‘We’re In The Initial Stages Of Adjustment’: CAR
The California realtors report on August home sales. “Home sales decreased 30.1 percent in August in California compared with the same period a year ago. ‘We experienced the greatest year-to-year sales decline last month since August 1982, when sales fell 30.4 percent,’ said C.A.R. President Vince Malta. ‘This is another indication that we’re in the initial stages of a long-anticipated adjustment in the market. Some sellers are still clinging to price expectations that are no longer valid in today’s market,’ he said.”
“‘Although the median price in the state and in several regions hit an all-time record in August, we expect softer prices toward the end of the year,’ said C.A.R. Chief Economist Leslie Appleton-Young. ‘The median price typically peaks somewhere between June and August before declining toward the end of the year. Some areas of the state already have experienced year-to-year declines for more than two months.’”
The Orange County Register. “House prices in Orange County showed an annual decrease for the first time in a decade, the CAR reported today. The median price of an existing single-family detached house here was $698,080 in August. That’s 2.5 percent below the house-price median of $716,300 reported for August 2005.”
“The last annual price drop reported by the state association was in July 1996, at the height of the housing bust that gripped the region in the early 1990s.”
From KGO-TV. “Bay Area homes sales are slowing down. The latest real estate trends show sales down by nearly 25 percent from August of last year. About 9,000 homes and condominiums sold in the Bay Area last month, that’s the lowest number since 1997. It is also a significant drop off from peak sales of 12,500 in 2003.”
“In eight of the nine Bay Area counties, prices haven’t fluctuated more than a point or two in the last year. San Mateo home prices really took a hit last month, dropping nearly seven percent. Dan Newland, Alameda Home Seller: ‘Well it certainly is a different market than it was even three months ago.’”
The Union Tribune follows up on condo conversions. “A year ago, it was not uncommon for three or four conversion projects to go before the council at any given meeting. The council approved all but one of the 105 projects proposed since 2000.”
“The slowdown comes as the inventory is piling up. Of the 1,231 apartments that have been converted in El Cajon, about 500 are on the market, twice as many as a year ago, said Ron Pennock, chairman of the East County Construction Council.”
“Robert Pinnegar, of the San Diego County Apartment Association, said conversions countywide have all but stopped. ‘A lot of the stuff that’s been approved this year around the region, it’s not going to be converted anytime soon,’ Pinnegar said.”
“During the peak of the conversion trend, De Los Rios at the Center for Social Advocacy said she received as many as 100 phone calls a month from upset and confused renters. The calls have dwindled to 10 or fewer a month, she said. Most are renters who receive an initial notice that their apartment is to be converted, but who months later see nothing happening.”
“‘That’s the clue to me that more of the projects are on hold,’ De Los Rios said.”
The Voice of San Diego. “The heated market inspired a lot of novices to jump onto the landlord scene. And those people often had little, if any, understanding of what might happen if the market stopped appreciating so dramatically. One of their biggest considerations is cash flow, they weigh their mortgage and other expenses for the property against how much they expect to charge in rent. So landlords who bought properties last year could find themselves in trouble.”
“Notices of default in the county, notices sent to property owners who’ve missed at least one mortgage payment, have increased 250 percent since last August, according to the County Records Service. And, for some, that statistic is enough to convince them that the rental market will be impacted dramatically in the short term.”
“‘There’s a lot of people in negative cash flow, who reached pretty far in trying to take advantage of this market,’ said Dan Holbrook, president of a mortgage brokerage and real estate investment firm in Carlsbad. ‘If we’re cruising along at 110 miles an hour and we hit a bump in the road, we’ll go careening off to the side.’”
“Bob Pinnegar, of the San Diego County Apartment Assoc., said it’s those who bought condo conversions in the last few years who will have the most potential for trouble. ‘The last ones to the party are the ones who’ll get hurt.’”
“Howard Boehm, of San Diego Professional Property Managers, agreed with Pinnegar. ‘The people who purchased in the last year,..that were just jumping on the bandwagon, a lot of them have extended themselves far beyond what they should have,’ he said.”
‘As of Sept. 11, there were 44,683 properties in some stage of foreclosure in California, and again, these exotic mortgages are a major factor,’ she says. ‘In San Diego, more than 50 percent of purchase money mortgages issued in recent years were these so-called creative loans. Now they’re coming back to haunt homeowners and lenders alike.’
Funny they picked 9-11 as a FB data point.
This is a HUGE milestone. All I can say is that I have been waiting for this day and am so glad that it is here. What a milestone.
Next milestone, median decline of 10%?? By year end?? Ben, maybe a weekend topic - what milestones are we expecting for this housing bubble and when - here are some ideas…..
