the thing that ate my house…
by problembear
after today’s news about falling house prices everyone who makes payments on a mortgage must be wondering just how much farther can they fall. the news isn’t good. economists all say the bottom is still a long way off.
stan and angela bought their home in target range over 15 years ago for $87,900.00 – their neighbors in back sold the identical house two years ago for $246,750.00 - stan turned down an offer on their home a year and a half ago for $263,800.00 – this week the realtor advised them to accept an offer of $181,250.00 – stan and angela have no choice now because stan has accepted a new teaching job for a lot more money in alaska. they are not destitute and they do not fear foreclosure but they have lost over 31% of the value of their home in less than two years.
“i don’t know where the local news media is getting their figures” stan says “but our realtor is a great friend and she leveled with us. if you want to sell your house now don’t listen to the talk about how missoula hasn’t seen big drops in housing prices yet. that is pure BS.” then stan added with a wry smile…”it’s like godzilla ate almost half our house.” he is looking forward to the new job with great challenges for his career and both of them have always wanted to live in alaska. they are on the young side of forty and excited about the future but angela sums it up…” i just assumed we would always be homeowners, now i am not so sure.”
there will be some capital gain on the house although probably not enough to buy another one soon. “we will rent a nice condo angela’s sister picked out for us in anchorage- right on the waterfront.” stan shrugs his shoulders and continues shoveling snow from the big driveway in front of his big two car garage. “i’ll miss the garage.” he says.
we have not seen the bottom of this yet . contrary to what you read in desperate realty ad seeking rose-colored local internet and press based articles the west is already hip deep in this value drop and missoula is smack dab in the middle.
i like to occasionally check two websites that provide some reality based perspective on this – patrick.net and bubblemeter.com
-
Recent Comments
JC on Memorializing War Swede Johannson on Memorializing War Swede Johannson on Rape is not “knucklehead… 
larry kurtz (@larry_… on Memorializing War larry kurtz (@larry_… on Memorializing War Turner on Liz’s Weekly Poetry Seri… lizard19 on Memorializing War
December 30, 2008 at 10:59 pm
Dude, is that the dinosaur from Pee Wee’s Big Adventure where Pee Wee and Simone waited for the sunrise after cleaning the diner, and where Pee Wee was telling Simone about her “big but” getting in the way of her dream of going to Paris, just before Simone’s jealous trucker boyfriend Andy chased Pee Wee onto the passing freight train with a dinosaur bone ripped from a sign? You know, the dinosaur?
December 30, 2008 at 11:04 pm
will have to consult with the S.O. on that one klemz. she watched pee wee’s playhouse religiously. we are actually just a couple of unsupervised 3 year olds….
December 30, 2008 at 11:31 pm
Well, they did lose 31% off the top…I’d say that’s pretty typical…but they made six percent or so over time, and lived in their house. It’s the people who bought at 263,000 and one spouse got laid off and now have to move who are hurting. There was such an imperative for home ownership, the whole “affordable housing ordinance” and people getting 100% mortgages and using inflated appraisals as the down payment. Everybody had to own a house, even though renting pencilled out much better.
I tried to get my wife to sell in summer of 2005 after the divorced couple across the street made 300k on their house, but hey, it’s where we live and raise the kids so we didn’t.
When home ownership gets back to being a lifelong goal and not a flippers dream, and a house is a place to live and not “an investment” then I think the market will be back to rational. We are still a long way from that in Bozeman. We won’t see capitulation until next spring, and I’m guessing four to five years before things start to head up. The 80s all over again.
December 30, 2008 at 11:46 pm
Sometimes my achingly tiresome anal retentive nature gets the best of me: they didn’t “lose” anything, there is a capital gain after all. I wonder if there’s some sort of cream I should be using.
