Places. The Final Asking, more than six months later, was $529K; we hear the place went for $485K.

Which is good, since the City of Charlottesville was going to have to buy it, otherwise, and turn it into the tollbooth for Park Street in an attempt to slow down the ridiculous amount of traffic cruising by each day.

1606 GROVE ROAD - Asking Dropped from $420K to $360K

MLS #444991

3 Bedrooms, 2 Baths, Year Built: 1953 Sq. Ft.: 2,130 Acre: .50.

baby finally changed hands in late June, after spending some of 2007 and all of 2008 on the market. We had reservations about it, which we detailed in our first post. A big concern was the proximity of the Bypass. With gas prices what they are, however, perhaps in the future the road will be much quieter. (We can hope, can't we?)

The Original Asking for 1606 Grove Road was
$410K, then reduced in Spring to $380K to $360K in June. We hear it went for $320K and seller paid closing.

606 Lexington Avenue - $329K

MLS #453606 3 Bed, 2 Bath Yr: 1920, Sq. Ft.: 1438, Acre: .17

This little lady didn't last long on the market. We featured 606 Lexington because of the price--a great example of the 'irrational exuberance' in C'ville. In stasis for decades (others would say "dumpy," but we're too nice for this), the place had an Asking that just a few years ago got something extra special in the Rugby area, or a spread out in the County. While Lex is a nice street in North Downtown, it's currently iffy as a neighborhood, as there are no firm plans for the Martha Jeff Complex, which gets empty in 2010. The yard of this house overlooks the parking lot. But some people live in the moment. We hear the house went for $305K--which was pure profit, if the long-time owners hadn't HELOC'd the hell out of it. Nicely done.

1325 Rugby Road - $1.6M

Drive by, and the "For Sale" sign at 1325 Rugby Road is now accompanied by "Under Contract." Nicely done, if it sticks.
MLS #452065

*Closing prices not confirmed. Feel free to add input in comment section.


Anonymous said...

Meanwhile, all is well in the Shenandoah Valley!!! (despite the record 2Q drop in home sales) Why, the Staunton paper is proclaiming that Now Is The Best Time To Buy!!!
Too bad the same "reporter" has been pumping the housing market in the same paper going back to the spring of 2006.
It's no wonder people overprice their homes when they put them on the market - every Realtor (with a precious few exceptions) will tell them that things are bound to get better. And the local papers simply refuse to cover the market accurately: wouldn't want to piss off the people who continue to buy real estate ads every week.

Anonymous said...

newspapers--and real estate print ads--are going the way of the soon, the idiocy will be over.....

Anonymous said...

Print ads are pointless - just a way for Realtors to document the "marketing" work they're doing on their clients' behalf to help justify their bloated commissions.
How about eliminating the print ads and passing the savings along to clients? Like that would ever happen!

Anonymous said...

Great post. Reminded me of Meredith Whitney's appearance on CNBC this morning:
3:15 on

"Case-Schiller and the futures market price in peak to trough 33% right now. I think it’s going to be well worse than 33%..."
According to Whitney, 33% reflects 2002-2003 price levels.

Anonymous said...

meredith whitney is a genius, and her "colleagues" on wall street are still trying to deride her, EVEN THOUGH she's been right for three years....

Anonymous said...

hmmmm....i'm wondering where the usual RE peeps have gotten to? i liked their comments

as a bubble blog, you could be a LOT harsher than you have been.

but maybe they've fled in terror?

great post.

Anonymous said...

I'm the one with the contract on 1325 Rugby and am pretty confident that it is going to stick. and yes, it does have robots (or will soon).

I really appreciate your blog. We need more commentary on the state of the real estate market that is not driven by those who have a stake in keeping prices up.

Elux Troxl said...

I would suggest that people will take you more seriously if don't attribute you statistics source as "Larry King Show". I mean really, it's a freak show. There are a zillion legitimate places to get those numbers.

C'ville Bubble Blog said...


If you scroll around the blog, you'll see we've linked to some of the "zillion" other places for stats and info.

