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Old 10th May 2007, 05:43 AM
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Bloomberg: Home Prices Fall in Rich New York Suburbs Once Immune to Slump

Note: We're barely 3 mths after the announcement of the subprime scams. Gosh, this is faster than IE7.



http://bloomberg.com/apps/news?pid=2...A24&refer=home

Home Prices Fall in Rich New York Suburbs Once Immune to Slump

By Bob Ivry

May 9 (Bloomberg) -- The U.S. housing slump has hit New York City's richest suburbs.

The average price in Westport, Connecticut, home of chief executive officers Herbert Allison of TIAA-CREF and Jeffrey Kindler of Pfizer Inc., and actor Paul Newman, fell 8.2 percent to $1.56 million in the first four months of 2007 from the same period last year, according to multiple listing service data. In Chappaqua, New York, where Bill and Hillary Clinton live, properties sit on the market an average of seven months before they sell, up from five months a year ago.

Wealth and excellent credit have until now spared bedroom communities in New Jersey, Connecticut and New York's Westchester County from declines in home prices. Now the tightening of credit in response to rising subprime defaults has disrupted the real estate food chain, bringing the national housing slump to Manhattan's doorstep. Prices fell as much as 18.8 percent this year in 15 of the 24 areas in which data was collected.

``People who may have bought their first home may not be able to do so now, and that stops some of the movement,'' said Doug Werner, a broker at William Pitt Sotheby's International Real Estate in Darien, Connecticut. ``Whales eat plankton. If the plankton disappears, what will happen to the whales?''

Data on home prices and time on the market for Jan. 1 to April 30 were obtained from listing services in New York, New Jersey and Connecticut. Realtors report sales to the listing services and the listing services then share those numbers with the Washington-based National Association of Realtors. The realtors group will release its data for April on May 25.

California Suburbs

Home prices continue to climb in the wealthiest California suburbs, at a much slower pace. Since 1998, values in the Silicon Valley counties of San Mateo and Santa Clara increased 110 percent and 129 percent, respectively. That growth slowed to an average of 3 percent in the two counties in the first quarter of 2007 compared with the year-earlier period, said Jim Harrison, chief executive officer of RE InfoLink in Campbell, California, which provides multiple listing services for the area.

Prices for the first quarter rose in Los Altos (2.5 percent) and Los Gatos (6.5 percent), and days that homes spent on the market before they sold increased in both towns. In Atherton, which Forbes magazine called the wealthiest ZIP code in the country, prices increased 6.2 percent to $3.25 million, while days on the market fell to 82 from 104.

``Silicon Valley is the reason the market is stable,'' Harrison said. ``The software businesses are hiring a lot of people still these days.''

Prices declined by 18.2 percent in Los Altos Hills, where homes spent a month longer on the sale block, and by 11 percent in Woodside, where homes spent two more months on the market than they did a year ago.

Bad News

While million-dollar homes aren't typically financed with subprime mortgages, which are given to borrowers with bad or incomplete credit histories, buyers in all price ranges have been scared off by the drumbeat of bad news about defaults by subprime borrowers, said Ara Hovnanian, CEO of Red Bank, New Jersey-based Hovnanian Enterprises Inc., the state's largest homebuilder.

``In these markets, there aren't going to be buyers concerned about subprime mortgages, but psychologically it's one more bit of news that's negative and it causes hesitation on the part of buyers,'' Hovnanian said.

The portion of subprime loans more than 60 days delinquent or in foreclosure rose to a seven-year high at the end of 2006, according to data compiled by Friedman Billings Ramsey Group Inc. of Arlington, Virginia.

Nationally, the 2007 median price for an existing home probably will decline 0.7 percent to $220,300, the first year- over-year drop since the National Association of Realtors began keeping records in 1968. It may be the first drop since the Great Depression, said Lawrence Yun, an economist with the organization.

`Trade-Up Purchases'

First-time home buyers are more likely to be subprime borrowers. Every purchase of an existing house by a first-time buyer triggers four other sales in the housing market, said Jeffrey Otteau, president of Otteau Valuation Group in East Brunswick, New Jersey.

``They are largely trade-up purchases,'' Otteau said. ``The buyer of the $300,000 house enables the seller of that home to buy a $450,000 house, and up the line until you get to a luxury home. None of that can happen unless the first-time buyer makes the purchase.''

