Posted by: Peter Coy on December 30, 2008
Where were you in March 2004? Because that’s the last time home prices were as low as they are now, according to the Standard & Poor’s/Case-Shiller 20-City Composite Home Price Index for October 2008, which was released on Dec. 30.
Back then, prices were going up. Now they’re going down. The nation’s mood could not be different. Euphoria then; a deep purple funk now.
So back to the question. Where were you in March 2004? Negotiating for a nifty option ARM? Scouting out a home in a new subdivision in the remotest exurbs? At the time—and this was before things really got crazy on prices and crappy mortgages—everything seemed possible.
I searched the Factiva database for housing-related articles that appeared in local newspapers in March 2004. Here are a few I found.
From The Desert Sun newspaper in the Coachella Valley, east of L.A. and San Diego:
“World Development, the Palm Desert company putting up Waring Palms, is having a hard time keeping up with Coachella Valley’s sizzling demand for new homes, said Executive Vice President Scott Stokes. He and other builders say they can’t find enough skilled workers in the valley to build as fast as customers are buying their homes.”
From The Patriot Ledger of Quincy, Mass.:
“Another big boom emanated from the South Weymouth Naval Air Station property this week, but it had nothing to do with planes.
“Rumors started flying that 3,000 or 4,000 homes could be part of plans for the 1385-acre property that lies in Weymouth, Abington and Rockland. Numbers like that scare the wits out of local residents and officials because of the impact so many homes would have on local services. The reaction was predictable.”
From the San Antonio Express-News:
“Jaime Arechiga - a Laredo land developer who expanded his horizons to San Antonio four years ago - is carving up lots all over Bexar County and New Braunfels.
“‘I’m in the community. I’m here to stay,’ said Arechiga, who now maintains residences in Laredo and San Antonio.”
From the Las Vegas Business Press:
“New legislation and rising land prices are helping fuel Southern Nevada’s condominium market. In 2003, vacant land prices averaged $202,100 an acre in the Las Vegas Valley, a 27 percent increase from the previous year, says Applied Analysis, a locally-based economic research firm. The southwest submarket reported the largest land appreciation at $244,200 an acre, a 32 percent increase over 2002.”
From The Washington Times:
“As home prices climb in the Washington area, buyers in the upscale home market can expect to spend more than ever before for a home with opulent features.
“Home price is not simply a function of the quality of construction and finishes, nor is it based solely on size. Prices often are based more on location. Buyers of luxury homes are sometimes looking for an exclusive, gated community; sometimes wanting plenty of land for privacy; and sometimes desiring a home as close as possible to Washington.
“Many buyers want to live in a planned community with recreational amenities and the convenience of a local retail center. Some luxury homes are found in developments with these amenities, often including a golf course.
“Other expensive homes are smaller homes in fashionable enclaves on small homesites.
“Priced from the $700,000s and up, upscale homes do share an abundance of opulent features such as hardwood flooring throughout the main level; two- or three-piece crown and chair-rail moldings; oversized ceramic-tile flooring; or even marble flooring in the baths and a master bath with a tub and a separate shower upgraded with more space, a seat, steam showers and multiple shower heads. ‘Walk-through’ showers with two doors or even without doors and just perhaps a glass-block divider are becoming popular for those homes with the space for an extended master bath.”
How silly that seems now.
Last but not least, here’s an excerpt from an article by Michael Gregory in Investment Dealers Digest that all of us should have paid more attention to:
“But despite the benefits of structure that allow them triple-A-status, events in recent years have shown that asset-backed securities have their own risks. The collapse of Heilig-Meyers in late 2000, the messy servicing transfer that followed and the ultimate disturbing recoveries to the once triple-A-rated bonds offer the clearest lesson of the huge risks for ABS investors.”
Happy new year!
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.