Daily Archives: November 12, 2009

Builders downsize

The WSJ reports on the downsizing of the American dream. Looking at the “before and after” schematics of two houses, though, I realize just how accustomed I’ve become to Greenwich-sized homes. These two Lilliputians are so small that the pre-recession model seem suitable as a Havemeyer starter home and the post-recession one maybe a guest room/pool house. We got a whole lot of shrinking to do before we start looking like Atlanta.

Slimming Down

Compare the floor plans of a boom-era luxury home and a smaller, post-recession design.

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Wouldn’t this be funny

Up in New York’s District 23, it seems that the vote count was screwed up and they’re redoing it. It’s entirely possible that Conservative candidate Doug Hoffman may prove to be the winner after all. Frankly, it won’t affect anything down in the tar pit whatsoever, but it will be entertaining to see what Krugman, the editors of the NYTimes have to say if the election results are reversed. They spent thousands of words parsing the meaning of Hoffman’s defeat  ad concluding that all was well with liberal Democratism after all. And so if Hoffman wins ….

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We’re not even close to the end of this mess

Reader AJ sent along this link:

Home-Purchase Index in U.S. Plunges to Lowest Level Since 2000

2009-11-12 12:00:00.8 GMT

By Bob Willis
Nov. 12 (Bloomberg) — Mortgage applications to purchase homes in the U.S. plunged last week to the lowest level in almost nine years as Americans waited for the outcome of deliberations to extend a government tax credit.
The Mortgage Bankers Association’s index of applications to buy a house dropped 12 percent in the week ended Nov. 6 to 220.9, the lowest level since Dec. 2000. The group’s refinancing gauge rose 11 percent as interest rates decreased, pushing the overall index up 3.2 percent.
The drop in buying plans points to the risk that the recent stabilization in housing will unravel without government help.
In a bid to sustain the recovery, Congress passed and the administration signed a bill last week to extend jobless benefits and incentives for first-time homebuyers, adding a provision that also made funds available to current owners.
“Uncertainty over the housing tax credit sent some tremors through the market in recent weeks,” Michael Larson, a housing analyst at Weiss Research in Jupiter, Florida, said before the report. “But now that Congress has extended and expanded the credit, we should see demand pick back up.”

AJ writes, and I agree, that we’re watching a market being artificially propped up with taxpayer subsidies. Greenwich isn’t affected by a piddling $8,000 buyer’s credit (so why do the two print columnists in town spend so much ink on them?) but the national figures reflect a Potemkin village, not a real marketplace. If people aren’t applying for mortgages, they aren’t planning to buy a house, all rosy predictions by builders and real estate brokers to the contrary.

We’re closing in on 300 active foreclosures here in town, and I know of many, many financial types, not yet in foreclosure, who are sucking wind, trying to keep up the appearance of solvency so they aren’t wiped out by their peers on Wall Street. Despite what you probably think, traders are not very nice people, and when they smell blood, they strike. So credit cards are being maxed out, late fees accruing, and mortgage payments are not being made. These are not people likely to be rescued by the federal government and so when they go down, they’ll go down hard. Add a couple of hundred more foreclosure properties to the 300 we have already and what do we get? Just about a doubling of our inventory, all of it bank owned and selling for peanuts. That’s not going to help sustain current values and to this Eeyore, presents a compelling argument against holding on til spring to await the market’s return. We should live so long.

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One contract, some interesting price reductions

0 Lockwood

0 Lockwood

101 Lockwood Rd (Rvsd) came on just a month ago asking $2.250 and already has a contract. Not the house of my dreams, but decent enough and a pretty good location (across from Druid). The sellers paid $1.965 for it in 2006 so they were smart to stay close to that figure now.

On the other hand 29 Byfield, a spec house, remains unsold. The builder reduced its price a whopping $100,000 today, to $5.898 million, but he’s got a problem: He originally priced it at $9.495 million back in April ’08 and I suppose buyers were too busy laughing to check out its charms because he was forced to reduce it, again and again, until last December when he reached $5.198. This January, he raised it to $5.998, where it has remained until now. I’m pretty dumb when it comes to these things but buyers aren’t and I’d expect them to conclude that, if the seller was willing to accept $5.2 last year, he should still be willing today, and I’d think price negotiations would start well below that figure, rather than the $5.898 he wants now. Furthermore, the assessment is $3.672, and some pesky buyer is bound to use that as a benchmark, rather than any of the seller’s prices.

And speaking of assessments, 11 Pinecroft, originally priced at $4.350 has, after two years, come down to $2.995. Its assessment is $2.3 million, which would be an attractive price for a house like this which is in a great location but in so-so condition.

 

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More exposure to mortgage debt; yeah, that’s the ticket!

The FHA, guarantor to just about every mortgage being written these days, is busted. You and I might think we had a problem were we in the same situation but this is Chinatown, Jake, so no worries.