The number of homes in Bergen, Passaic, Morris, Essex and Union counties of New Jersey that sold for less than $400,000 in the first quarter of 2007 fell 27 percent from the same period in 2005, Otteau said. Some of that decline can be pinned on rising home prices. Still, it provides evidence that fewer first-time buyers are entering the market, Otteau said.

Connecticut Market

In Connecticut, Stamford's price decline of 0.8 percent to $825,049 comes after 12 consecutive annual increases in home values from 1994 to 2005, said John Clapp, professor of real estate at the University of Connecticut in Storrs. Norwalk prices gained 1 percent to $704,302, but the time houses sit on the market there has increased to 100 days from 87.

``It doesn't take reduction in demand from many buyers to ripple through the market,'' Clapp said.

In Greenwich, where Starwood Capital Group LLC CEO Barry Sternlicht lives, the average home price dropped 1.3 percent to $2.33 million while time on the market climbed to more than seven months from less than five last year.

``Inventory is quite high,'' said Cheryl Scott-Daniels, chairwoman of the board of Consolidated Multiple Listing Service in Westport. ``The homes that are selling are selling because they're very well priced.''

Buyer's Market?

David Smith just sold his 11,000-square-foot Westport home on two acres for $5.9 million -- about $600,000 less than originally listed. He said he took a loss.

``It's a buyer's market now,'' said Smith, an investor based in London. ``There's so much to choose from, you don't get them to focus. Their attitude is, the longer I wait, the less I have to pay.''

Darien prices are virtually unchanged while values increased in New Canaan (22 percent) and Fairfield (1.3 percent).

The biggest price declines are along the Metro-North Railroad line in Westchester County, New York, just north of New York City. Prices fell in eight of the 11 areas in which data was collected. In some towns, the number of homes sold was too small to draw conclusions.

Larchmont and Mamaroneck experienced a drop of 18.8 percent to $1.08 million. In Armonk, prices declined 17.3 percent to $1.39 million. In Bronxville, the slide was 12.4 percent to $1.34 million. Prices also fell in New Rochelle (4.3 percent), Scarsdale (6 percent) and the Jefferson Valley-Shrub Oak- Yorktown-Yorktown Heights area (6.9 percent).

Middle Market

In Yonkers, the average home price dropped 1.7 percent to $485,987.

``The effect is the greatest in the middle-market communities -- New Rochelle, Yonkers, White Plains -- where home buyers are financing,'' said Chris Meyers, chief operating officer of Houlihan Lawrence Real Estate in Bronxville.

Even in towns where prices rose, homes spent more time on the market. In Bedford, which had a 24 percent gain, the average property sold spent 218 days on the market this year, up from 155 days in the same period last year. Prices rose in White Plains by 8 percent while days on the market increased to 168 from 139.

Only the Rye-Harrison-Rye Brook area experienced an increase in average home price (11.5 percent) and an unchanged number of days houses stayed on the market.

Meyers said Westchester sales picked up in November after Wall Street firms announced record employee bonuses totaling $36 billion.

`Mortals in the Realm'

``They propped up the housing market in the area and put all of us mortals in the realm where it's hard to compete with those kinds of income levels,'' Meyers said.

They also helped cushion New York City's suburbs from what the Federal Reserve, in its regional survey known as the Beige Book, last month called continuing weakness in the U.S. market.

The exception was New York City, where homes were ``selling well,'' the Fed's Beige Book survey said. Manhattan's median apartment price climbed 1.2 percent to $835,000 in the first quarter from a year earlier, said Jonathan Miller, president of New York residential appraiser Miller Samuel Inc.

Along the New Jersey Transit rail tracks in the northern part of the state, where housing prices rose 230 percent from 1992 to 2005, price declines are narrower than in Westchester or Fairfield counties, according to Otteau of the Otteau Valuation Group.

In Montclair, the average price fell 6 percent to $623,000. To the south, in Millburn and Short Hills, the average sale price declined 2.5 percent to $1.19 million. In Fair Lawn, where first-time buyers might find a starter home, the average price fell 4 percent to $450,000.

Months of Inventory

Otteau said his favorite statistic is months of inventory, or the length of time required to sell off all the homes that are currently for sale.

At the peak of the northern New Jersey real estate boom in 2005, the inventory was between one and three months, meaning that the ratio of buyers to sellers was about one to one, Otteau said. A year ago, inventory had swelled to 5.6 months of homes, and now it's 7.3 months.

