Real Estate Crash thread

[Toadman]

Overheard on the lift: "Hotel occupancy is the worst it's been since 1982."

The long-term rental market here is getting cheaper and cheaper as vacation rentals that aren't renting go on the long-term market. Most of them are for sale, too, as people realize that "buy a place I use 2-3 weeks a year and rent it out when I'm not there" isn't such a great deal anymore.

You can rent a seriously pimpin' pad in a good location in NV for $1500/month. Example:
http://reno.craigslist.org/apa/1531135704.html
And you can rent 2BR condos all day for under $1000 on upper Kingsbury.

Lots of denial here still, though: these same houses are sitting on the market forever at ridiculous prices. Sure, I want to pay 2-3x the rent for the privilege of "owning". Riiiiight.

I'm surprised it's taken this long for 2nd homes, that primarily serve as rental income haven't seen heavier discounting. But I guess you're right when you say there still is a lot of denial out there.

However, I've been inundated by VRBO, Homeaway, and the ubiquitous Intrawest spam the past few weeks on great rental deals at your ski resort of choice. So maybe desparation is starting to set in.

[skier666]

Here's another mighty large default......

NEW YORK — The financially troubled owners of two massive apartment complexes that sold for a record $5.4 billion a few years ago said Monday they're turning them over to their creditors.

The joint venture ownership team led by Tishman Speyer Properties and BlackRock Realty, hurt by the real estate market collapse, couldn't make a multimillion-dollar loan payment earlier this month for the Stuyvesant Town and Peter Cooper Village apartments in Manhattan.

Over the last few days it became clear the only viable alternative to bankruptcy would be to transfer to lenders control and operation of the 110 buildings and 11,000 apartments overlooking the East River, partnership spokesman Bud Perrone said.

"We make this decision as we feel a battle over the property or a contested bankruptcy proceeding is not in the long-term interest of the property, its residents, our partnership or the city," Perrone said in an e-mailed statement.

The group bought the complexes, which have about 25,000 tenants, in 2006 at the height of the real estate bubble in the nation's largest residential real estate deal.

The record purchase price seemed outrageous to many real estate analysts, but the partnership believed it had a winning strategy: It would aggressively convert thousands of rent-regulated apartments occupied by middle-class families into luxury units that would fetch top dollar.

But the tactic was a bust as the city's housing market cooled considerably. Ratings firms estimated the value of the 80-acre area had fallen to as little as $2 billion – far less than the outstanding loan balance.

Apartment conversions happened much slower than expected, tenants fought back and a state court ruled that about $200 million in the partnership's new rent increases was improper.

The group, which used a $3 billion mortgage and a $1.4 billion secondary loan to buy the properties, had been trying to restructure its debt. It couldn't make a $16 million loan payment due Jan. 8.

Analysts had been expecting the ownership group to default on its loan for several months.

It hasn't been determined when the ownership transfer of the sister properties will take place and who specifically the new owners will be, Perrone said.

Tishman Speyer, whose other properties include Rockefeller Center and the Chrysler Building, said it wouldn't consider a long-term management contract to continue operating the apartment complexes if it didn't involve ownership. It said it was committed to an efficient transition of the properties' operations and would manage them during that transition.

The housing complexes, which are so big they have their own newspaper, were built by Metropolitan Life in the 1940s for returning World War II veterans. MetLife Inc. decided to sell them in 2005, when real estate prices were soaring.

Tenants launched their own bid to take over the 11,227 units, three out of four of which were rent-stabilized and priced far below the market rate, before MetLife announced it had closed a deal with the partnership led by Tishman Speyer and BlackRock.

[Benny Profane]

Overheard on the lift: "Hotel occupancy is the worst it's been since 1982."

The long-term rental market here is getting cheaper and cheaper as vacation rentals that aren't renting go on the long-term market. Most of them are for sale, too, as people realize that "buy a place I use 2-3 weeks a year and rent it out when I'm not there" isn't such a great deal anymore.

You can rent a seriously pimpin' pad in a good location in NV for $1500/month. Example:
http://reno.craigslist.org/apa/1531135704.html
And you can rent 2BR condos all day for under $1000 on upper Kingsbury.

Lots of denial here still, though: these same houses are sitting on the market forever at ridiculous prices. Sure, I want to pay 2-3x the rent for the privilege of "owning". Riiiiight.

I hear you on that one. Very cheap rents I see, but the purchase prices are way out of line. That rubber band has to break soon.

I read recently that 90% of Nevada mortgage holders are underwater. No wonder Harry Reid is fighting for his job.

[liv2ski]

I read recently that 90% of Nevada mortgage holders are underwater. No wonder Harry Reid is fighting for his job.

Benny, I find that really hard to believe, as values are likely at a 2000-2001 level. That said, hopefully everyone that bought before that time didn't do a cash out refi or 2nd against their home. But, you never know

[whatcomridaz]

Well I'm ready for lakefront on Tahoe, decent houses are already under a Mill.

