Waiting for Toll Brothers
posted by Little_Silvered at 6:28 PM
Tuesday, May 02, 2006
Previous Posts
- Eminent Domain Abuse at The Shore
- People are Going to Hate Real Estate
- "This is not a market that is going to collapse,"
- South Jersey Realtor Provides Useful Info.
- Take Away Insurance...
- Comments From a Small Jersey Shore Bank
- Mortgage Rates to 6.58%
- Spring Lake “Extreme” Over Supply
- MLS for Eastern Monmouth up to 3822
- It’s Too Early to Talk About a Soft Landing
4 Comments:
The public face will of course be denial. But it is "uh-oh" time for NJ builders. Just look around. You can actually see construction beginning to grind to a halt all over NJ. Projects will be abandoned and corporate layoffs will begin. The summer months will be absolutely brutal to watch. mark my words.
"i wonder if the attitude of the realtors will change"......Can you really imagine seeing a humble realtor, driving up, in a modest vehicle (not making a deal on their cell phone)and telling you the truth about the property you want to buy? I can't! How do you change greedy, fast talking, liars that know their fast cash days are ending? They are going to be worse and more untrustworthy than ever!
Realtors' attitudes will never change. In fact, they'll even be worse because only the most cutthroat and snarky backstabbers will survive.
By Shawn Tully, FORTUNE senior writer
May 4, 2006: 12:47 PM EDT
NEW YORK (FORTUNE) - The stories keep piling up. In many once-sizzling markets around the country, accounts of dropping list prices have replaced tales of waiting lists for unbuilt condos and bidding wars over humdrum three-bedroom colonials.
The message is clear. Five years of superheated price gains rescued America from stock market collapse, put billions in consumers' pockets, and ignited a building boom that bolstered the nation's economy. But it's over. The great housing bubble has finally started to deflate.
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"The buyers' sense of urgency is gone," says Bob Toll, CEO of luxury builder Toll Brothers (Research), who has long been a housing bull. "They see the market going soft, so they stall."
[edit]
Welcome to the dead zone
Sales shrink as buyers float low-ball offers, and sellers refuse them. Realtors and mortgage brokers find other jobs. The bubble areas turn into Dead Zones.
There's no mystery about what it will take to close the affordability gap and bring the markets back to life: Prices will have to come down, and incomes will have to move up. Right now the ratio of home values to incomes in the bubble zones is about 40 percent above its historical average. So the only question is how much of the adjustment will come from rising incomes and how much from falling prices.
On that point there's reason to be hopeful. In the past, housing declines almost invariably occurred while the economy was suffering through a recession. This time the housing downturn is coming during a period of strength, with GDP surging nearly 5 percent in the first quarter. If the economy keeps chugging along, household incomes should grow at around 4 percent a year.
Under those conditions one likely scenario is that housing prices would drop 10 percent to 15 percent in the bubble zone over the next 12 months, then remain flat for maybe four more years while incomes catch up.
But there's another possibility. For the past few years the housing boom has driven the economy, adding jobs in construction, remodeling, and real estate services. And consumers gorged on the equity in their homes, taking out a total of $2 trillion via loans, refinancings, and sales over the past five years.
Those powerful stimulants, which added a full point to annual GDP growth, will soon vanish. If corporate spending or some other force doesn't come along to pick up the slack, we could go into a recession that would cut income growth to zero. Then inflated housing prices would have to shoulder the entire, wrenching adjustment, falling 30 percent or more over several years.
In either case, many individual homeowners have nothing to worry about: They can simply stay put and ride out the cycle. The only thing they'll lose is the opportunity to brag about their paper profits. And in some places, appreciation has been so sharp that a seller could see prices plunge 30 percent and still make a hefty gain.
The real losers will be those who bought recently at inflated prices and are forced to sell, usually because they're taking a job in another city or can't make the payments when their adjustable mortgage rate jumps. And speculators who bought overpriced condos in hope of a quick killing are going to get hosed.
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