``Some sellers took their homes off the market,'' Otteau said. ``That's made the picture look brighter than it actually may be.''

To contact the reporter on this story: Bob Ivry in New York at bivry@bloomberg.net .

Last edited by touchring; 10th May 2007 at 05:49 AM..
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Old 10th May 2007, 08:03 AM
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Re: Bloomberg: Home Prices Fall in Rich New York Suburbs Once Immune to Slump

Reading this article all I am getting is that most people are still in denial. It is all blamed on the nasty sub-prime people. Nobody seems to be asking about whether market prices actually overshot fundamental value, or whether there is slowdown in incomes at the top of the tree. Are those at the top concerned about the stability of the currency, inflation, higher interest rates or job security? Few of these issues seem to be addressed.
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Old 10th May 2007, 09:13 AM
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Re: Bloomberg: Home Prices Fall in Rich New York Suburbs Once Immune to Slump

Quote:
Originally Posted by Rubber Duck
Reading this article all I am getting is that most people are still in denial. It is all blamed on the nasty sub-prime people. Nobody seems to be asking about whether market prices actually overshot fundamental value, or whether there is slowdown in incomes at the top of the tree. Are those at the top concerned about the stability of the currency, inflation, higher interest rates or job security? Few of these issues seem to be addressed.

I think it's supply and demand, plus low interest rates - which is now impossible and due for revision due to Asian countries now unwilling to finance American debts, plus collapsing US dollar.

Of cos, if the housing mkt would affect the job market, it will be multiple whammies:

1. Oversupply of housing.

2. Higher interest rates due to withdrawal of Asian financing.

3. Collapsing dollar causes inflation, mortgage rate revision.

4. Job insecurity.


The full effect which would come perhaps 2008-2009?
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Old 10th May 2007, 09:59 AM
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Re: Bloomberg: Home Prices Fall in Rich New York Suburbs Once Immune to Slump

One of the main problems will be is that appreciating asset prices make people feel rich, which makes it easy for them to spend. In such an environment banks are generally very relaxed about lending money to home owners. Banks become more circumspect when asset prices are falling. People feel less rich and more insecure. They start delay purchases and party a bit less. That takes cash out the system, which cost jobs which then has a futher impact on property prices. So the whole thing goes around in a downward spiral.

There are two main economic phenomenon. One is a virtuous circle where success feeds on success. The other is a viscious circle where failure promotes more failure. Many of those active in US market particularly realestate probably cannot remember the last significant economic reversal. For that reason they will not generally be adequately prepared for it, not that any of ever are. Most people will, however, go from euphoria to deep depression when the wheels fall off. It can take years for the confidence to re-emerge.

OK, the stock market is still robust but that is probably just smart money trying to find a safer home.
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Old 10th May 2007, 10:10 AM
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Re: Bloomberg: Home Prices Fall in Rich New York Suburbs Once Immune to Slump

Quote:
Originally Posted by Rubber Duck
Many of those active in US market particularly realestate probably cannot remember the last significant economic reversal.

They will have to be at least 95 years old to remember.

Based on inflationary boom and bust real estate cycles i've seen in Asia, the US real estate dip has just barely began.

The bust will bottom out when basically the only people owning properties are people that don't need loans or mortgages, and when few people are interested in buying a house as a form of investment - almost everyone gave up on the idea of buying a house - except for a few very smart investors.

That is when it bottoms out.....


Bloomberg - U.S. Home Prices to Drop in 2007 on Loan Standards (Update2)
http://www.bloomberg.com/apps/news?p...qD4&refer=home


U.S. Home Prices to Drop in 2007 on Loan Standards (Update2)

By Kathleen M. Howley

May 8 (Bloomberg) -- U.S. home price declines this year are going to be steeper than earlier forecast because of the drop in subprime mortgage lending and the adoption of stricter loan standards, the National Association of Realtors said.

The 2007 median price for an existing home likely will drop 1 percent to $219,800 from 2006, compared with its earlier forecast of a 0.7 percent decline, the Chicago-based association said in a report today. It now projects the median price for new homes to fall $100 to $246,400, the first decline since 1991, from its previous estimate of a 0.4 percent increase.

