In the Worcester MA market where I primarily work, many of you know most of my inventory is 95% foreclosures. These are either standard defaults or reverse-mortgage foreclosures. 99% of those are so damaged as to be un-financeable and able to be purchased only with cash.
I also do rentals. I have seen a definite increase in rental prices, with even crappy units in unpopular neighborhoods being ridiculously high. I have a client who has beautiful apartments in great neighborhoods, and when someone moves he can almost always go up 100-300 buck a month from what that previous tenant was paying. WITH NOTHING INCLUDED EXCEPT WATER AND SEWER. So most Worcester tenants are paying, on average, between 1200-1600 a month for a 1200 square foot apartment built between 1890-1940. Small yard, maybe or maybe not off-street parking. Heat can consist of a gas “parlor heater” that sits in the living room so you cannot close the bedroom doors in the winter or you’ll freeze, or if you’re lucky, steam radiators from the 1920-1940 era. These buildings are not insulated for the most part, so your heating bill will easily run you 400-500 a month in gas. Unless of course you are on section 8. Then you pay about 40-100 a month towards the rent, and you typically will get “fuel assistance” which means your gas bill is zero (I have been in these apartments, they are like 80 degrees, they keep the heat cranked).
Every Thursday is housing court hearing evictions. There are 100-200 hearings EVERY THURSDAY. That means the landlords, good and bad, have been unable to collect rent or the tenant is horrible in some other way (filthy, loud, dealing, whatever), and they have served them their legal notices and now it’s court time.
When I did property management in this city, trying to evict someone was a nightmare. Especially section 8 clients. The would go before the judge, cry some sob story, and get 30-120 days to catch up. Almost never happened, and in the meantime, they still didn’t pay the current amount due.
My point to all of this is I am seeing multi-unit properties starting to sell for pretty high prices in the city. So if you are paying let’s just say 200,000 for a three unit, and you plan to live in one, your average monthly payment (with high taxes) will be about $1500 a month. Your water/sewer bill will be about 2500 a year, broken down quarterly. You are charging your tenants 1000 a month. then they move, or don’t pay. Then the hot water heaters break down. So for a while it looks good, and you can maybe pay on your own. But then you lose your job. Or your wife/husband does. With all the other debt you have, suddenly going to court and spending thousands to evict someone becomes untenable.
And prices are just going up.
“most always go up 100-300 buck a month from what that previous tenant was paying. WITH NOTHING INCLUDED EXCEPT WATER AND SEWER.”
WATER AND SEWER INCLUDED ARE SOMETHING NOT NOTHING.
What IS your F-ing POINT to that not fascinating rant you posted ?
2 sentences or LESS answer please. Cogent thoughts appreciated.
Muck About
July 15, 2016 11:36 am
Sounds like Taxachusetts is going farther down the tubes..
Too bad – Worcester is in lovely Western MA – but the state still sucks and did even when I worked in Burlington, MA back in the 60’s building the radars that went to the moon. Had a ball working on the project, hated living there..
He was asked by a London lad what he wanted his legacy to reflect, pretty fucking funny answer.
“Saving the world economy from a Great Depression — that was pretty good.
For us to be able to mobilize the world’s community, to take rapid action, to stabilize the financial markets, and then in the United States to pass Wall Streets reforms that make it much less likely that a crisis like that can happen again, I’m proud of that.”
What a Maroon.
BUCKHED
July 15, 2016 1:05 pm
The housing market in Charleston,S.C. is smoking hot . I’ve tried for a year to find my mom a new home in the 250K range. If I find one I know she’ll like it is generally sold in days for the asking price or above .
Rent prices are going up monthly too .
All of this is due to Yankees moving here…..and then wanting to turn our state into the place they came from …..screw’em !
I have a friend who owns thousands of apartments. He said that the housing bust was the greatest thing for him. Occupancy increased as did prices..it made him richer
Wip
July 15, 2016 1:44 pm
I guess that means I’m still good to go here in DC area. I just bought a shithole to flip. Wish me luck.
Tim
July 15, 2016 3:04 pm
My neighbor across the street is selling her house. She’s asking $475,000 for it.
It’s a nice house, and all, sure. It’s got 4 bedrooms, 4 baths, a swimming pool in the back yard, a nice big yard.
But is it worth almost half a million dollars? mmmmmmm……I don’t think so. Not to me, it’s not.
We’re renting right now. And as bad as I hate that, I read articles like this, and I see the Dallas curve, I’m thankful. It reinforces, to me at least, that we’re making the right decision for now, even if that decision is painful at times.
Administrator
Author
July 15, 2016 5:44 pm
From Mark Hanson:
• The bubblicious regions above all have one thing in common…STEM. As such, if the tech and biotech sectors hit a wall, which some believe has already begun, so will these housing regions.
• If these key housing markets hit a wall they will take the rest of the nation with them; Bubbles and busts don’t happen in “isolation”.
