Real Estate Market Creates Flippers in Trouble

I remember stumbling upon a website a year or so ago called Condo Flip . com.  The company had created an online marketplace for people to buy and sell condos at the click on a mouse.  It was/is the Match . Com for condo buyers and sellers. Maybe I am old school, but I would at least like a walk-through before forking over money to buy real estate. 

So, it shouldn’t have been a surprise, today, to find  the Sacramento Flipper in Trouble’s blog.  According to their web site a Flipper in Trouble (FIT) is defined as someone who has bought a house within the last two years and is selling it now for less than what they paid. 

It is amazing how many Sacramento FITs have sold within the last 6 months for a 10-30% loss.  There were a few under 10%, but mostly on houses in the $500,000 range.  So, those losses were still $40-50K.  The losses appear to be increasing each day.  The most recent, listed as closed on 11/15/06, sold at a loss of $150,000. 

If it looks like a duck and quacks like a duck.  It’s a bubble.

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John T. Reed’s Views of Various Real Estate Investment Gurus

You wake up in the middle of the night – unable to fall back to sleep, so you start flipping through the channels. Undoubtedly, you will come across a station – where a nicely dressed person in an exotic location is telling how rich he or she became selling real estate.  Then you hear testimony after testimony from people stating how they too became rich by following the gurus advice.  Depending on how your day was at work – you start contemplating calling and giving it a shot.  I remember in the late 80’s, I almost signed up for Robert Allen’s no-money down seminar.  However, a friend who had attended it in the past talked me out of it.  He saved me a few bucks, because then – like now real estate was in a recession.

John T. Reed reviews all of gurus past and present including Robert Allen, Wade Cook, Robert Kiyosaki, Carleton Sheets, Donald Trump and many more.

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Can the Economy Survive the Housing Bust?

Here is a scary chart to consider.  It plots the National Association of Home Builders’ Housing Market index – a monthly measure of builder confidence – against the Standard & Poor’s 500 stock market index, with a one-year lag. There has been a very close correlation between current builder confidence and future stock returns over the past ten years.

housing-lag-2.jpg

If the correlation holds true, there could be a rough road ahead for the stock market.  Just don’t expect the bubble heads on CNBC to give you a heads up.  As the DOW continues to make all-time highs, they continue to ignore any potential dangers spilling over from the real estate market.  Their position is that the economy is resilient enough to withstand the real estate downturn, the auto slowdown and any other negative news.  However, I find it hard to ignore all of the economic activity generated by home sales like new mortgages, realtor fees, outlays to painters and handymen, as well as the trips to Home Depot and Best Buy.

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Housing Market Stabilizing – NOT!

Luxury home builder Toll Brothers announced today that their earnings fell 44% in the past quarter.  In an effort to have Wall Street to look past the earnings and into the future, Robert Toll, CEO, provided hope that the market may be stabilizing. Toll stated that, “Fifteen months into the current slowdown, we may be seeing a floor in some markets where deposits and traffic, although erratic from week to week, seem to be dancing on the bottom or slightly above.”

That calls for the what is he smoking alert. rasta.gif  I am writing this post so that I can refer back to it after their next earnings release.  If TOL is trading higher by then I will be shocked.  Toll Brothers closed today up 3% at $32.87. 

The homebuilders are hoping that lower interest rates will kick start a new buying binge.  Someone may want refer them to this article “Ford said to eye new job cuts” or maybe this one “Intel said mulling up to 20,000 job cuts.”  For some reason, I think that buying a new home buying or upgrading is not very high on the priority list of the people concerned about thier jobs.

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Housing Slowdown Making it Hard for Empty Nesters

Parents whose children have grown up and are no longer living at home, often referred to as empty nesters, are not a very happy bunch these days.  Many are finding that their next phase of life is being held hostage by a giant albatross.  With the kids gone, their lifestyle is more suited for a luxury condo downtown than the suburban house with swimming pool.  However, until they can sell their albatross (aka home sweet home) – they are stuck dealing with the lawnmower and snow blower. 

Today’s Boston Globe really opened my eyes.  It used the dreaded four letter word that is often used in association with the housing market – GLUT.  It stated that September sales of single family homes were down 24% from last year.  The slow down has produced a glut of houses for sale, enough to last 13 months. The problem has been magnified by the baby boomers trying to sell to downsize.

The article mentioned the story of one couple that represents many people in the area.  They had just taken their home off the market after being on sale for nearly a year.  They had one buyer for their home last December for $419,000, but the offer was withdrawn days before the closing.  When they pulled the house off the market, the asking price was $329,000.  The price had been reduced over 20% and still no buyers.  The Boston market has seen double digit appreciation for past several years.  If you have been in your house for awhile you can afford to lower your price 20-30%, but how low can you go.  The couple stated that “no reasonable offer will be refused,” but still no takers.