Bloomberg NewsPhyllis Whitaker needed more than a mortgage broker and an
attorney to help buy a new house this year. She had to create a computer
spreadsheet to sort through all the incentives that homebuilders offered before
she agreed to purchase a three-bedroom Colonial in Novi, Michigan.
``It was
hard to keep track of them all,'' says Whitaker, 47, who will take possession
when construction is completed in December. She got $5,000 off the $299,990 list
price and $5,000 in extras such as air conditioning, outdoor sprinklers and
sod.
Anybody who is still in denial about the condition of the Real Estate and New Home markets in the U.S. needs to get a grip. As it happens, sitting here in the middle of the biggest land boom in Alberta since 1912, where housing starts, existing home sales, and (most of all) prices keep climbing, I found the details reported here to be surreal.Builders are paying closing costs and a year's worth of
monthly mortgage bills to lure buyers, says Joshua Cohen, an agent with
Wilkerson Real Estate and Investments in Las Vegas. More builders, such as
closely held Pageantry Communities Inc. in Las Vegas, are offering incentives
including $10,000 that buyers can allot for price reductions, equipment
upgrades, closing costs or mortgage payments, he says.
Wow. It's like it's happening on another planet.
In comparison, according to the Edmonton Real Estate Board, home sales in August were up 10.10% in total units (2,448) sold over August 2005, with a 55.1% increase in total dollars, at $675 million. At the same time, the median price of a Single Family dwelling is up 41.9% over last August, at $316,480.
I visited the Edmonton Region Home Builders Association to dig up more data, but the site hasn't been updated in some months, doubtless because everyone is too damn busy building houses to update their online content.
Compare the situation in Alberta with bites from the Bloomberg piece:Sales of new homes in August fell 17.4 percent from the same
I was talking with a client who is a realtor last week, and she was complaining that she's been up until 3am every night finishing her paperwork, but I have trouble feeling sorry for her. After all you make hay when the sun shines, right?
month last year to 1.05 million at an annualized pace, up from a three-year low
of 1.009 million in July, the Commerce Department reported today. The July
number was revised lower today from the 1.072 million that was reported Aug. 24.
The median price slid 1.3 percent to $237,000 from $240,100 in August 2005.
That's 7.8 percent below the 2006 high of $257,000 in April and marks the first
year-over-year drop in the monthly median new-home price since 2003.
I'm currently waiting for responses and feedback from friends and connections in the housing industry, to add more depth to this topic. In the meantime, lets continue to hope that rising cross-province emigration, high oil prices, and mid-east turmoil keep the good times rolling.
Sunday, October 01, 2006
U.S. Homebuilders giving stuff away to sell houses
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3 comments:
First off:
"She had to create a computer
spreadsheet to sort through all the incentives"
sounds alot more sophisticated, than it most like is. I see more spreadsheets created due to laziness, than complication.
Secondly; it's still territorial. Areas like Las Vegas are going crazy (giving stuff away), because leading up to this was a frenzy. Everyone and their brother (okay, not everyone, we chose to pass on LV) got into real estate in Vegas, because any idiot could make money there. But the gravy train has stopped and many are finding out that the actual game was "The Bigger Fool." Meaning the goal of the game was to find a bigger fool, than yourself, so they rather than you would get stuck holding the bag. But that's not happening everywhere. San Diego is feeling what would have to be called a minor impact, in comparison to Las Vegas. And only an hour drive from San Diego, housing prices are holding strong (actually still inching up) in east Riverside and Imperial County.
My understanding is that a few months back, a Las Vegas builder released a phase of homes that was actually priced less than the prior phase. Which was the straw that broke the camels back and marked the turnaround of the LV real estate market. So as prices started dropping, the builders were highly motiviated to move inventory. There's not many builders or even investors that can afford to sit on vacant inventory, not when you have a 8-14% clock ticking in your ear.
It'll be interesting to see what happens if they can't get the inventory moved. Many of the recent condo conversions have already gone the route of rental. Is there a possibility of putting together a pool to buy up excess inventory of detached homes with the plan to rent them? If one went hardline of only paying prices that allowed them to cashflow or breakeven, one could be sitting pretty 5,7 or 10 years down the road. So the question is, how motiviated are the builders?
"I was talking with a client who is a realtor last week, and she was complaining that she's been up until 3am every night finishing her paperwork, but I have trouble feeling sorry for her. After all you make hay when the sun shines, right?"
You should record her now. Then when things turnaround and there's no business to be found under any rock and she complains about that, you can play her the recording from now and say, "You're a real the-glass-is-half-empty-type, maybe a different line of business would be better for you." Or you can simply casually mention, "I guess the real good realtors have "staff" to handle their paperwork, so they can be freed up to produce more".
The land rush in Edmonton exemplified by Century Park goes on. In the Saturday, 30 September, Edmonton Journal, in the New Condos section, there was a write-up on Uptown Estates, to be built by True North Properties at 10050-117 Street. The units on floors 2-14 range from 1103 to 1246 square feet. The two penthouses are 1676 and 1710 square feet. The prices start in the "mid 300s." With very little advertising all but 9 of the 54 suites have sold. I wonder if more than the usual number were sold to speculators, who are certain that when it is completed (June 2008) suites will be worth a great deal more because the current gold rush will still be on. Since there is not so much as a stake in the ground yet, moving in in June 2008 is probably dreaming in technicolour, but True North does have a track record. Maybe they keep their trades particularly happy with money or maybe they keep them chained up.
I went on MSL two weeks ago out of curiosity. We moved from Edmonton to the Regina area - a small town called Balgonie 15 minutes to the east on Hwy. 1 - just over 4 years ago. We sold a zero-lot-line, 1098 sq.ft., 4 bedroom, 2 bathroom bungalow in Millwoods' Kiniski Gardens (specifically Burnewood) for $138,900. We had bought the home 13 years previously for around $70,000 so I thought we did well.
However, my search online found an almost identical bungalow in the same area (3 bedrooms, 2 baths) with a double detached garage listed for $275,000. (Gasp...thud!)
When I regained conciousness, I reminded myself that when we moved here we traded up to a 1500 sq.ft. open plan bungalow (4 bedrooms, 2 baths, large deck, detached garage, corner lot) for only $119,500. Our current house has appreciated 5% per year since we moved so our equity position has improved a bit.
I'll grant you that the Edmonton real estate market is seemingly supercharged right now, but what goes up usually comes down, eventually. I don't suspect that there will be a big correction in the Edmonton market soon, but maybe, if I'm really, really lucky I might be able to move back to the province of my birth when I retire. But I'll probably have to live in Wainwright.
In the meantime, I hope you all enjoy the overblown economy in Alberta, the hectic pace and the mounting urban (and rural) issues. Our income has gone up about 10% and our cost of living has gone down about 10%. The lifestyle here is one of the best kept secrets in Canada, very western, friendly, nicely paced and clean. If you can ignore the provincial NDP government, and the overtly socialist spin they put on everything they touch, life can be quite pleasant here.
Oh, and our football team is 7 and 7 (hey I couldn't resist, besides you guys won last weekend).
Most people in Edmonton and Calgary are trying to make the math work out so they can survive the Alberta boom, but economists have predicted that Saskatchewan's economy will experience similar - if not greater - growth as well over the next couple of years. Maybe folks should try doing the math using Saskatchewan variables. I know we like the result.
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