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Ajijic

US Home Sales

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This affects home buying and retirement by Americans. Hopefully this is not long term as many were hoping for some home equity to help in their "golden" years. A friend has been trying to sell in Santa Fe for 3 years with no equity left, huge mortgage nd savings drawing down. Unfortunately, too many in similar situations.

Another friend in Ft Myers who's home as dropped so much that with Homestead eligibility his taxes are now $7 for this year!!!

The article covers number of sales not prices but I am sure other articles will cover that too.

http://www.financialpost.com/news/America+stopped+buying+homes/3436505/story.html

A related story:

Washington — The Associated Press

Published on Tuesday, Aug. 24, 2010 10:12AM EDT

Last updated on Tuesday, Aug. 24, 2010 1:32PM EDT

Sales of previously occupied U.S. homes plunged last month to the lowest level in 15 years, despite the lowest mortgage rates in decades and bargain prices in many areas.

July's sales fell by more than 27 per cent to a seasonally adjusted annual rate of 3.83 million, the National Association of Realtors said Tuesday. It was the largest monthly drop on records dating back to 1968, and sharp declines were recorded in all regions of the United States.

Sales were particularly weak among homes priced in the lower to middle ranges. For example, in the Midwest, homes priced between $100,000 and $250,000 tumbled nearly 47 per cent.

As sales have slowed, the inventory of unsold homes on the market grew to nearly four million in July. That's a 12.5 month supply at the current sales pace, the highest level in more than a decade. It compares with a healthy level of about six months.

One reason the market is hurting is that buyers and sellers are in a standoff over prices. Many sellers are reluctant to lower their prices. And buyers are hesitating because they think home prices haven't bottomed out.

“It really is a self-fulfilling prophecy,” said Aaron Zapata, a real estate agent in Brea, Calif. “If all buyers perceive that home prices are coming down, then they will stop making offers - and home prices will come down.”

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Depends on the area.

Our kids bought a house in San Diego County recently and prices are up 15% in three months. Our old neighborhood in Westchester County NY has maintained itself very well. If you live in a dump like Punxatwney PA or Cleveland,or Phoenix,that's another story.

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Exception to the Cleveland dump comment.

The western and eastern suburban areas have held their own. Granted we never made the huge gains the rest of the country saw but we had way better lifestyle factors and steady gamins that haven't substantially eroded. The well-heeled are well-heeled whereever they land, its all relative and totally subjective. If you have the means and profession and want the total all-american suburban experience for your family there is not much better living than being wealthy in the rust belt.

However this article is telling in that the buyers aren't coming to the table in most of the US. That means many of them won't be coming to the table here. Just about all of our former neighbors are looking at working well past the time they had planned to work, not just because of reduced portfolios and housing equity but many with medium-sized businesses find they will have to stay at the helm longer because their businesses aren't salable in the timeframe they had previously been working around.

And we know 3 couples who tossed back to the bank the keys to their second homes in Naples having decided the hit was better than the anxiety dragging forward for years.

The one thing friends still in the midwest are waiting on is the 5 year ARMs kicking in. Those fancy no interest, adjustables were available in high return areas, those products didn't hit the midwest until well into 2005 and 2006. There is more to come.

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Don't forget that there's a demographic component to this. We are now in the "baby bust" homebuyer years and not only are there far fewer of them but the lousy economy is putting a real crimp on their ability to buy anything.

This is going to get worse before it gets better. My extremely lucky brother got his house sold in San Clemente, although for 40 percent less than it would have brought 4 years ago.

Fortunately for this area, it continues to attract affluent Tapatios. And Canadians can still sell their homes in reasonable time at good prices.

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Depends on the area.

Our kids bought a house in San Diego County recently and prices are up 15% in three months. Our old neighborhood in Westchester County NY has maintained itself very well. If you live in a dump like Punxatwney PA or Cleveland,or Phoenix,that's another story.

Sorry if I am taking this remark personally, but I've NEVER heard of The Valley of the Sun (aka Phoenix/Scottsdale) being called a "dump."

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Reuters · Wednesday, Aug. 25, 2010

WASHINGTON -- New single-family home sales unexpectedly fell in July to set their slowest pace on record while prices were the lowest in more than 6-1/2 years, government data showed on Wednesday.

