"The Case Against Homeownership" - Time Magazine

I had some time to kill the other day and happened to pick up a magazine with this cover story.

Now, as the U.S. recovers from the biggest housing bust since the Great Depression, it is time to rethink how realistic our expectations of homeownership are — and how much money we want to spend chasing them. As members of both government and industry grapple with re-envisioning Fannie Mae, Freddie Mac and the rest of the housing finance system, many argue that homeownership should not be a goal pursued at all costs.

It's a good, and detailed, recount of the mess we find ourselves in, so pick up the Sept. 6, 2010 magazine to read more.

Don't forget to check back to Dan's Deep Creek Blog for your future updates on Deep Creek real estate.

"Plunge in home sales not pretty, but necessary for real recovery" - Washington Post

The next thing you need to know is that home prices are probably going to drop, perhaps precipitously. This is simple supply and demand. If no one is buying the thing you're selling, you lower the price. Prices drop until demand matches supply, and then prices stabilize. And that's where we were before this decade's housing boom that led to the financial crisis.

Sounds familiar, doesn't it? Click to read more of the Washington Post piece.

Don't forget to check back to Dan's Deep Creek Blog for your future updates on Deep Creek real estate.

Deep Creek Housing Downturn ..

seems to have hit townhouses/duplexes (or townhouse/duplex owners) particularly hard. For evidence refer to the following subset of 2010 Deep Creek distressed properties.

ACTIVE

257 MARSH HILL Rd #2: short sale, current list price: $299,900, 2006 sold price: $319,000. "VERY MOTIVATED SELLER, WILL CONSIDER ALL REASONABLE OFFERS!"

257 MARSH HILL Rd #17: current list price: $299,900, 2004 sold price: $320,000.

1692 DEEP CREEK Dr #29: current list price: $299,900, 2006 sold price: $295,000 + renovation cost, agent-owned. Owner previously told me that he was confident this property would sell for $380,000+ and indicated that it was a good investment. Incidentally, in Jan 2008 this same agent told us all that "local developers realize that Deep Creek has always been in high demand and that prices will go back up this summer." In the meantime, he purchased a lakefront home with a $750,000+ mortgage to take advantage of one of those tax avoidance schemes.

257 MARSH HILL Rd #13: current list price: $321,000, 2005 sold price: $355,000.

60 BRIGHT Psge #60: current list price: $379,000, 2007 sold price: $417,000.

611 MARSH HILL Rd #1: current list price: $1,185,000, 2008 sold price: $1,325,000.

565 GLENDALE Rd #312: short sale.

13 WINDING Way: current list price: $249,999, 2004 sold price: $285,000, over 500 days on market.

24 HOOPPOLE Ct Unit B-6: current list price: $349,000, 2005 sold price: $380,000.

SOLD

1692 DEEP CREEK Dr #3: short sale, 2010 sold price: $309,000, 2005 sold price: $380,000. Recent sold price nearly 20% below 2005 sold price.

IN LIMBO

12 SKI HARBOR Dr #12: current list price: $365,000, 2007 sold price: $400,000. Delisted July 10, 2010.

ON THE VERGE

254 WINDING TRAIL Ln Unit 7B: current list price: $435,000, 2008 sold price: $435,000.

Don't forget to check back to Dan's Deep Creek Blog for your future updates on Deep Creek real estate.

"Biggest Defaulters on Mortgages Are the Rich" - NY Times

Whether it is their residence, a second home or a house bought as an investment, the rich have stopped paying the mortgage at a rate that greatly exceeds the rest of the population.

Of course some of these people are finding out the hard way that borrowing a lot and being rich are not the same thing. Makes this blogger wonder how many Deep Creek borrowers might fall into this category. Stay tuned ..

Don't forget to check back to Dan's Deep Creek Blog for your future updates on Deep Creek real estate.

Deep Creek short sale property sells for nearly 15% below list price ..

see for yourself right here. One less property for sale in the bloated local inventory which stood at 708 properties as of the end of November.