1. When econonomists finally cave and blame the housing crash for the crashing economy.
2. When do you think the stock market is going to tank and how much by when due to the housing market.
3. When lenders are finally going to “officially tighten”, or eliminate neg am loans etc……or the OFHEO officially announces lending restriction policy.
4. The number of foreclosures announced at year end.
5. When inventory crosses 12 months supply??
6. Number of layoffs in construction crosses 50,000 or some number
7. Number of layoffs in mortgage lending goes over 50,000 or some number
8. David Liareah gets fired.
9. Newsweek cover of housing extremely negative.
10. President Bush discusses number of people losing their homes due to toxic mortgages.
11. 60 Minutes does a piece on the housing crash…
Waddya think???
Will these 44.6K properties be on the market again soon? My guess is that we merely see the tip of the iceberg at this point, and that the iceberg is Titanically large.
Well, you never really know. House prices could pop up again like in England.
They are already heading down again, I heard. Additionally, England had no building boom.
OC Median: -2.5% YOY
Price declines in OC? Where all the beautiful people live? Nah. Must be a typo.
ITS IN THE BAG!!!
David Liareah is enough of a man (or an idiot) to keep putting out stupid statements, but where is Gary Watts!?
No kidding. I would like an update on the “Inverted Year” theory. Mr Watts?
lol - Ms. dwr, I caught that.
A French report indicates that Gary Watts is in hiding in Pakistan in a mountain villa he purchased to flip last year, but has been unable to sell.
ITS IN THE BAG!!!
LOL I spit my coffee out for that one. LOL
- ‘The people who purchased in the last year,..that were just JUMPING on the bandwagon, a lot of them have extended themselves far beyond what they should have,’
- It is true … there is a lot of JUMPING going on.
- Like sellers jumping to the conclusion that there house is worth way way more than than they will ever get any time soon.
Now add to the people that purchased last year all the equity junkies that refi-ed every last bit of their appreciation. It’s not just those who purchased last year that are now under water. These idiots always assume folks just let their equity gains alone and are currently riding a cushion. Nope!
- ‘The people who purchased in the last year,..that were just JUMPING on the bandwagon, a lot of them have extended themselves far beyond what they should have,’
I’d be willing to say that it goes beyond just last year. I’d push out the problem GFs’ to ‘04.
Price declines in OC? Where real estate prices always go up by over 20% YOY? Not possible. Must be a typo.
I can’t tell you how happy that stat makes me. It’s only a very small decline, but it is the start of many declines to come. I feel like (hope) we just crested the apex on a roller coaster, and the steep part of the decline is coming on quick. The only question is, how far down will prices go in the OC? My wild-ass guess is 50-60%, which would bring prices for SFR down to around $300-350K.
I’ve read and heard statements from several people in the know (i.e., people with access to MLS data) that “things in the pipeline” are much worse than what we’ve seen to date. Maybe when Gary Watts said “15% is in the bag” for 2006, he meant 15% price declines.
Next time we hear from him, this is probably what he will claim to have meant all along…
“Next time we hear from him, this is probably what he will claim to have meant all along…”
Agreed.
“I’ve read and heard statements from several people in the know (i.e., people with access to MLS data) that “things in the pipeline” are much worse than what we’ve seen to date.”
I’m sure the fear is genuine among those who know better in Sacramento. The closed door meetings have likely already begun too. “Rich folks to the life boats while the steerage are locked below!”
Go to realtytimes.com and these clowns continue to parrot the “No Bubble here” “Gary said this and that”
Dear Waiting, if we see 50-60% price declines, it is highly unlikely anyone will be buying a house. More likely, 99% of us will be in food lines worrying about our next meals. While I agree with you that prices are stupid and out of hand, be careful what you pray for, as you might just get it. The chaos that would accompany that kind of price decline will leave NO ONE UNSCATHED. Huge unemployment, a collapse of many industries. What ever it is you do, it is connected in some way to a prosperous real estate industry. You will not have a job. It is not only a falling knife scenerio today, it is a double edge sword tomorrow, which will cut in many many directions.
It does not matter what we wish for. Also, I don’t agree that there will be food lines. Many speculators will be taken out. Many FB’s will be taken out. The system will be cleansed of its excess. The sun will still shine. I say bring on the 50% declines!
Crispy,
I agree. Those that say a return to historic norms will be a disaster for this country are trying to paint price skeptics as some sort of extremists. Sure there will be some financial pain, but even in the worst of the Texas bust, there weren’t food lines.
Now, was there a huge change from how high people had flown and what they had to get used too? Of course, but looking back, they didn’t need that private plane after all.
