Posted on 10/16/2007 7:15:41 AM PDT by 2banana
Builders Giving Up On The Sinking Market In California, Developers Leaving Behind Housing Projects — And Their Tenants
SAN PABLO, Calif., Oct. 10, 2007
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As housing prices continue to drop, developers are scrambling to get rid of houses they can't sell. Many are turning to auctions. (CBS)
Housing Developments Abandoned
Partially-built houses are being left in developments as builders walk away from a collapsing home market. Homeowners who bought at the market's peak are left to absorb costs. John Blackstone reports.
(CBS) In California, where developers have been racing to turn farmers' fields into subdivisions, they're now walking away, leaving houses partially built.
Those who have already moved in wondering what will hit next.
“I'm concerned that once the weather starts getting bad, there's tile piled on the roof that could just fly off,” homeowner Marius Gieske told CBS News correspondent John Blackstone.
Dunmore Homes had building projects in a dozen California communities from Bakersfield to Yuba City. Now it’s halted work everywhere, giving up on a fast-falling market.
“We couldn't sell a moving target,” said John Slaughter, vice president of construction and operations for Dunsmoor Homes. “What we wanted to do is stop.”
That moving target, collapsing house prices, has already cut $1.2 trillion from the value of American homes. And the losses are mounting, going to $4 trillion by one estimate, by the end of next year.
So developers are scrambling to get rid of houses they can't sell. Many are turning to auctions.
“You don’t know where the bottom is, and so an auction will tell you if you hit the bottom and where it is,” said Craig Barton of Anderson Homes.
But as Anderson Homes searches for the bottom, those who bought from the developer at the top feel betrayed.
Sherry and Percy Berquist, who paid $597,000 last year were shocked to see $335,000 set as the opening bid for an identical house to be auctioned. The developer may be able to absorb that loss. The Berquists can't.
“It’s gonna be very tough,” said Sherry Berquist.
Across the street Amy Sturdevant paid $585,000 for a house. But now the developer has set $295,000 as the opening bid for similar houses down the street.
“I feel like my parents’ grave has been robbed. This was an inheritance. I sit out here and I look at this…” said Sturdevant.
Those like Sturdevant and the Berquists who bought at the peak may be the biggest victims of this housing bust said Financial Planner Patrick McGilvray.
“That's the real tragedy for the people who got in at the height of the market. They are going to tough it out,” McGilvray said. “They are the ones who are going to carry the water so to speak for this debacle.”
If part of the reason for falling prices is overbuilding, it may not be over yet. While construction has slowed builders are still putting up new homes at a rate of more than one million this year.
Not in EVERY market, however. California, Washington DC area, Boston, etc.......markets that were obscenely overpriced for so long are taking the major hits. Where I live (north Raleigh, NC)? Properties are doing JUST fine, tyvm.
Isn’t that a question that varies according to age, income and net worth (i.e., ability to absorb risk)? Sounds like a better question for a personal financial analyst rather than someone posting on a web site.
It’s the mentality these days. Everybody thinks they are entitled to half a million if their Big Mac has too much cheese.
Except for folks like me and sender, who you admit will be "more than fine." That's not exactly doomsday.
The so-called "tidal wave" will just mean lots of lenders stuck with lots of real estate that will have to be auctioned off. And some folks will have to move to smaller homes while they get their finances back in order.
Maybe - ask yourself these questions
Can the average wage earner afford the average house (at about 3x wages)?
Can you buy a rental house and have a postive cash flow from day 1?
Is the price/(Rent-Expenses) of housing stock at around 12?
I am not sure why fixed mortgages do not have prepayment penalties. Corporate bonds often have prepayment penalties. I am not sure why fixed rate mortgages are offered at such favorable terms if there is so much exposure on changing interest rates.
In a larger sense, it is easy to criticize in hindsight. The movement of interest rates and the collapse of the energy industry were not expected. Even with more prudent policies, there would have been much pain.
I walked away from about 500k (appraised value) of houses, because they were worth less than I owed. I’m a statistic too! Went from 170k appraisal to 115k appraisal in a year.
Carolyn
Builders have been shutting down in my area as well.
Most sellers are selling below cost here in AZ. You take cost+10% you're awfully generous.
My cost was ~135k to build the houses, they sold at auction for 115. That’s in Casa Grande, though, things are a little better up in Phoenix, but not by too much. I ended up doing much of the work myself in order to “pay” myself the labor cost to keep food on the table. It wasn’t greedy/get rich, it was simply markets tumbling by 40 percent or more in response to interest rates climbing. The numbers made sense when I purchased, but nobody predicted a 40% plunge except perhaps the “gloom and doomers”. They were completely correct here.
Hence the "points" and "fees" charged by the bank when issuing the loan in the first place.
Companies like Linux Financial and a few others have been “changing the game” (their words) by doing no-fee-no-point refis. Probably just to perfect creditors though, so it doesn’t change the B-paper and Alt-A loans that shouldn’t have been made in the first place.
That's because y'all buncha idiots worked the market like a Ponzi scheme!!!
Knuckleheads.
Oops, I mean “credit SCORERS” not creditors.
Having a hard time garnering much sympathy unless there was fraud (greed and foolishness don’t count). Definition of a fair price is one on which a willing buyer and a willing seller agree.
Personally, I’m putting all my money into tulips.
Waaaahhhh... It's a matter of common sense. If one has any, they could have easily asked themselves--- Hmmm.. Housing prices have doubled here in 5 yrs, has my salary doubled during the same time?? Stupid people do stupid things. The smarter ones learn from their mistakes.
Speculators don't think like that. Look at the stock markets in China and India. Doubling begets doubling again. At some point the bubble bursts, but they all think they are smart enough to get out ahead of time.
I may be wrong about this, but I believe Federal banking laws prohibit prepayment penalties of this sort. Banks would love to be able to impose charges like this.
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