Record-high defaults by subprime borrowers, those with flawed or insufficient credit histories, have prompted mortgage lenders to limit the number of people who qualify for a home loan, according to the realtors' report. At the same time, unemployment is down and household incomes are up, which should help bring a housing recovery in 2007's third and fourth quarters, the group said.

``If it weren't for a favorable economic backdrop, housing would probably have a hard landing,'' Lawrence Yun, the group's senior economist, said in the report. ``We see this as a soft landing with home sales rising gradually in the second half of the year and prices recovering a bit later.''

Sales of previously owned homes, 85 percent of the market, probably will total 6.29 million this year, the group said, less than the 6.34 million it called for on April 11. New home sales probably will fall to 864,000, lower than the 904,000 in the month- ago forecast, the association said.

2008 Recovery

In 2008, home resales probably will increase to 6.49 million, the highest since the record 7.08 million sold in 2005, the group said. New-home sales probably will total 936,000 next year, the highest since 2006.

This year mortgage rates probably will be lower than 2006, the report said. The average U.S. rate for a 30-year fixed home loan probably will be 6.4 percent, down from 6.5 percent last year, the association said.

Unemployment probably will average 4.6 percent this year, unchanged from 2006's six-year low, and inflation probably will fall to 2.5 percent from 3.2 percent. Disposable personal income, adjusted for inflation, will rise 2.6 percent, matching last year's gain, the group estimated.

The U.S. median price for a previously owned home has not declined since the real estate trade group began keeping records in 1968, despite regional declines. [color]The last time the national median declined probably was during the Great Depression in the 1930s, Yun said.[.color]

To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net .

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Old 10th May 2007, 10:18 AM
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Re: Bloomberg: Home Prices Fall in Rich New York Suburbs Once Immune to Slump

So if you are looking at a crunch in the real-estate sector, and the financial sector because there is little or no new net borrowing, and the service sector because people are not able to pamper themselves to the same degree, you are left with the booming automotive sector I guess.

Realtors always see things as a soft landing. That is a fact of life. Even if they know it themselves, they can afford to admit to anyone else that they are in deep shit.
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Old 10th May 2007, 10:23 AM
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Re: Bloomberg: Home Prices Fall in Rich New York Suburbs Once Immune to Slump

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Originally Posted by Rubber Duck
So if you are looking at a crunch in the real-estate sector, and the financial sector because there is little or no new net borrowing, and the service sector because people are not able to pamper themselves to the same degree, you are left with the booming automotive sector I guess.

Realtors always see things as a soft landing. That is a fact of life. Even if they know it themselves, they can afford to admit to anyone else that they are in deep shit.

I think few people today actually understand what the combo of Bush and Greenspan has done to the American and also the world economy.

Just look at Japan - there are more billionaires in China OR India than Japan. Compounded interest on real estate loans and a stagnated market can be very brutal.

During the last downturn in Singapore lasting from 1997 to 2003, at the bottom, many people buy second homes using pure cash - or very low mortages like 50% or lower. Because home prices are so lethargic, an interest bearing mortgage makes less sense. I've also seen cases where people take a mortgage, but got a similar amount of savings in an FD!!

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Old 10th May 2007, 10:37 AM
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Re: Bloomberg: Home Prices Fall in Rich New York Suburbs Once Immune to Slump

UK has experienced long downturns in real-estate in the recent past, and yes it will take about 5 years to turn it around.

I guess the Republicans know that there is no political benefit in trying to sort out the mess. If they can ride it through to the next presidential election all well and good. If they cannot, the the Democratic President will be left with a mess that he cannot sort out within his term in office. By which time it will be Jeb Bushes turn to squander somebody else's legacy, I guess.

Quote:
Originally Posted by touchring
I think few people today actually understand what the combo of Bush and Greenspan has done to the American and also the world economy.

Just look at Japan - there are more billionaires in China OR India than Japan. Compounded interest on real estate loans and a stagnated market can be very brutal.

During the last downturn in Singapore lasting from 1997 to 2003, at the bottom, many people buy second homes using pure cash - or very low mortages like 50% or lower. Because home prices are so lethargic, an interest bearing mortgage makes less sense.
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Old 10th May 2007, 06:37 PM
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Re: Bloomberg: Home Prices Fall in Rich New York Suburbs Once Immune to Slump

>By which time it will be Jeb Bushes turn to squander somebody else's legacy, I guess.

Well, that's certainly cheered me up.

Not.
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