Critics say the agency insured too many loans to unqualified borrowers in 2007 and 2008, a position the agency itself now agrees with. Nearly one in five loans it insured in 2007 now fall into the category of “seriously delinquent,” it revealed Tuesday.

The F.H.A. says that it is now insuring loans to more financially secure buyers with highercredit scores. In a sense, the agency is bulking up and giving as many loans as it can to diminish the pool of problem loans. It guaranteed more than $360 billion in mortgages in the last year, four times the amount in 2007.

Critics say this is only increasing the size of the ultimate peril.

“They keep saying they’re going to outrun their problems, but some way, somehow, the taxpayer is going to end up on the hook,” said Edward Pinto, a former executive with the government mortgage giant Fannie Mae.

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Often, your first offer is the best one

132 Hendrie Ave

132 Hendrie Ave

This Riverside cape came on the market in 2007 asking $.145 million. It’s a tired old house but the land is nice, even if it does back up to the tracks. My memory’s a little vague on the exact amount but I know I extended an offer on behalf of a builder client back then for, I think, $950,000. The sellers rejected it. As they rejected another offer, made a year ago May, for $750,000. Today it’s been reduced to $995,000. My reaction? That was 2007′s price, not 2009′s.

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Announcing a new service: removal of Obama stickers from Lexus SUVs

The Demmerkrats are getting ready to impose a medicare tax on capital gains. Don’t worry, it will only apply, at least at first, to gains of $250,000 or more so if you sell your Greenwich house in the immediate future, you shouldn’t be hit – they can’t tax what doesn’t exist, yet. But if the market comes back, …

As a public service, and for only $35 per sticker, I’ll be conducting an Obama removal removal session Thursday, November 26th at the Eastern Middle School parking lot, 10-12. Special discounts for Bentleys.

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The center will not hold

U.S. Government latest bail-out recipient.

Obama, worried about the Kazillionbillion dollar deficit he’s created, now wants to use the imaginary money he invented for the TARP program and use it to reduce our debt, thus saving $200 billion dollars. This wouldn’t fool a kindergartener, but then, we’re talking about the same members of the American public that voted for this man.

WASHINGTON — The Obama administration, under pressure to show it is serious about tackling the budget deficit, is seizing on an unusual target to showcase fiscal responsibility: the $700 billion financial rescue.

The administration wants to keep some of the unspent funds available for emergencies, but is considering setting aside a chunk for debt reduction, according to people familiar with the matter. It is also expected to lower the projected long-term cost of the program — the amount it expects to lose — to as little as $200 billion from $341 billion estimated in August.

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Contract on Linwood Road

Thanks to a reader’s tip I learned about this bank-owned property that wasn’t listed on either the Greenwich or Connecticut MLS. My clients tossed a bid at it and today have a contract.

Which is nice, and it’s an excellent value, I think, but more instructive is how my clients came to make their offer. They had an accepted offer on another property in Old Greenwich but while we were there with the building inspector the listing broker called: someone else had bid higher and the sellers were going to accept it unless we matched the new price. We paused to consider this breach of promise and, while considering, I submitted a bid on the Linwood place just in case my clients declined to pursue the Old Greenwich property.

They did decide, reluctantly, to meet the higher bid, but felt wronged – some people don’t consider their word to have any value but for those who do, going back on it is an egregious fault. My clients were of the latter school, the Old Greenwich seller obviously belonged to the former. In any event, that same evening, as they were in their lawyer’s office signing contracts I received notice that our bid on Linwood had been accepted. So we all trooped off that night to see Linwood for the first time, my clients preferred it, and thus the contracts for Old Greenwich remain on the back seat of my car.

Last heard from, the “winning” bidder on the Old Greenwich property is having second thoughts and may have walked away. Which happens. The Linwood house is indeed a better property but due to the ill will generated by the reneging Old Greenwich seller, it would have sufficed had Linwood been merely equal to or slightly inferior.

So we got a better house, at a better price, and the seller either has his price with buyer 2 or he doesn’t – we’ll find out soon. My advise to sellers in this situation is that, once you’ve accepted an offer, stick with it, but tell the buyer what you’re doing and that, while you are honoring your word, you do have a second, higher offer waiting in reserve. That eliminates most of the first buyer’s power to negotiate down from the accepted offer but preserves the good will between you. And good will holds deals together better than anything else.

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I predicted this a month ago

Obama rejects all troop options in Afghanistan. The “experts” profess surprise, but if an armchair blogger like me could see it coming, how expert are they? Look, this is really simple: if the One adds troops, he infuriates the left nuts and makes the war his. If he pulls everybody out and Afghanistan returns to a Taliban terrorist training site, he gets every normal American mad. If he continues the status quo and everything falls apart – which it will – he can continue to blame Bush for getting us into the mess to begin with.

And so that’s what he’ll do.

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