The Commerce Department said sales dropped 12.4% to a 276,000 unit annual rate, the lowest since the series started in 1963, from a downwardly revised 315,000 units in June.

Analysts polled by Reuters had forecast new home sales unchanged at a 330,000 unit pace last month.

Read more: http://www.financialpost.com/news/home+sales+plunge+lowest+levels+since+1963/3440965/story.html#ixzz0xdF75EIt

Canadian home sales have also dropped off but not to this extent.

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Seems to me when you have unemployment approaching Depression level numbers it'd be silly to expect home prices to do anything but slide... Sure areas with affluent people will do better but not forever.

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Don't forget, contributing to the 27% drop was that the $8,000.00 tax credit ended June 30.

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There will be waves of foreclosures. The government has tried to stop the waves but passing laws and trying to get lenders to modify loans but up to 50% of the modified loans still default. People are still upside down and many still losing jobs. Things will never be like they were and the only thing that will move prices upwards will be wages. Prices in many areas aren't reflective of the average wages as they still need to fall as they were artificially inflated by speculators and people purchasing with little to no down payment and then not having to verify their income to qualify so they lied to buy a home, hoping to sell 6 months or a year later and make $100,000. Now those homes are hitting the market, some hit right away, others will hit later when their loans adjust (non fixed rate loans). Many people purchased using negatively amortizing loans where people are only paying a fraction of the real payment and the owners are living in the homes or renting them out but the loan payment will adjust and be up to double what they are paying which will be a shock for many as they extended themselves to the maximum payment.

People are still losing jobs as everything is trickling down, no more wheelbarrows of money pouring in due to everybody being "rich" flipping homes and cashing out their equity.

It will get worse and it would be foolish to make a big purchase now and come anywhere close to maxing out any payment. The tax man commeth very soon and the middle class wage earners will be paying the lion's share for all the Obamacare and bailouts not to mention the regular costs of running a country.

This is and will affect almost all areas, if you don't think so you are naive. True, some areas are harder hit than others but no area is immune, especially as they say the commercial real estate market is the other shoe to drop soon.

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"Things have never been more like this than they are today."

Dwight D. Eisenhower

The only things that "trickle down" are bad.

Atlas

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Atlas,

Eisenhower's quote is actually:

"Things are more like they are today than they have ever been before.",

which I've always thought of as one of the great comedic lines...

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Don't forget, contributing to the 27% drop was that the $8,000.00 tax credit ended June 30.

A related story:

http://www.financialpost.com/news/features/unsupportable+American+dream/3437975/story.html

25% of sales were foreclosures. The plus 12 month supply of listed homes is double what is needed for a balanced market which is a 6 month supply. Meanwhile that number is dramatically better than the huge number of listings versus sales at lakeside where there is more than a two year supply of mls listed homes vs. sales. Generally, such a huge oversupply of listed homes on the market leads to downward pressure on home prices.

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Interesting all the comments on the US housing market. My business is selling foreclosures for Banks. The long and short of the market is:

1.People have been loosing jobs and therefore unable to pay, or the only job they can get is parttime - this doesn't pay the bills.

2. People are making "commercial" decision to stop paying and walk from their properties.

3. The 5 year arms have basically all triggered and there in't enough equity in the home for a refinance so the "lender" requires an up front cash "difference" payment before they grant a new mortgage - as a result the buyers are needing to walk.

4. Under the "Government" sponsored tax buyer credit the investors were the principal buyers, not Joe and Mary Blogg.

5. Prices during this period went up in some areas by 10% - strangely similar value to the tax buyer credit.

6. Showings have slowed down on foreclosure sales because investors have stopped buying - prices are therefore sliding down again.

7. Banks "sat/delayed" on a large number of foreclosue to prop up balance sheets and see if prices would continue to rise; that has stopped and Banks have increased the foreclosure rate.

8. Even if housing stabilizes by 2012-2014 and prices start to rise at normal 3-4% perannum in will take until 2024 before the houses double in value from their low point which will still be atleast 15-20% off 2006 values. Now add on the cost of money over that period then it may be 2030 before you see true 2006 dollar value.

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I always seem to get crabbed at when I post on this website. You would think I would learn.

I agree, the bad times have not even begun. We bought our house in central Phoenix in 1980 for $45,000. Three years ago, it was worth $160,000. When we bought it, this was a nice, upper middle class Mexican American neighborhood.