• House prices have retaken Bubble 1.0 levels on the exact same drivers: easy/cheap/deep credit & liquidity that found its way to real estate. The only difference between both era’s is which cohorts controlled the credit and liquidity. In Bubble 1.0, end-users were in control. In this bubble, “professional”/private investors and foreigners are. But, they both drove demand and prices in the exact same manner. That is, as incremental buyers with easy/cheap/deep credit & liquidity, able to hit whatever the ask price was, and consequently — due to the US comparable sales appraisal process — pushed all house prices to levels far beyond what typical end-user, shelter-buyers can afford. Thus, the persistent, anemic demand.
• Bubble 2.0 has occurred without a corresponding demand surge just like peak Bubble 1.0. As such, it means something other than fundamental, end-user demand and economics is driving prices this time too.
• The end result of Bubble 2.0 will be the same as 1.0; a demand “mix-shift” and price “reset” back towards end-user fundamentals once the speculators finish up, or events force them to the “sidelines”.
• Lower prices will create demand, which the housing sector will always achieve one way or another…it’s what it does. Just like the anemic demand led the price crash of Bubble 1.0, which ultimately led to increased demand as prices stabilized lower.
• The Bubble 2.0 pop will also free up supply in the same manner as Bubble 1.0, just not as much from foreclosures. However, I do think people underestimate the volume of low-down mortgages originated over the past several years, and those with little to no equity in legacy loans or rising interest rate mods, which if house prices drop a few percent turn high-risk, especially when factoring in the 6%+ cost to sell. But, it doesn’t matter where the supply comes from — maybe the PE firms start to dump rentals — as it’s fungible.
• Sure the bubble could blow bigger. Maybe we get a double-bubble. Bubbles are strange things. But, when they begin to fall there is a lot of air under there because the downside has clearly been established.
• Lastly, I am betting 2016 marks the high for house prices, as mortgage rates can’t go meaningfully lower, the unorthodox demand cohort is exhausted, and real affordability to end-user shelter-buyers has rarely been worse. In fact, I believe this is the year house prices go red yy.
…and consequently — due to the US comparable sales appraisal process — pushed all house prices…
OK Mr. Hansen, you’ve laid some blame out there, but where’s your solution?
Mesomorph, R.E.Pup… any thoughts?
Right… but it seems like he’s drilling down to the appraisal process as a significant part of the problem. What’s the alternative to that? Let the banks lend on whatever value/ price that they feel like?
I see the need to drill down to root causes of the problem in order to avoid repeating mistakes, but I don’t see the appraisal process at the core of the problem.
Deja vu! We saw this “movie” already and we know how it ends!
could be: science fiction double feature
In the Worcester MA market where I primarily work, many of you know most of my inventory is 95% foreclosures. These are either standard defaults or reverse-mortgage foreclosures. 99% of those are so damaged as to be un-financeable and able to be purchased only with cash.
I also do rentals. I have seen a definite increase in rental prices, with even crappy units in unpopular neighborhoods being ridiculously high. I have a client who has beautiful apartments in great neighborhoods, and when someone moves he can almost always go up 100-300 buck a month from what that previous tenant was paying. WITH NOTHING INCLUDED EXCEPT WATER AND SEWER. So most Worcester tenants are paying, on average, between 1200-1600 a month for a 1200 square foot apartment built between 1890-1940. Small yard, maybe or maybe not off-street parking. Heat can consist of a gas “parlor heater” that sits in the living room so you cannot close the bedroom doors in the winter or you’ll freeze, or if you’re lucky, steam radiators from the 1920-1940 era. These buildings are not insulated for the most part, so your heating bill will easily run you 400-500 a month in gas. Unless of course you are on section 8. Then you pay about 40-100 a month towards the rent, and you typically will get “fuel assistance” which means your gas bill is zero (I have been in these apartments, they are like 80 degrees, they keep the heat cranked).
Every Thursday is housing court hearing evictions. There are 100-200 hearings EVERY THURSDAY. That means the landlords, good and bad, have been unable to collect rent or the tenant is horrible in some other way (filthy, loud, dealing, whatever), and they have served them their legal notices and now it’s court time.
When I did property management in this city, trying to evict someone was a nightmare. Especially section 8 clients. The would go before the judge, cry some sob story, and get 30-120 days to catch up. Almost never happened, and in the meantime, they still didn’t pay the current amount due.
My point to all of this is I am seeing multi-unit properties starting to sell for pretty high prices in the city. So if you are paying let’s just say 200,000 for a three unit, and you plan to live in one, your average monthly payment (with high taxes) will be about $1500 a month. Your water/sewer bill will be about 2500 a year, broken down quarterly. You are charging your tenants 1000 a month. then they move, or don’t pay. Then the hot water heaters break down. So for a while it looks good, and you can maybe pay on your own. But then you lose your job. Or your wife/husband does. With all the other debt you have, suddenly going to court and spending thousands to evict someone becomes untenable.
And prices are just going up.
“most always go up 100-300 buck a month from what that previous tenant was paying. WITH NOTHING INCLUDED EXCEPT WATER AND SEWER.”