December 31, 2008 at 2:47 am
As the other posters pointed out, clearly Stan gained from the situation. While you can lament that the gain wasn’t as much as it could have been, what can you do about it? The housing market is constantly in flux. Reality dictates that you can’t just up and sell your house because the neighbor sold his house for a significantly higher amount than you bought yours for many years ago. What if Stan didn’t get the great job in Alaska and held on for another 5 years? Maybe the gains would be even higher than the neighbor. Or, they might be lower than it is now. Owning a house is a long term commitment, not something that can be bought and sold on a whim. You pony up and hope for the best.
I guess I just don’t understand what the fuss is about…every homeowner in America is losing value on their house. Some of us (myself included) are paying loans on a house that is probably going to be worth less than when we bought it.
Lament for us, please.
December 31, 2008 at 9:12 am
I’m with Doug here. Why is it that everyone seems to have sense of entitlement to a gain of 50% over 7 years? Or a sense of entitlement to whine about not making that kind of gain because the neighbors did 2 years ago? Not calling you out goof, I don’t think that is what you were saying.
Few, busting metropolis, here in Montana will be upside down unless you started with something far overpriced along with a funky loan and did it in the last few years. And if that were the case, then there was a reason you had to get that funky loan, which is the reason we’re in this mess in the first place.
There’s plenty to blame.
The mentality of homeownership used to be that you bought and lived in it a half a lifetime until you moved or were in it for 15 years. Now it’s a mini-source (flip-style) of easy income, probably just a micro-sign of American’s over excess – a micro-sign of exactly what the Wall Street bankers were doing by putting out
crack addictwealth building, make-easy-money, flip a house loans.December 31, 2008 at 10:05 am
Nice post, problem bear. The real estate market in Missoula is falling apart way faster and harder than the industry thought it would. Look at MOR’s sales for November, one-third as many homes sold as in 2004. The median price is holding up, but that is going to change soon. I bet we’ll see the median price drop 5-10% by June. But, I think sales will steady themselves at pre-bubble levels what with the lower mortgage rates and sellers responding to the market with lower asking prices.
The price-rent ratio is still out of whack in Missoula. The typical 3 bedroom house rents for $1200. To get a $1200 mortgage for that house you’d have to have a loan no bigger than $160,000. This list of houses that fit this ratio in Missoula is very small. Obviously, there will be further adjustment.
Some sellers have responded by taking their properties off the market. Some have accepted lower offers. Some are stubbornly sticking with their asking.
December 31, 2008 at 10:35 am
I think there’s a difference between an appraisal and the selling price. When sellers outnumber buyers, selling prices tend to go down even if the home is appraised at a higher level. We certainly should experience that in Missoula. It’s nothing compared to the price drops in the Flathead on the luxury homes. It’s also nothing compared to the overdeveloped areas of CA, AR, NM, and FL where developers overestimated demand and are sitting on large stocks of new housing (as opposed to existing home sales).
Does it suck? Yes. Is the sky falling? Not exactly. Is fearmongering as bad as rose colored glasses? Absolutely.
December 31, 2008 at 10:40 am
telling the truth is fear mongering? that is what is whacked and probably one of the big reasons for the Bush-crash. when the emperor is naked it is important to not just tell people but to post it on youtube. but that’s ok kritik, i am used to going it alone when it comes to the truth.
December 31, 2008 at 11:29 am
You told one anecdote and then made several claims around it. Your idea of truth telling and mine are obviously different. Further, truth can be framed in your fear mongering way AND truth can be framed in a realistic, pragmatic way. Truth is not some objective thing with one definitive narrative. My point about appraisals versus selling price was an attempt to help you understand “the truth” behind what happened to your friend. But who cares? Your brand of truth you’re so proud of is way more important. Please, continue to go it alone (what’s with the lone ranger BS? Give me a break, man).
Anyhow, I’m sorry you friend didn’t get the selling price he felt he deserved. We’re not expecting turn arounds in the market for 12-18 months for home sales. One thing that might turn around are investments into existing homes (rehab -go green!; and remodels). Those loans are more attainable and can combat deflation in home values.