Gradually, the old folks died off and the neighborhood changed. The houses were sold basically to people from Mexico and Central America. How they qualified for mortgage loan was a mystery to me? After talking to them, I figured it out.

Under the Community Reinvestment Act of 1977, banks were pretty much prohibited from red lining what were deemed to be marginal neighborhoods.

Real estate agents working with social welfare agencies like ACORN managed to get banks to loan on risky properties to unqualified buyers. Banks don't like to be sued, especially class actions.

I ended up with neighbors without immigration papers, no social security numbers, no bank account, no verifiable work history. But they got a smoking deal on their house mortgage. This was fine, as long as they made the house payment.

However, banks are not in the business of losing money, or at least they are not supposed to be. They invented the adjustable rate mortgage and the balloon payment to protect themselves.

All of a sudden, half of the houses in the neighborhood were in repossession. When the banks couldn't turn these properties, they started renting them out. Now we have Anglo neighbors. When I get talking to them, they all seem to have lost their homes up north.

And now, I see the tenants tuning over. If they couldn't pay their house payment, how could they pay their rent?

How many vacant houses can a bank own?

It is only a matter of time until someone starts burning houses for the insurance.

I think the problem was too many federal programs for the wrong kind of people.

That is my opinion. If you have a different take on the situation, that is fine. You are entitled to your opinion.

Rufus

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Stupidity and Greed make excellent bedfellows. At least, until the bed is repossessed.

Most of us started our real estate investing in an environment where a substantial down payment and verifiable income was needed before you could call a house your own. Then came the "house as piggy bank" mentality, where leverage was all. Then came the fancy packaging of loans and then came the Recession. It is no surprise that some neighborhoods look like ghost towns, especially where the high flyers flew the highest.

We can play the blame game, but there's so much to go around that it's useless. It's a tragedy on many levels.

How does all this affect us here? Well, we can sit on our listed houses which we paid cash for until hell freezes over, but we need a buyer eventually or we need to forget about a sale.

Meanwhile, somebody does benefit. One of our offspring just bought a nice home in the states for a fraction of what they couldn't have afforded a few years back. A foreclosed house, of course. So somebody wins and somebody loses in this painful musical chairs real estate game.

What I think we need to abandon is the notion that the good times are going to roll again any time soon. That's a tough one to swallow.

:unsure:

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Houses in Santa Fe were hugely inflated 3 years ago. The median price of a home was near 500,000. Prices are muchhhh lower now . This occurs in a housing bubble in many areas. I live near Santa Fe and if we decide to move to Chapala area will we be renting out our house, renting down there and hoping things get better in the next couple of years so we can sell our house here in New Mexico.

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Prices aren't going back up. The best you can hope for is that the decline stabilizes. Between the end of mortgage "funny money",the end of the demographic bulge of homebuyers,and the declining wealth of the U.S. you simply are not going to get more for your house 2 years or 10 years from now.

If you can sell it, sell it.

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Before the housing market "stabilizes", two things have to happen:

1) Homes have to become affordable. That means that there must be a relationship between wages and home prices such that it makes more sense to buy than to rent. Everyone who wants home price stabilization should support anything that can be done to improve the job picture, i.e. good jobs with livable wages. In the past, unions made this happen not only for their own members but for everyone else because employers had to pay competitive wages, and pay increases under union contracts pushed up the general wage rate. Unions in the US are now barely a shadow of their old strength: only 6-7% of the private sector workforce is represented. Until more workers are able to pressure their employers to pay livable wages, probably through a revived labor movement, things will be stuck at the bottom of the cycle.

2) Homes must be to live in, not treated as commodities. Historically, house prices have risen very slowly and this was a good thing. In recent years speculators "flipping" houses, homeowners using accumulated equity as a "piggy-bank", banks and Wall Street firms commoditizing mortgages, and people jumping into housing market price run ups hoping to double their money--or more--have all created the situation we are now in. Get-rich-quick nearly always leads to getting poor even quicker.

"We have met the enemy and he is us." (Pogo, the comic strip character).

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There are three realities about the U.S. housing market.

1. The "funny money" mortgages that drove a lot of sales are no more and not coming back soon.

2. The home buying "cohort" is now the "baby bust" a much smaller group of people.

3. The general prosperity of the U.S. is in a steep slide, people simply have less money to spend.

Put it all together and it spells further declines in home prices. If you think holding out a couple years is going to get you a better price, you are probably dreaming.