I still remember in 1998 when Kern River Crude went to $8 bbl (today its at $50 bbl). The LA Times wrote a front page article claiming we would be a ghost town. Did not happen. Yes, those working in the oil patch were hurt and the rest of our economy slowed, HOWEVER, no food lines and people still found ways to make a living.
“Those that say a return to historic norms will be a disaster for this country are trying to paint price skeptics as some sort of extremists.”
They are also trying to paint the Fed into a corner, in order to convince them to respike the punch bowl.
JR= jobless realtor? yes there will be food lines but only for realtors come lately.
Watt’s that….you all say a 15% drop?
Even the early 1990’s bust saw some properties drop up to 40% (I was there and one of those was mine) and that bust was a mouse fart compared to what is in store this time around.
I would say that 50% drops are VERY possible and even likely. Go back to 1997 (last sane year) and then tack on 4% for each year (normal appreciation) and THAT is your 2006 actual value.
Gary can put that in his bag…..
I have to roll with Crispy on this one. It will be painful yes… But food lines Why?? because the market rolled back to 5 yrs in price. I don’t think so. I find that hard to imagine. Now if we roll back in price to where you can pick up the Playboy mansion for a couple hundred grand. Then yes food lines may be the order of the day.
I’m talking 97′ pricing, baby! Let er rip!
For the “tin foil hat” crowd. Anybody wondering why gas sold off or how it was done? Anybody finding it unusual how Goldman Sach’s keeps turning up at the white house, PPT team, take over of Amarath gas positions, TOCOM Gold shorts, etc?
http://www.financialsense.com/Market/wrapup.htm
97 price is basically 89 price: and 89 was another bubble and so on. Nobody knows
My best hope is 2000-2001 prices.
‘97 price is basically 89 price: and 89 was another bubble and so on. Nobody knows ‘
Actually, Santa Monica 90405 declined 50% between 1989 and 1995 and all of California declined an average of 21% during the same period. It was terribly painful but not the end of the world. The current bubble makes the 1989 bubble look like a hiccup, both in terms of magnitude and scale. Now, instead of a few cities and regions, it has spread to about 20 states including both coasts and some popular western cities.
The price of gasoline went down? It’s definitely Bush’s fault! No wait…
While yes it looks hokey that GS is taking over Amaranth Gas positions (and for a tidy profit), it could be that GS is one of Amaranth’s prime brokers. In this case, it would be their duty to do so, for good or for bad (I cannot say definitively GS is their prime broker as Amaranth acts as their own transfer agent and haven’t looked deeper than that).
You WILL NOT see ‘89 prices. 40% haircut in the most bubblicious areas.
“Actually, Santa Monica 90405 declined 50% between 1989 and 1995 and all of California declined an average of 21% during the same period. It was terribly painful but not the end of the world”.
Painful for who? I was a young engineer that was able to buy his first house in 1994 in CA. Without the price drop, I never would have been able to buy. Price drops can be painful or a blessing depending on your point of view.
Prices in many markets have increased by 50% in the last two to three years. If they were to drop by 50% during the next two to three years, why would this create a depression?
looks like we had the same thought, Guess Who (see below)
Maybe not a depression (although some think it can get that bad), but possibly (probably?) a recession. Remember, a *lot* of consumers have been fueling their buying binges with home equity ‘extractions’, and justifying overspending with the ‘it’s all good, I’m rich with all of this new equity’ mantra. Once consumers stop buying so much non-essential stuff, either because they *can’t* (no more money in the equity piggy bank), or because they *won’t* (they don’t feel so rich with equity disappearing), our consumer based economy could hit what they call a “rough spot”…if it hasn’t already.
JR - I can empathize with your last purchase. My mom bought her condo in OC in 1990, saw its price plunge 33% and didn’t get back to its purchase price until approximately 1998. But, as mentioned by others, a 50% drop in OC (and my comments were directed at OC) would only bring us back to prices from around 2002-2003, and I was basing this decline on getting the price/income ratio back to its historic mean (around 5 for OC - higher than most places), which would indicate prices need to get back to $300-350K. What will actually happen? I really don’t know, although I’m leaning towards an overcorrection as more likely than an undercorrection. I agree that there will be pain, as there has in past housing busts, but I don’t think that we’ll see a depression. OC took a 30% hit before and, while it hurt, we survived. Considering that prices have gone up much more than in the late 1980s, I think that a further decline will, likewise, hurt but we will again survive. My hope for the decline is not because I want others to hurt (OK, maybe there is a little schadenfreude, since I actually want to purchase a house and have been forced to wait for several years while this thing plays out), but because I want housing prices to get back to fundamentals so that people like myself can again purchase a house at sane prices. And, it looks like your purchase at the top in 1990 worked out in the end for you, as it for my mom, who sold her condo in 2004.