I've profiled this property in a previous Deek Creek market update posting and suggested that potential buyers who were genuinely looking to purchase a property at Deep Creek Lake at a bargain price take a serious look at these properties being listed by distressed sellers. In this case it looks like those sellers could have been you and me, the US taxpayers, since IndyMac originally issued this bad loan and was later taken over by the FDIC.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

On the bright side in the Deep Creek housing market ..

at least for property owners and particularly those trying to sell a property right now luckily there haven't been too many, if any, listings in the area go to 1000+ days on the market. So despite all the for sale signs this holiday season things could certainly be a lot worse. Quite a harrowing story from the Irvine Housing Blog.

Merry Christmas and Happy Holidays to all!!

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Somehow I missed this last week ..

but another interesting piece in the USA Today on the history and potential future of the US real estate market. I guess you could say this is bad news for all those who used "creative financing" to buy second homes at Deep Creek Lake at the peak of the market, but with all the bailout programs in the works or still coming maybe all these debts will just magically go away. Read the full story from the USA Today entitled "Why home values may take decades to recover". If you click on the link to the charts under "Anatomy of a crisis" you'll also see some historical inventory charts not unlike the one I have linked at the top of this page for the Deep Creek market specifically. I also found it interesting that on a national level an inventory of 6 months is considered a healthy market. That begs the question what would the Realtors put that number at for the Deep Creek market? I'm guessing it would be considerably less than the current 37, perhaps more like 8-9 tops. There are a lot of interesting thoughts and charts enclosed in the links so check them out if you are a follower of the housing market.

Meanwhile, on a slightly different note, last week I also read on another blog that the current state of the economy is good news for Wisp ski resort and should increase revenue this season (as if it were likely or a given that this would happen). A good snow season might help increase revenues at Wisp this year but I highly doubt the folks at Wisp are counting on a banner year unless we get a really good snow season. The basic premise of the argument was that people are avoiding taking longer more expensive trips to western ski resorts and instead finding closer alternatives. While that may be the case for a select few, those following this logic also have to consider that some of the previous pool of regular visitors to Wisp may choose to stay home altogether. As it is however, I can only assume that this writer believes middle income people are less affected by the economic downturn than those higher up the scale who could previously afford regular ski trips to Vail or other western destinations. It's mindboggling the kind of logic (or lack thereof) you can find online these days.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

One of the most popular articles in today's Wall Street Journal ..

sounds a lot like what I've been trying to tell people here. Maybe James R. Hagerty in Pittsburgh has been keeping tabs on this blog as well. Read his piece entitled "The Future for Home Prices: Americans still see real estate as their best shot at wealth. It may be wishful thinking" at the Wall Street Journal online.

"Those hoping for a quick rebound are likely to be disappointed. Economists and other pros generally say home prices won't bottom out before the second half of 2009, and some don't see a bottom until 2011 or 2012. Even when they stop falling, prices may scrape along the bottom of the rut for years."

"Some experts say it's a bad idea to count on your home rising in value at all. People should think of their own homes mainly as places to live, not as investments, advises Kenneth Rosen, chairman of the Fisher Center for Real Estate at the University of California, Berkeley."

That second quotation seems to be exactly the opposite of those ads you see on TV from the NAR these days (more great comments on the same ad here). Wow, NAR credibility might be only thing that has fallen more than Lehman Brothers or Bear Stearns. So who do you believe? Realtors using statistics from 1995 or an expert like Mr. Ken Rosen?

Another interesting article by Mr. Hagerty in January of this year suggesting, as I have with the Deep Creek real estate market, that the national housing downturn has lagged in some areas of the country. He also discusses rising inventories and declining prices of all things.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

"Inventory Rises, if Not Sales" ..

ALTHOUGH the prices of Manhattan apartments have remained high so far in the fourth quarter, figures on inventory and new listings illustrate a sharp deterioration in the market as the economy and consumer confidence fell.

Read more in the NY TImes about how experts expect price declines to follow rising inventory. One could assume they might have something similar to say about other markets with large inventories of unsold properties.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

"Growing Number of Affluent Homeowners Can No Longer Afford Their Mortgage" ..

It's an older story from the DC suburbs where a lot of Deep Creek buyers reside but given some of the recent comments here and elsewhere I thought it was relevant if nothing more than to show that the so called "luxury" market is not necessarily immune to the real estate downturn as a result of the bursting of the housing bubble. Read the full story here or see the following excerpts:

The foreclosed signs that have been sprouting up in less-affluent communities since 2006 are beginning to appear in the well-off suburbs, attached to houses that once cost $1 million or more. Although those kinds of homes are in the minority now, real estate agents predict the numbers will swell.