[Benny Profane]

Benny, I find that really hard to believe, as values are likely at a 2000-2001 level. That said, hopefully everyone that bought before that time didn't do a cash out refi or 2nd against their home. But, you never know

Yeah, I saw another figure today putting it at only 65% (!), but, maybe, in reality, it's more like 90%, due to the HELOCs and the simple fact that homes wouldn't move an inch if they went on the market tomorrow. And, by the end of the year after all the Alternative mortgages reset, it'll be very close to 90.

[rideit]

My folks just rented a badass pad in manhattan, I think on the UES, for NOTHING. Like, close to Syracuse rents. It's crazy out there.

[Spats]

I hear you on that one. Very cheap rents I see, but the purchase prices are way out of line. That rubber band has to break soon.

You'd think that -- but remember that the entire weight of US and Federal Reserve fiscal policy has been put behind not allowing housing prices to fall to their natural level. Add banks letting people stay payment-free for 12-18 months or more to the natural state of denial, and it's going to take a long time for anything to get reasonable.

In the meantime, renting will be a much better deal in bubble locations like NV.

[Gaffney10]

what is the current % you can offer on say an average home in the Bozeman area? Are people taking 10-15% less than list price? I have some friends in the Triangle (Raleigh area of NC--growing like crazy) offer 18% less asking and they got it......I know the surplus is good in Bozeman so I thought I would ask...

[liv2ski]

what is the current % you can offer on say an average home in the Bozeman area? Are people taking 10-15% less than list price? I have some friends in the Triangle (Raleigh area of NC--growing like crazy) offer 18% less asking and they got it......I know the surplus is good in Bozeman so I thought I would ask...

Since asking prices can be all over the place, I would suggest you look at listings in that area on a regular basis to get a feel for what is what. Normally foreclosure prices are setting the floor value and resellers will be higher.

[Benny Profane]

You'd think that -- but remember that the entire weight of US and Federal Reserve fiscal policy has been put behind not allowing housing prices to fall to their natural level. Add banks letting people stay payment-free for 12-18 months or more to the natural state of denial, and it's going to take a long time for anything to get reasonable.

In the meantime, renting will be a much better deal in bubble locations like NV.

True. The banks are still fucked, wallowing in huge piles of toxic crap, that they were allowed to mark off of market last spring. If homes go down just another 10% this year, which is more than likely, they are even more fucked. And, the sad thing is that the US government now is the only lender in the game, and they have positioned who knows how many new "homeowners" over the last year or two to be underwater next year by giving them no money down loans with low credit scores. Sick.

[Gaffney10]

Since asking prices can be all over the place, I would suggest you look at listings in that area on a regular basis to get a feel for what is what. Normally foreclosure prices are setting the floor value and resellers will be higher.

I currently monitor the listings on the web and through other sources......

For example, if a home has been on the market for more than 2 months and they are asking $325,000.....have people offered 15% less and got the home at $276K?

I know it depends on the situation but is this common? I hear of 5-10% sometimes but in the current market, especially in Bozeman (homes everywhere) is 15-20% off asking price a dream or a reality?

[Benny Profane]

http://www.uli.org/sitecore/content/...inAmerica.ashx

[Benny Profane]

Yeah, baby. This is from a source that typically tells me that I should buy now, because it's a great "investment", and can only go up. Basically a schill for the real estate industry, which is what they're trying to do here, but, of course, how do they answer all the people who may say, whoa, is this really the bottom? Or, the start?

Rock on, cheap ski condos.

http://www.nytimes.com/2010/01/29/gr....html?emc=eta1


In Jackson, Wyo., “buyers are paying cash and determining the market,” said Greg Prugh, a broker, who said prices have fallen by as much as 50 percent since 2007. He recently sold a two-bedroom condo in Teton Village listed at $700,000 for $360,000 in cash. “Modern-day Jackson was built on construction, financing and real estate,” he said. “With financing tight, those jobs are gone, and the middle-class people who bought condos on spec are forced to sell.”

[Benny Profane]

http://online.wsj.com/article/SB1000...d=patrick.net#

"Freddie's federal overseers nevertheless have instructed Mr. Haldeman to focus on something that isn't likely to make the bleak balance sheet look any better: carrying out the Obama administration plan to allow defaulted borrowers to hang onto their homes.

On a recent afternoon, employees at Freddie's headquarters here peppered Mr. Haldeman with concerns about the company's future. He responded that they were "fortunate" to have such a clear mission—the government's foreclosure-prevention drive. "We're doing what's best for the country," he told them."

"Nearly a year and a half after the outbreak of the global economic crisis, many of the problems that contributed to it haven't yet been tamed. The U.S. has no system in place to tackle a failure of its largest financial institutions. Derivatives contracts of the kind that crippled American International Group Inc. still trade in the shadows. And investors remain heavily reliant on the same credit-ratings firms that gave AAA ratings to lousy mortgage securities.

Fannie and Freddie, for their part, remain at the core of a housing-finance system that inflated a dangerous housing bubble. After prices collapsed, sending shock waves around the world, the federal government put America's housing-finance system on life support. It has yet to decide how that troubled system should be rebuilt.

On Dec. 24, Treasury said there would be no limit to the taxpayer money it was willing to deploy over the next three years to keep the two companies afloat, doing away with the previous limit of $200 billion per company. So far, the government has handed the two companies a total of about $111 billion."