50% increase is less than a 50% decrease. I.e., a home is worth $150k. It increases 50%, making it worth $150k. If it decreases 50% it will be $75k (not $100k). In short, appreciation percentage is limitless, but an asset cannot depreciate more than 100% (unless there are outrageous costs associated with owning, like toxic sludge gysering from the back yard).
This is probably obvious to most people but in Scott’s post above the first $amount should be $100k.
50% off would just be going back to where prices were 3 years ago, and still over double what prices were in 1997.
Allright, I give up. Let the prices drop 50% and make the pigs pay. I remember the pain I felt after buying a California home in Jan 1990, only to see it fall in value about 30% thru 1994. I had to do a CASH-IN REFI (yeah, baby, that is JUST A BIT DIFFERENT than what everyone is doing lately) to lower the floor on my World Savings floater (7.5% to 3.5%).
This downturn is not catching me by surprise. I prepared. And for all the pain I felt in 90-94, I did keep the children fed. I learned to live off $25,000/year, down from $102,000 in 1989. Very humbling and I do not wish it on anyone.
“Very humbling and I do not wish it on anyone.”
Yes, I do expect there will be pain, and not just for home debtors.
And I fully expect that the government will help distribute the pain, even to those that took the less risky path. “A fool and my money are soon partners”.
jr your mistake was buying at the top no
Bottomfeeder, Yes, I did buy at the top in 1990.
And in reply to WA Renter’s questions “Where are the buyers coming from?”…. I was a GF at the time. My home cost $172,000 in Jan 1990 ($100/sf) and by June 1990, the same model sold for $190,000. I was a genius….except that was the last sale for about 2 years and prices tanked. And I protested my tax assessment in 1993, lowering it to $135,000 with the assessors blessing, so I could save $400/year. My only saving grace was putting 25% down when I bought. Still, when I went to refinance with the SAME DAMN LENDER in 1994, they made me put up $10,000 more in cash, to get to 80% LTV. Talk about pain. But I did it and my PITI dropped to $681/month that year.
Man, those were some brutal years. But I must say, I spent a lot of time with the children, coached soccer, little league, went to school once a week to have lunch with the 4 boys. It was the worst of times, but since work was so slow, it was the best of times with the family. There was a big silver lining. And that house today throws off $800/month positive cash flow.
dear jr, i doubt all of us are tied to the re industry.some of us sold in 04 knowing this would pop.dont make assumtions.most people will be fine only the reckless spenders and re estate people will go under.
“most people will be fine only the reckless spenders and re estate people will go under”
Meaning most construction workers, RE sales people, and mortgage pimps…All notorious savers…
In the last cycle in soCalif, prices dropped 35% from 1990 to 1996. A nice $325,000 house dropped to aobut 200,000. I saw condos drop 50%. It took 11 years to break even, 1990 to 2001. I think houses are 40% overvalued, so they could drop 50%. I believe that they have actually dropped 10% from their peak in the second quarter, but there are not enough sales to prove this yet. A big drop will wash out all of the speculators, many of the investors, and keep many people out of buying their only home for many years.
If you adjust for inflation over that period, housing dropped more that 50% in real terms. Even more for some high end areas in OC.
“I think houses are 40% overvalued”
I think houses in San Diego were 40% overvalued in 2002. You could argue against this, but the trends were out of whack even then.
They’ve doubled since then.
This back o’ the envelope calculation would leave us at 70% overvalued today.
Sensible Lender is dead on. Condos and some extremely bubbly zip codes dropped 50% after the 1989 bubble collapsed. Someone on these blogs posted a whole bunch of headlines from this implosion and the current headlines look very much like the fall of 1989. The 1990 headlines included bank failures. It unwound very quickly then with most of the deprectiation happening in the first 2.5 years of the implosion.
Oh, we will see 50-60-70-80%+ percent declines. We are WAY past due for a correct in the market place. No food line here, we are well perpaired. All debt must be paid at some point and many folks will learn that long over due lesson. Tough for those that lived beyound their means they will find out, “what goes up, must come down”.
How come some of you are talking about at 50% price drop based only on the past (1990) bust? What I see is that the population (here in SoCal) has been exploding. As a result demand for housing has increased. I am familiar with the area in Alhambra - San Gabriel blocks. There aren’t enough houses those folks there. I don’t see more than 20% price drop in that area.
dl-
Buy every single home in your “different” area once this happens!
“What I see is that the population (here in SoCal) has been exploding.”