We linked specifically to our pal Larry because when his handlers think a story is "important" enough to hold the attention of his gigantic audience, which is comprised of people holding remotes in mid-air, ready to turn the channel, then you know the housing and credit crisis have finally caught the attention of the typically complacent primetime viewer.

Pretty soon there will be more tabloid coverage about people like Ed McMahon, Jose Canseco, and Evander Holyfield, who have houses in foreclosure. A national shame will become entertainment fodder.

Anonymous said...

Those Bullmont shacks really epitomize a lot of what's wrong with Charlottesville. Great idea about artinplace.

Anonymous said...

Some of your posts comment on the psychological factor of using "99" as an ending price...for instance, $699,000 instead of just admitting that the asking price is $700,000.

This really is an incredible mind-F that we all allow ourselves to engage in! It happens with everything from clothes to electronics to cars to cell phone service and beyond.

So when I see the houses in this post that have had price cuts of 20 or so thousand dollars, I actually am likely to at first believe they're better priced. But they're not. It's just that I've been fooled.

Numerical nuance is a crazy thing.

Scott_R said...

Oh my goodness! This is a little off-topic, but did anyone catch this morning's earnings report from good old Freddie Mac? Ouchie!

The credit contraction continues! That means less and less mortgage money out there to chase after these bubble houses!

The Prime Alt-A and OptionARM defaults are picking up steam! Whee! That whooshing sound is the air coming out of the bubble.

This thing has only just gotten started...

Anonymous said...

While I love reading this blog, I sometimes get the impression that certain commentators here find gleeful delight in every bit of bad news in the real estate market. Lots of good people have been hurt in this crisis. It hasn't all been greedy flippers and financial idiots.

C'ville Bubble Blog said...

Diana has a point, that lots of good people have been hurt, and will continue to be hurt in the housing collapse.

Some of our commenters are gleeful. But that's the beauty of the Comments section, right? Differing opinions.

Some of the people hurt, though, have been hurt BY the flippers and "financial idiots" (which we take to mean mortgage originators or brokers, for instance, who steered people into exotic loans).

We more or less try to be "respectful" and not name names. But we could: Buyers and Sellers and their Agents, as well as Agents' histories, can be easily discovered on the Web, through sites we link to. It's possible to discover what kind of mortgages a particular house has, and where it originated. We let readers do the linking if they want further info. When we DO name a flipper, for instance, it's because the name has been used as a selling point in the RE listing or ad.

But more people have been hurt by the housing debacle than just house buyers and sellers: credit cards, student loans, car loans, and personal loans are all impacted by this crisis--loss of leverage, even for those who don't own.

And there are lots of folk whose retirement accounts, which were supposedly "diversified," have taken serious hits. We're a College Town: anybody who has retirement funds with TIAA-CREF (Teachers Insurance and Annuity Association-College Retirement Equities Fund--the largest retirement system in the world) has the potential to suffer a big loss, depending upon their individual allocations. That's just one example.

We appreciate input from folk like Anonymous of 1325 Rugby. That place had a $1.6M asking. It's a beautiful house, has charming neighbors (one of whom appears on bus billboards all over town), and it was owned for decades by the same folk (we hope you got a fantastic deal)--and yet this new owner is still interested in commentary from people who don't have a stake in keeping the bubble blown up.

Because that's a serious problem here, and elsewhere: a house shouldn't be a moneymaker. It should reflect the habits, tastes, and predilections of the occupants, and offer comfort and material security, a sense of belonging, to those who call it "home."

It should not be an ATM machine. Any increase in value should be seen as a secondary benefit, not the primary reason for purchase.

There's a reason they call 'em "the good old days."

Scott_R said...

Diana -

As a "gleeful" commenter, I definitely admit to a great deal of Schadenfreude. However, I respectfully disagree with your assertion: there is no way this bubble could have gotten "blown" in the first place without a lot of people engaging in financial stupidity, both lenders and borrowers.