[khakis]

News headline yesterday called prices here still overvalued by 26%. think i'll wait for those killer auctions.

Just out of curiosity I did some real estate searching in Detroit. $1,200 will buy you a nice 2 bedroom fixer.

Wife and I were talking about Detroit last night. Never been, but there are supposed to be some unbelievable historic buildings downtown. Any chance of Detroit ever recovering economically? Albeit at a much-contracted level? Though it would suck to fly into town to check on an investment property and find a bunch of bums squatting there, warming up over a fire they built from your crown moulding.

[Dantheman]

Any chance of Detroit ever recovering economically?

Who knows if this will actually go anywhere, but it's a pretty cool idea

http://money.cnn.com/2009/12/29/news...tune/index.htm
http://www.hantzfarmsdetroit.com/

[skier666]

http://www.thinkbigworksmall.com/myp.../23088/1458579

[Dantheman]

http://www.thinkbigworksmall.com/myp.../23088/1458579

That's a ridiculous deal, but did you see this comment? Sounds like these guys might not be telling the whole story.

OneWest has to experience a huge amount of loss (20% of the total UPB of all loans purchased by them as of the closing date) before the provisions of this video take effect. In my opinion, leaving out that part of the agreement is a little disingenuous.

[skier666]

The link made it into my email, gave a quick watch, nothing more....just like anything, take with a grain of salt.

[Benny Profane]

Wife and I were talking about Detroit last night. Never been, but there are supposed to be some unbelievable historic buildings downtown. Any chance of Detroit ever recovering economically? Albeit at a much-contracted level? Though it would suck to fly into town to check on an investment property and find a bunch of bums squatting there, warming up over a fire they built from your crown moulding.

I'd put my money into Vegas or Miami if you're shopping for a distressed urban market with some kind of future bounce, but, Detroit? I don't think so. Why would it bounce back?

[mcsquared]

I'd put my money into Vegas or Miami if you're shopping for a distressed urban market with some kind of future bounce, but, Detroit? I don't think so. Why would it bounce back?

Why would Vegas? Detroit at least has the capability to be self sufficient to some degree and a history of being productive. Without tourism and excess consumption how long would the lights stay on in Vegas?

By the way, khakis must have gotten his latest issue of This Old House Magazine yesterday too. Because I was pondering similar things.

[khakis]

By the way, khakis must have gotten his latest issue of This Old House Magazine yesterday too. Because I was pondering similar things.

I did, but I haven't opened it yet...too weird! We were talking about it because my wife watched a documentary on rail travel and it had a segment on Detroit, and she was commenting on some of the cool buildings downtown that were shown.

yeah detroit sounds like it's got infrastructure, good sites for brownfield industrial development, like that nearly-dead industrial town in Germany that has had a rebirth as the world leader in renewable energy-related manufacturing (wish I could remember how to find that article again). And cool old buildings. Those are expensive here in denver!

a REO track home in a vegas suburb is the last thing I want to buy. They can bulldoze those for all I care.

[GeoMatt]

The wife and I are in the process of closing on a house in Evergreen, CO. We looked at around 20 houses. Everything from new listings, to short sales, foreclosures, bankruptcies, and even some on the market off and on for over two+ years. By all appearances, the market in Evergreen is a bit sheltered in regards to home prices. I don't think there has been a big downfall, with prices holding about where they would have been 4-5 years ago. So long as an owner has held for that length of time, they aren't going to lose their shirt. Also noticed quite a few homes being flipped, and some very good candidates for flipping.

We settled on a home that has been on and off the market for about 1.5 years, with the title being held in trust as part of a bankruptcy. We will be pruchasing from the family that constructed the home 8 years ago - high end details abound, with almost no work required to meet my wife's high standards (this I'm very thankful for). Final purchase prices was more than 25% off of the intial listing price in Summer 2008. Financing has been very easy for us to do lack of any debt and available cash for 20+% down; we've been able to get mortgage agents to compete for our business.

I think it is going to take some time for the market to stabilize, and potential buyers to come to terms that home ownership is the American dream, not a right. The qualification process for financing is certainly more stringent than it was the last time I did this in 2004. Zero down jumbos on stated income is certainly a thing of the past. The more stringent qualification process is certainly playing into the failure rate on refi applications.

[Benny Profane]

Did you ever see that Tom Hanks movie, The Money Pit? Imagine that house in a slum.

You guys should take a drive from Albany to Buffalo on the Thruway, stopping in all the old canal industrial towns that have been on life support for decades. Schenectady, Utica, Syracuse, Amsterdam, Rochester (soon), and many smaller cities with nothing going on. Trust me, NY state taxpayer dollars have been thrown at those places for too long with all sorts of hope-for-the-future "development zone" schemes, with nothing to show for it. What makes Detroit any different? All that activity is in China today, and it ain't coming back. Yeah, there's human capitol there, but those people would move in a flash if they could move to a civilized place, and, I'll bet a lot have and are at the moment.

Vegas will come back. Maybe not to levels of the last decade, but, never underestimate the capacity for Americans to spend whatever money they have to have adult fun.