What I see is that the population of houses built here in SoCal has been exploding (at least around SD) and the population growth has been relatively flat, with net outmigration reported last year.
GS-
CORRECT! (you just said it much better than me)
San Diego county’s population decreased last year for the first time since like the 1960s. A large population, yes, but not necessarily a growing one. (Although I’m not certain if illegal aliens are counted in these population numbers…)
I am talking about areas like alhambra, san gabriel.
dl,
It’s not how many people **want** to live here, but how many can **afford** to. It’s the availability of money that drives prices (we might all want yachts, but our desires will not affect yacht sales or prices one iota — it’s our money that drives the demand). Of course, we can have 30 people living in one house. But, how will that affect housing prices in that neighborhood (people who could legally afford to live there will move because they do not want to live in ghettos/barrios).
Alhambra is a sty (sorry, no offense). No one in their right mind thinks that is their dream city. Any possible increase in population in that area is due to illegals and ppl highly unlikely to yet afford homes. You need more apts, not SFH
I agree, Alhambra is a sty. Took the wife for dinner and dancing there recently to see what the “revitalized downtown” looked like now. All asian and mexican inngrants, packed in like sardines compared to the roomy suburb where I live, and the nightclub looked like they transplanted everyone in from East LA (and I’m Mexican). Schools are pretty crappy too.
“if we see 50-60% price declines, it is highly unlikely anyone will be buying a house. More likely, 99% of us will be in food lines”
Why so? I live in Newport Beach. My house is “valued” at more than 4 times what I paid in 1995; it has doubled in the last 18 months alone. If it drops 50% today then I’m looking at a early 2005 valuation.
Then Jack, you’ll be one of the lucky ones that sees a 70% correction. Just watch.
Yes, we’ll have a depression, but a depression is just a severe, extended recession.
I suspect most of the people reading this blog will stay employed. Remember, the Great Depression only put somewhere between 25% and 30% out of work; also, if you’re reading this blog, you’re already smarter and better prepared then most.
I can’t say this often enough… we’re already in a recession, only Uncle Sam and Wall Street don’t want you to know. Just like with housing, once the psychology takes hold it’s game over.
This is not just a housing bubble. It’s a worldwide credit/debt bubble. It’s an overvalued stock market. It’s a multi-trillion dollar derivatives bomb. It’s the end of pensions — all of them, public and private. It’s the twilight of the U.S. automotive and airline industries. It’s the U.S., the world’s sole superpower, bankrupt at all levels.
Then again, it’s not the end of the world. All the excesses will be wrung out of the system and we’ll continue on, stronger for it. IMHO, self-sufficiency will be the hallmark of the early 21st centry.
Thanks for the uplifting message
Tj — I’ve got a funeral to attend on Friday and have been asked to give the eulogy. I hate that job — what would you charge, to fill in?
I agree with most of your assessment. Fortunately, a fairly small percentage of American homeowners participated in the run-up, so even with all of the side-effects of this major decline in home prices, our world will not end; all of Ben’s bloggers should be pretty much OK when the smoke clears.
we’ll onto go into a ‘depression’ if the government does what Hoover and FDR did - attempt to artificially force wages up or maintain them during a deflationary period…
i doubt we’ll have any real deflation in the first place, the FED will just turn the spigot back on, and I do not think anyone will advocate the price fixing of all goods and services - so we’ll not have anything close to a depression
we will have a recession as capital gets pulled out of real estate and into other areas - which will create a lot of deadweight loss in the real estate related industries and a lot of transaction costs associated with moving capital around
i hope that the people hurt by this don’t get the ear of Congress but if we have a financial Katrina, don’t bet on it - idiocy is apparently safe if done is large enough numbers
Chip, I simply state it as I see it. I firmly believe in the maxim “hope for the best, expect the worst”. The more people here that take that to heart, the better off we’ll all be.
BTW, only about 10% of the people were invested in the stock market at the time of the 1929 crash.
tj….I think this housing correction could produce a extended recession or depression . I also hope for the best but prepare for the worst .
Don’t believe in the omnipetence (sp?) of the Fed when it comes to the RE bust. If cutting the Fed Funds rate was the cure of all evils, why not keep it at 1% forever? There must be a reason they don’t. Perhaps they need to keep our foreign creditors at least somewhat confident that the dollar will hold some value in the future.
I’ll have a job, either as a short seller or back working on bankruptcies. I’d be happy either way.
JR posts “Dear Waiting, if we see 50-60% price declines, it is highly unlikely anyone will be buying a house. More likely, 99% of us will be in food lines worrying about our next meals.”