As for unions, they seem particularly adept at killing jobs which certainly helped most private sector manufacturing jobs leave the U.S.. Not to mention the fact that in the U.S. more than half the union members are government workers, the most overpaid, under-worked and unfireable regardless of competence, group of "workers" there. I wonder what happens when the limits of printing money are hit, how are those fat government salaries and benefits going to be paid?

If you can find a buyer at any price now, take it. It is likely to be less in two years.

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If you can find a buyer at any price now, take it. It is likely to be less in two years.

Mainecoons, I think that is truly a very wide generalization. Especially when it comes to real estate. Some areas of the US are making some gains. Location, location, location.

That said, I do agree that the highly inflated and ridiculous prices that we saw four years ago are gone. And since that is better for the stability of the entire economy (though not necessarily myself personally), I say Hooray!

(I'll make no comments on the Unions as the moderators object to politics and inflammatory discussions. As well they should.)

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As to the question of US labor unions bringing back good times, I ask you to do a little research? Who owns 87 per cent of Ames True Temper? Who now owns Firestone Rubber? Who owns the Schwinn bicycle company? Who owns Austin Motors? Who owns the controlling interest in Haliburton?

The list goes on.

When foreigners buy the controlling interest in a company, they don't do so to deal with truculent, self serving labor unions. No, they take those jobs back to their home countries.

While the company may still have an "American" sounding name, and maybe even a headquarters in the US, the ownership and the jobs are overseas.

No, the housing market will not come back until people have real productive jobs, not government "make work" jobs.

Rufus

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As to the question of US labor unions bringing back good times, I ask you to do a little research? Who owns 87 per cent of Ames True Temper? Who now owns Firestone Rubber? Who owns the Schwinn bicycle company? Who owns Austin Motors? Who owns the controlling interest in Haliburton?

The list goes on.

When foreigners buy the controlling interest in a company, they don't do so to deal with truculent, self serving labor unions. No, they take those jobs back to their home countries.

While the company may still have an "American" sounding name, and maybe even a headquarters in the US, the ownership and the jobs are overseas.

No, the housing market will not come back until people have real productive jobs, not government "make work" jobs.

Rufus

Here's an excerpt from Halliburton's last proxy statement,showing significan ownership. No sign of a union.

Stock Ownership of Certain Beneficial Owners and Management

The following table sets forth information about persons or groups, based on information contained in Schedules 13G filed with the Securities and Exchange Commission, or SEC, reflecting beneficial ownership, who own or have the right to acquire more than 5% of our common stock.

Amount and

Percent

Name and Address

Nature of

of

of Beneficial Owner

Beneficial Ownership Class

BlackRock, Inc.

65,030,477(1 ) 7.21 %

40 East 52nd Street New York, NY 10022

(1) BlackRock, Inc. is a parent holding company and is deemed to be the beneficial owner of 65,030,477 shares. BlackRock, Inc. has sole power to vote or to direct the vote of 65,030,477 shares and has sole power to dispose or to direct the disposition of 65,030,477 shares.

The following table sets forth, as of March 1, 2010, the amount of our common stock owned beneficially by each Director, each Director Nominee, each of the executive officers named in the Summary Compensation Table on page 27 and all Directors, Director Nominees and executive officers as a group.

Amount and Nature of

Beneficial Ownership

Sole

Shared

Voting and

Voting or

Name of Beneficial Owner or

Investment

Investment

Percent

Number of Persons in Group

Power(1) Power of Class

Alan M. Bennett

20,110 *

James R. Boyd

40,110 *

James S. Brown

312,111 *

Milton Carroll

13,145 *

Albert O. Cornelison, Jr.

270,327 *

Nance K. Dicciani

12,717 *

S. Malcolm Gillis

21,636 *

James T. Hackett

10,341 *

David J. Lesar

2,055,338 *

Robert A. Malone

7,717 *

J. Landis Martin

89,638 *

Mark A. McCollum

210,988 *

Jay A. Precourt

72,306 *

Timothy J. Probert

265,673 *

Debra L. Reed

26,436 500 (2) *

Shares owned by all current Directors, Director Nominees and executive officers as a group (20 persons)

4,014,345 *

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