December 31, 2008 at 4:26 pm
i go it alone because nobody pays me to shill out boosterism for a special interest industry kritik. nobody pays me anything for this. i learned long ago the market between a willing buyer and a willing seller is what determines truth – not some corporate flak BS appraisal system designed to hide it. don’t even try to explain the rotten system you adore because with the exception of a handful of suits it has failed the rest of america….badly. i know the construction industry intimately – warts lies and all so try blowing smoke and installing mirrors at the conventions. i just have fun knocking them all down here.
December 31, 2008 at 4:31 pm
Price-rent ratio is also based on over-speculation. Rents – $400/bedroom!! – and prices have a long way to drop in Missoula and Bozeman. Too many realtors, bankers and cutthroat freelancers hanging on to too much overpriced property. Their death grip will loosen when pain overtakes their greed.
December 31, 2008 at 4:52 pm
If you show people the emperor has no clothes, they crucify you for displaying genitals. That’s America.
December 31, 2008 at 5:06 pm
but klemz- if you think about it. the system is hollow anymore. except for a few diehard bush supporters and paid industry flaks, there is no “they” anymore.
as the old system breaks down there is a painful but golden opportunity to rebuild a new system based on sound economic principles instead of down-up profiteering and brief case robbery. america is definitely ready for that now after being lied to for a decade. i am tired of being fed BS by corporate lackeys and thieving CEO’s. it is time for some truth telling. that is the only way that real change can occur.
January 1, 2009 at 6:25 am
jhwygirl said: “Few, busting metropolis, here in Montana will be upside down unless you started with something far overpriced along with a funky loan and did it in the last few years. And if that were the case, then there was a reason you had to get that funky loan, which is the reason we’re in this mess in the first place.”
For the record (not that it matters) I didn’t get any funky loans. I got a VA loan and was glad to get it at a price we can afford. The house wasn’t overpriced…if it was, it’s not much to worry about. But I doubt I’ll be making $100 grand+ on it as the guy in the story did on his house. Sounds like he got a pretty good deal, even though it wasn’t the peak price he had wanted.
January 1, 2009 at 9:52 am
Then what are you complaining about, BM? that you won’t be making +$100 grand on it? You said “Some of us (myself included) are paying loans on a house that is probably going to be worth less than when we bought it.” I was responding to that.
Used to be that a 2-3% annual return was a more than fair profit on homes.
I’m not rejoicing in all this, although the conditions, if they maintain, are such that and many like me may eventually be able to buy.
The greed that did it all started at the top, trickled from banks and mortgage lenders and real estate agents down to investors and developers and contractors and house selling and house buying and house flipping homeowners. All were happy.
Now the entire nation – the entire world – reaps what we have sown.
Someone – many – should have had better control over the segment of our economy that is the main driver.
January 1, 2009 at 11:47 am
If you had purchased a house in Bozeman in 1977 you could have sold it in 1988 for exactly the same price. Prices went down, stayed down, and then came out of it in a rush in 1990.
I don’t agree with problembear, (well, maybe once) but certainly not that we are going to see 25-30% unemployment. But we are going to see double digit unemployement and a rollback in population and a 30-40% rollback of housing prices, maybe more.
It will be measurably more dire, but not something the Gallatin hasn’t seen before.
January 1, 2009 at 12:29 pm
So 100K appreciation isn’t enough? Gosh, I just can’t see the problem here. The high offer was grossly inflated. Housing prices have GOT to come down. And when they do, some people won’t see as much appreciation. I’m with jhygirl, we need to get back to where 2-3% appreciation is acceptable and there’s some end to the greed-fest driven by massive debt.
January 1, 2009 at 1:50 pm
I guess I didn’t read it like a cautionary tale. I think that’s exactly the point, Jodi.
This recession will only be a tragedy if we don’t learn anything from it. Yet, it’s hard to gain any knowledge when people want to either ignore the problem or treat it like a monsoon.