The line will be filled with FB’s,Thier Lenders and last but not least The great RE Agents.
Quit being so mellow-dramatic… Japan RE prices dropped 80% over 10 years and there weren’t any food lines.
the japanese are savers. big difference.
There were food lines and homeless people in Japan. Something never seen in the country since 1945. Don’t kid yourself.
Japan survived partly due to a good savings rate (arguably too high) and a strong domestic demand for goods and services.
Whilst the former doesn’t apply, the latter is true - the US has considerable domestic demand which will be reinforced by a weaker dollar.
Funnily enough, I am flying to Japan later today. Last time I was there (last year) it was boomtime. I suspect it will be the same now, as the Asian powerhouses keep going.
And I’ll pipe in that while I think a good percentage of Americans are crappy savers, the Savings statistic itself is a flaming pile of crap and basically recognizes only a lack of spending post tax dollars, thereby excluding things like 401Ks and active investment in capital ventures that countries with well developed financial/capital markets can utilize - countries for instance where property rights are hazardous at best would naturally have a higher rate of savings as they have limited uses for their money outside of ensuring for future consumption.
Yeah, Japan and the U.S. - that’s comparing apples and oranges. Take a trip there and you’ll see lots of people still doing jobs that were eliminated in the U.S. decades ago. Granted, that IS changing - I counted 50+ homeless camping out in front of Ikebukuro (Tokyo) station one night - but all in all the Japanese exhibit a social cohesiveness that our nation hasn’t had since WWII. The bubble here will be painful but necessary - the only other option is a non-starter - a continued upward spiral of prices. Anyone who ever played Sim City knows what is going to happen next in many areas - but shame on the politicians and business leaders who now - or soon will be - claiming ignorance. By the sound of it, most everyone on this blog sensed something amiss before it was even 2000.
I’m not entirely comfortable discounting the broader economic effect of a signficant nationwide decline in housing prices. A 20% decline wipes out trillions of dollars of equity across a broad consumer spectrum, and at a time when total home equity represents a much larger percentage of GDP than it did during prior downturns. Couple this with a possible domino effect pulling down other nations with housing bubbles, and with a potential slowdown of China’s growth, and it’s not hard for me to envision a result far worse than your garden variety recession.
There’s just way too much debt in the world, and all of it basically rides on the health of our housing economy.
Really, I’m not by nature a “gloom and doomer”, but the fact that we’re witnessing a national, as opposed to regional, rolling over of the housing sector is pretty scary to me.
equity ~ gdp. is my understanding of economic way obsolete?
China’s slowdown is more likely to be from unsustainable and unhealthy levels to more realistic growth, which is good for everyone. They cannot continue to grow at the rate seen in the last couple of years.
Hope this cheers you up!
It would be worth it to see all the holier than thous get their just due. Now you want us to be nice as you have looked down on us fiscal conservatives with your big houses, fancy cars and expensive clothes…all paid for by your “equity”? I don’t think so…my money is in the bank waiting to buy you out at 10cents on the dollar!
I think JR is correct. By the time this all shakes out I think you’ll see bread lines. I look forward to a return to normal home prices, but I think there are other fundamental problems with the economy, including the debt and deficits, broken entitlement programs, war, terror, and you name it, not directly housing related. The number of big issues facing us all at one time is unprecedented. It won’t take much to start the ball rolling downhill.
Why, after watching prices rise 300% over the last 7 yrs with no fundemental means of support, does it seem impossible that they’ll return to fundemental support levels -ie 50% off?
I agree that it’s weird so many people think that the so-called property wealth created OUT OF NOTHING over the past 5 or so years is now integral to our economy. What are we, children? Do people not understand that what goes up can (and usually does) go down? It’s just a silly but all-too-human sense of entitlement — getting used to the “good times” as if they are your birthright.
Why, after watching prices rise 300% over the last 7 yrs with no fundamental means of support, does it seem so impossible that they’ll return to fundamental support levels -ie 50% off?
“Dear Waiting, if we see 50-60% price declines, it is highly unlikely anyone will be buying a house. More likely, 99% of us will be in food lines worrying about our next meals. ”
Can’t disagree more. SD example: House in Hillcrest (trendy area, older homes, lots of small craftsmans like this one) bought in July of 2000 for $200k. Sold in July of 2005 for $800k. This is a 32%/year increase, quadrupling, or double twice of price - however you want to look at it. If that house drops to $400k (50% loss) by 2008 it will have still averaged a 9% return per year for 8 years, more than double the traditional average. The buyers would have a gain of 100% and the only wealth lose would be the paper loss, which only matters if they plan to cash out and move out of SD.