Affluent neighborhoods have been able to stave off foreclosure longer, but the effects of once-popular loans, such as adjustable-rate and interest-only mortgages, are beginning to take their toll, economists and real estate agents said. The consequences are being seen in places such as Loudoun County, where the rapidly expanding population and income levels meant razing dairy farms for new subdivisions over the past two decades, as well as Fairfax and Montgomery counties, where new subdivisions proliferated and demand drove up prices.

Updated 11/29/08: And check out all these "luxury" homes that are now bank owned or in foreclosure. Then try to remember that the people who own these homes aren't affected by the trivial day to day matters like paying bills as the rest of us are .. or so agents trying to sell luxury properties at full price right now would try to tell you.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Sometimes everyone just needs a good parody ..

One of my readers sent an e-mail today to ask if I had seen this one yet. I had not and thought I should share.

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And these are the people crying to be bailed out ..

Don't forget to check back to Dan's Deep Creek Housing Blog for future updates.

"It's Economics 101" ..

according to Jared Bernstein, senior economist with the Economic Policy Institute, when speaking on the topic of continued record home price declines. He continues, "You have a huge speculative bubble leading to a severe inventory overhang. And now home prices will have to decline accordingly." Read more at CNNMoney.com and pay special attention to his comment that sellers may be starting to blink.

Don't forget to check back to Dan's Deep Creek Real Estate Blog for future updates.

Finally, another editorial in the local paper that I can relate to ..

Republican Newspaper Editorial.

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Most e-mailed article in the New York Times today ..

Home Prices Seem Far From Bottom.

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Another Garrett County/Deep Creek Lake short sale contributing to the pain being felt on Wall Street and Main Street ..

Since the sale price listed here is well below the $400,000 loan amount from May 2007 we can assume that M&T Bank (or whoever they sold the mortgage to) took a significant loss on the sale of this property. The really sad thing is that sales like this one are robbing banks and financial institutions of the necessary capital they need to make loans for hard-working folks and small businesses who are responsible enough to repay any loans they might receive. Maybe in the new bailout bill Congress can ask the CEO of the company who approved this loan in the first place, the real estate agent who made a large commission from this sale and the previous homeowners who basically got a gift from the bank to contribute a portion of those proceeds towards the roughly $1trillion that might be necessary to fix this mess. That sure makes a lot more sense to me.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

More news from the TheHill.com ..

Not surprisingly the National Association of Realtors political action committee is spending big on this election in hopes of maintaining favorable rules for them. Haven't we all seen the horrible consequences of allowing powerful organizations such as this to buy influence in Congress?

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Here's an idea ..

In the Financial Times Raghuram Rajan, Professor of Finance at the University of Chicago’s Graduate School of Business, proposes that the government force banks to raise capital from within (i.e. from shareholders) instead of simply throwing taxpayer money into a bottomless pit. His position is that there is too little capital (and by the same token too much debt) in the financial system and that simply trading their worst assets for government money and thereby passing the debt onto the government still does not go far enough to prevent more problems from popping up. Interesting idea to say the least.

Don't forget to check back to Dan's Deep Creek Blog for future updates.

Should we really be surprised at where the economy is today?

A Yahoo! Personal Finance piece from Laura Rowley in February 2006.

"Mostly, we can't help wondering if the lending and spending free-for-all of recent history will end badly -- for all of us. Imagine interest rates continuing to rise amid an employment downturn. The option ARM holders and other over-leveraged consumers put their homes on the market, or hand the keys to their lenders. The housing market experiences a sharp decline. Commercial banks, Fannie Mae, and Freddie Mac require a taxpayer bailout (a la the early 1990s) -- increasing either the current or future tax liability."

Don't forget to check back to Dan's Deep Creek Blog for future updates.

"For sale: Allen Iverson's six-bedroom home in Villanova, PA" ..

Speaking of the housing market, here is an interesting story from Yahoo! Sports Blog and the Wall Street Journal concerning the sale of Allen Iverson's Philadelphia area home - well below what he paid for it in 2003 it seems.

Don't forget to check back to Dan's Deep Creek Blog for future updates.