Posted on 08/14/2006 9:46:15 AM PDT by ex-Texan
NEW YORK (Reuters) - Americans are carrying a lot of excess weight and desperately want to slim down. No, not their waistlines -- in the size of their homes.
"Steeply deteriorating." "Hard landing." "Kaput." These are some of the terms used by analysts to describe the slowing of the U.S. housing market. And with the glory days of home-price appreciation now over, some homeowners are declaring, "Downsize Me!"
A huge gap between the supply of homes for sale and demand for housing means prices are leveling off -- and could tumble. David Horwitz and his wife, Diane, are the type of homeowners looking to streamline their expenses and unload their roomy homes for more humbler abodes.
The Horwitzes, both semi-retired, just moved into a 1,200 square-foot apartment on the Upper East Side of Manhattan after living in a 2,200 square-foot home in Scarsdale, New York.
"Our property taxes went down by 1,000 percent, the ConEd (bill) was cut by two-thirds and the cost of home maintenance was reduced by at least 50 percent," said David Horwitz. "No gardener, no roofer cleaning gutters, no tree spraying, no snow removal, no exterior painting every six or seven years."
The Horwitzes, who have no mortgage, plan to reside in the apartment for a while, so even if prices fall it is of little significance to them.
Mike Wright and Lin Drury are also enjoying the city life.
Halstead Property, a Manhattan real-estate firm, recently sold the couple a 900 square-foot co-op in the Inwood Hills area of Manhattan. Their new place is smaller than the 1,100 square-foot townhouse they called home in Ossining, New York.
A writer by profession, he said his motivation for moving to Manhattan was not just to downsize, but to be closer to his wife's job as an associate professor of nursing at Pace University, New York City and Westchester.
TIMING THE MARKET
Sometimes, though, buyers need to pay up to scale down.
The Wrights' downsizing was their second in two years. Prior to their Ossining home, they enjoyed a 2,200 square-foot condo four blocks from legendary Wrigley Field in Chicago.
"We realized prices would be higher in New York than in Chicago," Mike Wright said. "We didn't expect to get a smaller home while spending about one third more. If we'd bought, say, five years earlier, the price might have been less."
Diane Ramirez, president of Halstead Property, has seen downsizing pick up steam in recent months, especially among suburbanites in New York, New Jersey and Connecticut.
"Homeowners are probably sensing now may be the right time to get the best price before the market cools further," Ramirez said. "Some of these homebuyers are empty-nesters now finding their homes are larger than what they need and more than they can handle."
In Florida, which saw double-digit home-price gains in the past few years, homebuyers appear more interested in perks. In fact, in the Sunshine State -- long-known as a downsize destination for retirees -- homebuyers are losing interest in size altogether.
"People are at the point where they would rather have a luxurious interior than expand," said Budge Huskey, president and chief operating officer at Coldwell Banker Residential Real Estate in Sarasota, Florida. Potential buyers want kitchens designed for entertaining, state-of-the-art appliances, media rooms and home theaters, he said.
"Many of these people have downsized already, and now they want a more luxurious home," he said. "They are more interested in a Jacuzzi than another bedroom."
Gopal Ahluwalia, vice president of research at the National Association of Home Builders, a trade group in Washington D.C., said feedback from consumers and builders indicates the average size of a U.S. home is flattening out.
The average home size went from 1,500 square feet in 1970 to more than 2,400 square feet in 2005. During the same period, the average household size declined, from 3.11 to 2.59, he said.
"Ten years back, most people wanted more space -- now they want more features," Ahluwalia said. "If you look at 35 years of history, from 1970 to 2005, and even early 2006, home size has been continuously rising, except during periods of housing recession."
TAKE MY HOME, PLEASE
In any event, packing up a house full of belongings -- which could be decades worth of stuff -- and transferring them to another home is a daunting and dreaded task.
A wealthy couple in one of New York City's toniest Fifth Avenue cooperative apartments came up with an unusual solution: They sold two rooms, or about 650 square feet, of their 3,400 square-foot apartment.
Edward F. Johnston III, vice president and director at Brown Harris Stevens, a Manhattan-based real estate firm that specializes in high-end property, advised the couple.
"It was a large space for just the two of them -- they never used the dining room," he said. "Most high-end luxury buyers are not influenced by a cooling market, but if you own an apartment you always want to sell at the right time."
"They already had one of the biggest apartments on a high floor in one of the top buildings on Fifth Avenue," he said. "Did they really need 9.5 rooms as well?"
"The average home size went from 1,500 square feet in 1970 to more than 2,400 square feet in 2005. During the same period, the average household size declined, from 3.11 to 2.59 . . . home size has been continuously rising, except during periods of housing recession."
There is a glut of homes on the market. Over 4 million houses are listed for sale across the U.S. Even in Minnesota there is an over supply. For sale signs are growing like weeds out there.
Locals no longer can afford the condos being built on the Oregon coast. They are moving away. Middle class residents are being run out of places like South Florida. No big deal anyway. The housing market will soon be glutted with foreclosures. About $ 4 trillion in exotic ARM loans will be reset to current interest rates beginning next year. Payments are going up from 2.5% to recomputed rates equal to 7.5%. [Read more?] Or just hit my FR page. For the naysayers out there I repeat your mantras: "Not here. Not in my neck of the woods. Homes prices are still going up. Lock your windows. Nothing to see here."
*Ping*!