Now the 2004/2005/2006 and porbably 2007 buyer would be in for a world of hurt. But of all homeowners that will only be a small percentage. And (sad to say) it will be the people who never should have been allowed to buy in the first place because they cannot afford it.
Things will get tougher and tighter, as they should, but done properly the worst thing that wil happen to the average American (bearing in mind that some individual’s lives will be destroyed) is that they will have to learn to live within their means - not such a terrible thing in my estimation.
As hard as I find that to believe, 50% off would make sense. Using the old rule that debt service shouldn’t be more than 33% of income, with OC’s median family income around $65,000, the median house price (assuming a 6.25% interest rate and an interest-only loan), should be no more than $343,200.
That’s based on the formula (sustainable price) = (median income)*.33 / .0625.
Assume people spend a whopping 40% of their monthly income on housing, and you get a median price of $416,000.
We’ve got a lot of room to drop before we reach anywhere near the price levels “fundamentals” would support.
In 5 years from now people will be feeling sorry for people that own houses with toxic loans . You will not want to mention that your a homeowner with a toxic loan and some people might lie and say they are renters rather than suffer the shame of being a HOWTL.
I’m just kidding …. A HOWTL is ..Home owner with toxic loan
Home Owned by Suicide / Exotic Debt = HOSED
HELOC and/or mortgage loan, they’re all gonna get HOSED.
While I agree with your math. There is another piece to this puzzle. Rent prices equate to what people can afford. We all agree housing is overbuilt and I think the sector that is overbuild is on the high end rather then the low end. (at least in SOCAL) I think the high end can retract at the rate you show but I believe the low end will do better with maybe a 30% decline. Here’s why. Rents have been held lower due to the flood of homebuyers. These home buyers with their toxic mortgages will return to renters and increase the supply of renters. The lower end will be better positioned to absorb this flood better then the top end. As people shift from owner to renter their ‘needs’ change they will rent the smallest cheapest home that suites their new needs rather then stretch to catch as big a piece of the rising tide. This is why when I bought in early 04 with a long term plan to keep the home and rent it later, I purchased a house that was at my minimum requirement that had a higher potential to rent rather then buying twice the house that my circle of friends purchased. Supply and demand. My next purchase will be one of those higher end homes once the market has fallen and leveled off since I think they will be a better buy. Currently my prediction in no sooner then early 08 and more then likely early 09. Some areas and markets will take until 10-11 to fully fall back into balance
“These home buyers with their toxic mortgages will return to renters and increase the supply of renters.”
You didn’t address what will happen to the properties these people occupied. They with be offered for sale at whopping discounts or for rent at market prices, increasing the rental inventory and holding rents steady.
The problem right now is too much total inventory, meaning a lot of vacant housing.
You are correct that rental inventory will go up but as I alluded to the homes that will be for sale will be bigger and nicer then these same people rent. this is why the lower end will do better. More demand in lower priced rental properties, then there is in high dollar homes that are difficult to rent -even for even a fraction of their current prices. I see the glut but I also believe the glut is greater in the higher end, hence a greater correction. I hope this clarifies.
‘then there is in high dollar homes that are difficult to rent -even for even a fraction of their current prices.’
In my neighborhood, condos priced at $425K rent for $1550 and houses priced at $900K rent for $2600/month. However, the condos stay rented longer and the houses seem to have new “for rent” signs in front of them every six months or less. My conjecture is that those who rent condos are less image conscious and less likely to rationalize an absurd purchase for only a “few hundred more” every month (teaser rate).
I see the same thing in my area!! There is a base of what people need and have the means to pay for that is always grounded in reality. People will not bid up rent prices since these prices come from real dollars earned every month. Rent prices can hold steady or even collapse if the jobless rate were to spike. The government will not let this happen. When faced with deflation or inflation they will pick inflation every time. If the housing market starts to tank (it has) and we start to see a significant uptick in jobless rate the Fed will start to lower interest rates again to soften the landing. This will spur business activity and create jobs.
This guy is not in the initial stage of the adjustment:
http://www.foreclosureforum.com/mb/messages/18897.html
“Prospect purchased a Condo Conversion for $300K in April 05.
I just ran comps:
There was one “re-sale” in early ‘06 for same model at $350K.
The Condo Conversion builder had many units unsold and recently sold many of the same models for $250K, 245K and $240K. “
Oops. Hope he didn’t need that 60K.
The dumbest people on earth have to be the ones who bought condo conversions to generate rental income.
In my neck of the woods, the monthly mortgage pmt of a typical 2 bdrm unit was 140-150% of market rent. Why would any renter pay 40-50% more when they could go down the street and rent a brand new unit?