January 1, 2009 at 6:02 pm
It is called a ‘housing bubble’ because it is a bubble, and eventually a bubble pops.
Unless your friends leveraged the increased value of their home for loans to squander in the consumer culture, they should consider themselves to be lucky and prudent.
The great fallacy of any bubble is the regret of those who fail to cash out at the bubble’s height. The truth being that to survive a bubble with your assets and savings intact is an accomplishment.
As the euphemisms pour forth – ‘upside down’, ‘under water’ – reality is much harsher. No matter how you cut it fiscal imprudence is always a mistake. and those that avoid it should give themselves a pat on the back.
January 2, 2009 at 8:55 am
Problembear – People get paid to blog?
January 2, 2009 at 9:08 am
Who? Where? Sign me up! Now!
January 2, 2009 at 9:12 am
Seriously, right? LOL!
January 2, 2009 at 9:25 am
Well, Kritik, some people are paid to blog. There are plenty of examples, and any site with ads is a good start. Although if a site has ads it doesn’t mean that the site bloggers are making their living off of blogging. More often they’re supplementing the costs of running the site, keeping the domain, etc.
Then there are other sites, like Talking Points Memo and Think Progress, for starters, that are basically all-out blogs where the writers make their living blogging. Daily Kos is another. I’m sure there are conservative examples too. If a writer is making their meat-and-potatoes income blogging, they’re probably also writing a book, or columns for other sources, or consulting, etc.
It happens.
January 2, 2009 at 9:45 am
Let’s do it!
January 2, 2009 at 9:51 am
I want to get paid for commenting.
January 2, 2009 at 10:09 am
“Homes sold in Whitefish were down 31.4 percent, Bigfork 46 percent and on Flathead Lake 33.3 percent, according to a mid-year report by Jim Kelly, who runs a real estate appraisal and consulting firm in Kalispell.” from the Flathead Beacon via New West.
Two for one lots soon to be five for one. from goof houlihan
January 2, 2009 at 5:08 pm
that doesn’t surprise me goof. in fact, i think home values will probably closely mirror the average drop in value of portfolios with an average of 30-40% losses not uncommon, from all the people i have talked to so far.
and like a lot of commenters have said values need to come down to affordability for people to buy again. i just hope the phony appraisals pushed by paper pushers and people sitting on overvalued real estate stops so that the real prices begin to appear. i don’t mind the fall so much as not feeling the bottom- that is what bothers me.
when i read local booster articles quote bruno fria of lambros with his self-serving numbers of 5% drops and no-one bothers to look at the actual numbers of real people selling it bothers me. just tired of eating BS, i guess so my feeble attempt to bring some reality into play here.
January 2, 2009 at 5:23 pm
it’s hard, problembear, to get actual selling figures because of Montana being a non-disclosure state.
Not consumer friendly – and you can only guess which industry’s lobbying efforts are to blame.
January 2, 2009 at 5:31 pm
the appraisers i have met in the real estate business do not strike me as much above catfish in genetic material and everyone knows catfish love murky waters.
January 2, 2009 at 5:37 pm
problembear, the reality is worse than any newspaper is reporting, that’s true. How are the k-12 school enrollment figures holding up in between semesters? Oh yeah, a good indication, as are job openings at the University.
As for real estate, I read that goofball Bendbubble2 when I want to see Bozeman’s future six months from now.
January 2, 2009 at 5:44 pm
the funny thing is that if someone wants to write about the housing bubble the last place you would go for information would be a realtor who is barred from telling you what something sells for even if they wanted to (but of course the truth would not be in their own self interest)
- but that does not stop a reporter or blogger from talking to regular people who just sold their house. they can tell you the real story.
reporters could just talk to real people instead of industry flaks or bureaucrats all the time. I do it all the time and it can be very rewarding to talk to real people and get away from bureauspeak and industrypap once in awhile. it might surpise them how different the truth is out there.