I like these smaller homes (from a Minnesota designer):
http://www.notsobighouse.com/
"Not here. Not in my neck of the woods. Homes prices are still going up. Lock your windows. Nothing to see here."
South Orange County, CA.....so true! Houses are actually on the market for 2 to 3 weeks, then they are sold, rather than being sold before they hit the market. Although there are national trends, there will always be exceptions to that trend.
What, that's not fair, isn't real estate supposed to perpetually appreciate at astronomical levels? This calls for an investigation! (sarc)
Good thing I bought a nice large house at a discount and got a 5.75% flat rate loan, then, eh?
Given I also plan not moving for 10-15 years, I could be real cozy. After all, pace Reuters, these bubbles pop every 10 years or so. We got nailed in place by the last one and got out at the top of the last bubble. It may be location, location, location for selling, but timing has some value too.
Thanks.
That's a neat trick. Most people know that they can't go down more than 100%.
Speaking for myself, I've got better ways to spend my money :)
"If you look at 35 years of history, from 1970 to 2005, and even early 2006, home size has been continuously rising, except during periods of housing recession."
...and this would be one of the latter periods. Ergo, no news here, just the usual cycle repeating itself. Naturally, a fembot for Reuters wouldn't have the database to know or expect anything like this. Besides, it tends to trash the middle-class and that's always good for a journalistic laugh.
Every few days I go to Google news and search "foreclosure" and "forclosures". It is all I need to see...
Ha ha, I got 5.35%. LOL.
Great news, as I'm planning to put 10% down on my first home here in the next few months. With a fixed-interest mortgage, I should do fine...sounds like the market is moving my way.
This is a silly article. This happens everyday of every year...empty nesters want a smaller home to maintain. And they try to link this to the dropping housing market? I guess you could right the same article in a booming housing market...the empty nester is taking advantage of selling his house during a booming market. Or you can do it in a downsizing market...empty nesters are tired of seeing their equity vanish so they are unloading their big house for a smaller home.
Nice try.
The actual article has nothing at all to due with any housing bubble. There was one paragraph (which you dutifully highlighted as it fits YOUR agenda) which fits the MEDIA'S agenda to pronounce "doom and gloom" as long as Bush is in office. Does it bother you that your agenda about the economy is identical to the media's?
But what this article is talking about is people who want to "downsize" not for price but for convenience. Most of these people are actually spending MORE money buying these condos and apartments than they sold their previous homes form.
Nice try, but this article does nothing for your agenda.
The beauty of capitalism. Winners and losers in about the same proportions. Sometimes your the windshield, sometimes your the bug..
Congratulations! My advice: Buy the best location, not the best (favorite) house.
Newport home defaults jump 118%
Costa Mesa home-loan defaults rise more than 50% year on year in sluggish house market, new figures reveal.
By Amanda Pennington
The number of defaults on Newport-Mesa home loans jumped dramatically in the second quarter of the year compared to 2005, a rise some experts say could be the result of the sluggish real estate market.
According to numbers released by DataQuick Information Systems, in Newport Beach the number of defaults skyrocketed, showing a 118% jump from the periods in 2005 to 2006. The number of defaults in Costa Mesa went up more than 50%.
These numbers do not necessarily represent the number of homes that continued through the foreclosure process and went up for auction, said Kurt DeMeire, chief executive officer of County Records Research, a Huntington Beach corporation that researches and processes foreclosures in California.
"The real story is not just the number of defaults going crazy, but the number of properties that are actually making it to auction, and that has increased dramatically," he said.
In today's market, more homes are making it to auction and going back to the lender because the home no longer has equity, DeMeire said.
"Most people think it's just junkie properties that go into foreclosure," he said. "Every neighborhood in the county has foreclosures every day."
In California, the foreclosure process is a series of steps that gives homeowners the chance to reinstate their loans or sell the property before it goes to auction. Andrew LePage of DataQuick said only about 7% of homeowners who file default notices in the state lose their home in the foreclosure process.
"The notice of default is just the first step in a foreclosure," DeMeire said. "The owners then have three months to come up with the money, or just sell out, this is when most people sell — most people that go into foreclosure sell the property."
If the homeowner does not sell or come up with the money owed, he said, a notice of trustee sale — or an auction notice — must be published in a newspaper for three weeks, giving the owner an additional 21 days to sell or pay their lender.
"At these auctions, the question is are they being picked up by a bidder or are they just going back to the lenders?" DeMeire said. "A lot of properties have plenty of equity so they attract bidders."
Keith Cotarelo, president of Signature Loan Group, said he expects to see more bank-owned homes after the auction process is complete.
"Personally I think you're going to see a lot more bank-owned properties, and in turn they will have to change some of the lending practices," he said. "I see it coming around to eliminating some products."
In particular, Cotarelo said, the practice of 100% financing has hurt homeowners in the long run.
"A lot of them have been caught in the crux of creative financing and the reality of what the rates have done. A lot of lenders selling the product were not explaining it very well, and with knowledge comes power," he said. "If they were able to understand the product they were being given, they might be able to make more informed decisions as far as being able to handle the [interest rate] increases that were built in … none of us wants to buy a home just to lose it in the next couple years."
Rising interest rates could be to blame for the increase, but DeMeire said the standard reasons like divorce, unemployment — a distant second, he said — gambling, incarceration and deaths still play a role.
The only good thing about greater Boston is that house values keep going up.
Wait until this time next year.
Well, which is it?!?! Are we building too many "McMansions" or are we selling off all our big houses? Whose propoganda to believe?
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