WATER AND SEWER INCLUDED ARE SOMETHING NOT NOTHING.
What IS your F-ing POINT to that not fascinating rant you posted ?
2 sentences or LESS answer please. Cogent thoughts appreciated.
Sounds like Taxachusetts is going farther down the tubes..
Too bad – Worcester is in lovely Western MA – but the state still sucks and did even when I worked in Burlington, MA back in the 60’s building the radars that went to the moon. Had a ball working on the project, hated living there..
Muck
Muck,
Don’t bullshit us. We never went to the moon.
Haven’t you heard?
All praise should go to obama.
He was asked by a London lad what he wanted his legacy to reflect, pretty fucking funny answer.
“Saving the world economy from a Great Depression — that was pretty good.
For us to be able to mobilize the world’s community, to take rapid action, to stabilize the financial markets, and then in the United States to pass Wall Streets reforms that make it much less likely that a crisis like that can happen again, I’m proud of that.”
What a Maroon.
The housing market in Charleston,S.C. is smoking hot . I’ve tried for a year to find my mom a new home in the 250K range. If I find one I know she’ll like it is generally sold in days for the asking price or above .
Rent prices are going up monthly too .
All of this is due to Yankees moving here…..and then wanting to turn our state into the place they came from …..screw’em !
I have a friend who owns thousands of apartments. He said that the housing bust was the greatest thing for him. Occupancy increased as did prices..it made him richer
I guess that means I’m still good to go here in DC area. I just bought a shithole to flip. Wish me luck.
My neighbor across the street is selling her house. She’s asking $475,000 for it.
It’s a nice house, and all, sure. It’s got 4 bedrooms, 4 baths, a swimming pool in the back yard, a nice big yard.
But is it worth almost half a million dollars? mmmmmmm……I don’t think so. Not to me, it’s not.
We’re renting right now. And as bad as I hate that, I read articles like this, and I see the Dallas curve, I’m thankful. It reinforces, to me at least, that we’re making the right decision for now, even if that decision is painful at times.
From Mark Hanson:
• The bubblicious regions above all have one thing in common…STEM. As such, if the tech and biotech sectors hit a wall, which some believe has already begun, so will these housing regions.
• If these key housing markets hit a wall they will take the rest of the nation with them; Bubbles and busts don’t happen in “isolation”.
• House prices have retaken Bubble 1.0 levels on the exact same drivers: easy/cheap/deep credit & liquidity that found its way to real estate. The only difference between both era’s is which cohorts controlled the credit and liquidity. In Bubble 1.0, end-users were in control. In this bubble, “professional”/private investors and foreigners are. But, they both drove demand and prices in the exact same manner. That is, as incremental buyers with easy/cheap/deep credit & liquidity, able to hit whatever the ask price was, and consequently — due to the US comparable sales appraisal process — pushed all house prices to levels far beyond what typical end-user, shelter-buyers can afford. Thus, the persistent, anemic demand.
• Bubble 2.0 has occurred without a corresponding demand surge just like peak Bubble 1.0. As such, it means something other than fundamental, end-user demand and economics is driving prices this time too.
• The end result of Bubble 2.0 will be the same as 1.0; a demand “mix-shift” and price “reset” back towards end-user fundamentals once the speculators finish up, or events force them to the “sidelines”.
• Lower prices will create demand, which the housing sector will always achieve one way or another…it’s what it does. Just like the anemic demand led the price crash of Bubble 1.0, which ultimately led to increased demand as prices stabilized lower.
• The Bubble 2.0 pop will also free up supply in the same manner as Bubble 1.0, just not as much from foreclosures. However, I do think people underestimate the volume of low-down mortgages originated over the past several years, and those with little to no equity in legacy loans or rising interest rate mods, which if house prices drop a few percent turn high-risk, especially when factoring in the 6%+ cost to sell. But, it doesn’t matter where the supply comes from — maybe the PE firms start to dump rentals — as it’s fungible.
• Sure the bubble could blow bigger. Maybe we get a double-bubble. Bubbles are strange things. But, when they begin to fall there is a lot of air under there because the downside has clearly been established.
• Lastly, I am betting 2016 marks the high for house prices, as mortgage rates can’t go meaningfully lower, the unorthodox demand cohort is exhausted, and real affordability to end-user shelter-buyers has rarely been worse. In fact, I believe this is the year house prices go red yy.
…and consequently — due to the US comparable sales appraisal process — pushed all house prices…
OK Mr. Hansen, you’ve laid some blame out there, but where’s your solution?
Mesomorph, R.E.Pup… any thoughts?
Solution is very simple. Prices will revert to the long-term average by falling 30% to 40%. WTF do you mean by solution? Bubbles burst – always.
Right… but it seems like he’s drilling down to the appraisal process as a significant part of the problem. What’s the alternative to that? Let the banks lend on whatever value/ price that they feel like?
I see the need to drill down to root causes of the problem in order to avoid repeating mistakes, but I don’t see the appraisal process at the core of the problem.