for an excellent example of just such a reporter just listen to kevin maki on KUFM. he is montana’s studs terkel. not afraid to go out there and talk to real montanans and get the truth straight from the horses mouth- that’s what i’m talkin’ bout. real journalism –
not just phoning it in….(not to infer of course that reporters aren’t usually hard working and underpaid- sometimes i get a little shrill when i blather on too much…it’s my oldest bear syndrome cropping up -telling everyone how to live. oh no S.O. says it’s time for the cattle prod again…)
January 2, 2009 at 7:44 pm
I think we need to start talking about how lower appraisal rates will mean lower property tax income for local governments. I guess I’m more worried about that than how much money people make from selling their homes. Maybe I’m way off on that…
January 2, 2009 at 7:47 pm
Oh, and what exactly is a “flak?” You keep calling me one (at least I think you are). For the record, I’m much more of a flake. ;-)
January 2, 2009 at 7:52 pm
Sadly, that’s a staffing issue too, and one of the two primary reasons why dailies suck.
There’s nothing more fun than spending several days bumbling around a town where everybody’s talking about the same problem. It doesn’t work so well in Missoula, because people in this town are… how do I put this… not interesting.
But, in order for it to work, your publication has to be okay with the possibility of investing its resources in something that may go nowhere.
January 2, 2009 at 8:16 pm
sometimes on a sortie i get a little trigger happy with the sidewinders when somebody accuses me of fear-mongering ( i do make ample use of hyperbole on occasion but i really thought it was a pretty tame and straight on piece.) i apologize for that, kritik. but i guess i wouldn’t be much of a problembear if i was better behaved. the boys below deck are getting tired of rearming the wings so often though so will try to tame it down a little.
January 2, 2009 at 10:32 pm
“I think we need to start talking about how lower appraisal rates will mean lower property tax income for local governments.”
I’m not sure what a “reappraisal rate” is. But for the 2008 tax bill on residential property, due last november and next May, appraised taxable market values are currently, right now, at the 2003 level. Perhaps housing prices have fallen below 2003 appraisals, but that’s the year of record for the current appraisal. The 2008 tax bills were based on the final phase in of 1998 to 2003 values give or take a year.
Where taxable values have dropped like a stone are in “centrally assessed” properties, like railroads and utilities. Those values are based on the value of the company, real voodoo, not on the appraised value of the real property and improvements in each jurisdiction. It’s highly unlikely those companies will keep their value in a recession. No local government can predict what those will do.
Commercial property that can be valued at other than assessed/appraised value of the property might also drop in value.
And industry that closes down that has substantial investment in machinery and equipment could affect tax base (value of a mill) as well.
If your local government isn’t looking at ways to save money this year and have some cash carryover, it should be.
January 2, 2009 at 11:09 pm
Goof: I think it is… I think…
Problembear: I like to tease… and it gets bad too. But I can take what I dish so don’t change a thing. :-)
January 2, 2009 at 11:09 pm
Oh, but what is a “flak?” I must know!
January 2, 2009 at 11:16 pm
Concussive shells filled with crap — or, alternatively, guff. News flaks absorb flak. I wish in both senses.
January 3, 2009 at 8:43 am
I use “flak” as a polite word for, “scheit”. As in, “I get a lot of scheit for being the moderate commenter on a liberal blog; it makes me grateful for Big Swede.”
January 3, 2009 at 10:32 am
LMAO! Thanks guys!
January 3, 2009 at 3:01 pm
News flaks need some flax to help with the flak injuries…
Goof… put another log on the fire. You’ve earned a cord or two here. ;-) And watch out for Big Swede. He’d make a pretty cute Muppet, shotgun and all.
January 3, 2009 at 6:18 pm
no fair picking on big swede and me while i’ve been out ice fishing you guys.
Q; how do you catch a bear while ice fishing?
A; leave a circle of peas around the hole. when the bear bends over to take a pee, you kick him in the ice hole.
too much JD in the flask makes for bad jokes- sorry.