Let's not paint all housing with negative news

The broad brushes have been slathering black paint all over the national housing scene the past week.
In case you missed the dark headlines: Foreclosures at record highs, builders in the dumps, home prices riding a greased pole to the ground floor.

The problem with broad brushes is they’re sloppy and stray beyond the lines of what’s reasonable. Let’s take each dollop of bad news one by one:

The foreclosure crisis: Yes, Floridians are defaulting on their mortgages at unprecedented rates. The firm RealtyTrac flagged 5,904 “foreclosures” in the Tampa Bay area in August. Read the fine print: 770 of those homes were repossessed by lenders. The rest represented people behind on their mortgages, most of whom will likely either keep or sell their homes. And huge numbers of foreclosure properties are owned by speculators casting off what for them are bad deals. It’s a mountain of a problem, but more Matterhorn than Everest.

Builders got the blues: We heard last week that home construction is plunging to depths not reached since 1995. Is anyone perplexed why slower residential construction, in a Tampa Bay market with 41,000 homes listed for sale, is bad news? Sounds like a market purging itself of excess supply. And when did 1995, amid a tech boom, become a benchmark for sluggish economies?

Home price slide: I sold my house during the slump this year. I got $205,000. My neighbor a year earlier got $245,000 for a smaller house. I felt cheated. I was wrong. In eight years I made $113,000 profit. That brings us to Moody’s Economy.com. It published a list that breaks down how far prices should fall in markets across the country. Here in the Tampa Bay area, Moody’s foresees home prices bottoming out in the summer of 2008, when we should have lost 12 percent from the peak in late 2006. Let’s return to my example. My home sold for 16 percent below my neighbor’s. That’s worse than Moody’s forecast, and we haven’t even reached 2008.

Here’s the point: Real estate is intensely local. A bird flu of a market in Sarasota — Moody’s projects a 25 percent home price decline — may be a head cold of a market here in Tampa Bay. Not every neighborhood will suffer the same from the slump.

Easy answers are scarce. But it helps to use a finer tip on your brush.

Comments

[Fuzzy Bear]

Good start in the article, but the press has not come close to the bottom line as to where the problem lies in the housing mess.

First and formost, the press has a tendancy to follow the cheerleaders from the National Associations of Realtors and the state and local associations. These associations are nothing but cheerleaders trying to drum up business for it's members. To date, the NAR has missed every forcast it has put out this year and last year.

The main cause or bottom line is that housing has exceeded the budgets of the local economy and houses are no longer affordable. Housing prices in the Tampa Bay region sky rocketed driven up by the speclators and flippers trying to make a fast buck. The results are a market of unaffordable homes which are often ending up in foreclosure. It takes an income of $58,000 per year to afford a $225,000 which is at the peak for that income level. Anyone with financial sense would not purchase at the peak of their affordability. I for one would not purchase a house in this inflated market. The risks of failure are just too high!

The press need to do a better job of getting the facts and to stay away from questionable information that has proved to be unreliable from organizations such as the NAR and other associations. Try reading the comments from thehousingbubbleblog.com and the public will see what others, like myself are saying about the housing market. To date, this site has been right on the money regarding their comments.

[E. Geno Petricca]

Bravo again! Thanks for the no-nonsense article above describing the "negative broad brush" approach most take.
We too sold 2 properties in the start of the slump. One was @ $25,000 below market and another @ $22,000 below market. Yet as you also stated above, we sold at $80,000 and $100,000 above what we paid in 5 and 6 years respecfully. And very very happily too!

About 7 years ago, a very successful real estate friend asked me what the best real estate deals were? I replied; "Cash deals?", "nope" he replied...
"no inspection?", "nope"...
"10 grand over asking price?", "nope".

He said, "The best deals are Win-Win! When you the seller or buyer feel like a winner, and the other guy feels like a winner too! Those are the BEST DEALS! When everyone is happy and friendly at the closing and shaking hands giving out addresses for Christmas cards!"

Wow, he's right too, those have been my "Best Deals" and will continue to be!

Good article...like this blog!

[Bill]

Which neighbor sold his house for $245,000. Did he have a swimming pool and/or waterfront? I know your house had neither. And, really, how much smaller was this neighbor's house? Would it really matter to the market?

[jim thorner]

Bill, my neighbor had neither a pool nor waterfront, but had the good luck to list before the "bubble burst." His home was only slightly smaller than mine, so it didn't make much of a difference.