The bottom line is: you either borrowed in line with your ability to actually re-pay the loan, in order to purchase a house to actually live in, or you took a risk with some kind of unusual financial product and expected to either get out of the house or the financial product sooner than the original term or deal. If it's the former, then you very likely are just fine and aren't hurting - you can afford the house and you can keep on living there. If it's the latter, well, then you took a risk, and these are the consequences.

So, why do I take pleasure in seeing these risk-takers get burned? Because I think they took stupid bets - obviously stupid bets - sometimes because they really didn't know better, and sometimes because they found it convenient to hear what they wanted to hear from the "professionals" (sales hacks) who profited handsomely from giving self-serving advice. It is this latter class of amoral profiteers whom I most enjoy seeing gored.

I'm a pretty libertarian person - I don't really believe in protecting other people from harming themselves and I don't take particular pleasure in seeing people do stupid things. The trouble is: their stupidity didn't just hurt them - it hurt anyone who tried to be even remotely prudent. The stupidity put the cost of homeownership out of reach of prudent people. In case you haven't noticed: wages have not been rising for the past eight years. The false prosperity was all the result of imprudent borrowing.

So, yes, for those of us who recognized this idiocy for what it was when it was going on, a return to sanity is most welcome. You may be happy being a debt-serf to the top 1% in this country - we are slowly losing our Republic to an Economic Aristocracy - but I am not. And in case you hadn't stopped to notice: it's pretty damn hard work paying as you go and not living on credit, especially around here.

Anyone who has been caught up in this catastrophe inadvertently - unexpected divorce, disability, medical emergency, death, etc. - should be equally angry at the people who created this mess. If the mess-makers had not so severely gamed the system - to profit off of regular homeowners/buyers - people who are caught up inadvertently in the mess wouldn't be so screwed. Of course, I'll return to my original point: if you were prudent in the first place (ie, didn't overpay for housing by taking a big risk), you are probably in a position to get back out.

When I got my first mortgage, I had to put down a very significant down-payment and allow the loan officer review panel access to all my personal finances - well beyond just employment verification - I had to prove I didn't borrow my down-payment and I had to prove I had stable employment, etc., etc. In short - I had to prove I really had a decent chance of repaying the money they were loaning me. That whole process made it one hell of a lot harder to get a house - do I have some resentment of the "free money" crowd? Sure!

Was it better for the housing market and financial system (society at large) to do it "the hard way" - "slogging 10 miles to school through 4 feet of snow" - you're damn right it was.

Who really benefited from the go-go boom of cheap/free credit? New homeowners in our "ownership society" (you could not come up with a more Orwellian term to describe our debt-serfs - who is the real owner)? Homebuilders, mortgage brokers and real estate brokers - that's who profited. At least homebuilders actually make something (although far too much of it is crap and will be falling down junk in 20 years - before the mortgages are paid off) - the latter two are simply transaction parasites.

Anonymous said...


Have you thought of switching to decaf?

C'ville Bubble Blog said...

We love Montpellier on caffeine. If we knew who he actually was, we'd be sending him gift certifs to Greenberry's, Mudhouse, Java Java, etc. Weekly.

Anonymous said...

There is plenty of blame to go around; on that point we entirely agree. Outrageously reckless behavior on the part of some has caused the entire population to bear the cost in one way or another. Instead of blaming people I would blame the evils of loose money, easy credit and greed.

However, I think it’s unmerited to blame real estate agents for the global housing mess. Among the most unfair hyperbole I’ve heard is that agents advised clients to buy bigger and more expensive homes so they could make a larger commission. Ack! Unfair! I always tried to help buyers understand the responsibilities and cost of home ownership.

Realtors are people who need to eat too. Throwing us under the bus won’t help.

(In the spirit of full disclosure, I have not sold real estate actively since December when my small child became critically ill. He’s on the mend, and I plan to eventually return my career of helping house God’s people.)

Anonymous said...

Late on this post, but just for the sake of posterity, the transfer info finally showed up online at the city tax assessor's office, and 708 PARK STREET, with ORIGINAL ASKING OF $829K WENT FOR $470K.

Anonymous said...

Sold Price Update:

606 Lexington, Asking $329K, went for $295K.