“Why would any renter pay 40-50% more when they could go down the street and rent a brand new unit?”
1) Real estate always goes up.
2) Buy now or get priced out forever.
to avoid throwing their money away” of coarse
And with that 1% teaser rate and 100% LTV offers, it’s like free money!
Stories like that are happening just down the street from me too - where developers are auctioning off unsold units in buildings converted over 3 years ago! Condos are nice - I live in one - but they are certainly not for everyone - and not worth much more than $150k (in the Chicago market) - no matter what anyone tells me! Whether it be noise, looney neighbors, crappy associations, or worthless management companies - condo living is not worth the prices we have seen in the last decade. These units are good for a niche market - but that same market (single, travelers, grad students, young couples) should never have paid SFH prices for what is no more than an apartment with some potentially annoying and costly hitches.
How’s that song go…”ya gotta stand for something - or you’ll fall for anything.” Bottom line: too many people became sheeple and threw common sense out the window.
But, I suppose granite countertops really look swell at a wine and cheese soiree. Ha!
I didn’t suspect a YOY decline in Orange County until late Fall. The chips are falling faster than I suspected.
Needless to say, I have a hard time seeing why all the realtors think Gary Watts is some sage of the market. What a joke. He undershot the last couple years of the boom not realizing the effect of the flippers and suicide loans on the way up and now he obviously didn’t see the effect on the way down.
All in all it doesn’t take a genius to figure out why this is finally happening. Simply put, you can’t expect a market whereby something that used to be around 200k six or seven years ago and is now around 600k to be sustainable. At some point in time the collective B.S. detector had to go off and the time is now. The only real marvel of it is that more people didn’t realize that 600-700k was way, WAY out of the affordability league for the VAST majority of SoCal residents. I’m just out of law school and working in an area where prices have also shot up though no where close to where SoCal is at. When I told my Dad about a 300k 2000 sq. ft. house a guy in my office was buying (a client developer was cutting him a great deal, it would have normally gone for about 375k), and then told him how great a deal it was, my dad with his much longer perspective said “I don’t know who all these people are that can afford 300k houses.” Really, how much money should you be making to buy a 300k house? I think it should be at least around 80k. Given the median household income in this country (and this house was definitely the median type house), then I also indeed wonder who all these buyers are.
Same guy. With a cut-rate initial interest, no-doc liar loan, that 80K qualifies for a 600K house. Of course, three years down the road he had better be making 160K or it’s foreclosure city. And I doubt anyone mentions that small problem during the process.
With an income of 80K, I’d spend 200 absolute max.
I agree with you mostly, my rule is 3X income. 240k would be my max with 80k. But people can stretch and make it on 30 year fixed on 300k with an 80k income, assuming they don’t have a tremendous amount of debt besides the home.
However, there are tons of 80k households buying 600k homes. Again, it doesn’t take a genius to figure out that an average income of 80k (and it isn’t even average, I’m overshooting here), can’t afford to spend 36-40k a year on housing (30 year fixed). After taxes and housing costs, the household would literally have 15k left over per year for everything else. Can anyone imagine an entire household living off of $1,250 per month? Car payments, gas, utilities, food for four (two parents two kids), clothing, insurance, etc. Yep, not workin’.
Oops, miscalculated. The housing costs would be more like AT LEAST 48-50k a year.
Wow.
A cousin of mine who I suspects might make $100K, bought a $900K house last year. Put down $200K or at least was supposed to. Later he mention his $800K mortgage. Could he have gotten a home equity loan already. He has bought two “investment houses” since. One was nearly $400K. Would probably rent for $1000 per month. This is in Northern VA - DC suburbs. The “investment houses” are farther out in VA.
“With an income of 80K, I’d spend 200 absolute max.”
Me, too. Spot on and cold reality for a lot of young’uns.
Ditto. A lot of people seem to forget that the 3X income and 28% front-end DTI ratios were determined during a time when people had relatively stable jobs (unions), pension plans, SS and employer-paid healthcare. Since more and more of us are going to be funding 100% of our costs through retirement, the old ratios are way to aggressive, IMHO.
I’d say Txchick is right on, if not aggressive.
I don’t like that 30% of gross income. I think 30% of net is fine by me.
Me too, ’cause I’ve got no other debts to pay.
“With an income of 80K, I’d spend 200 absolute max.”
Funny thing. Up here in Western Washington, 200k gets you a trailer. Nobody making 80k per year buys a trailer. Yet, the trailers sell. And they sell to poor people, who cannot afford them. The poor people get ARM’s for trailers they will never pay off. The lower end of the market is EXTREMELY overvalued. To take a drive around rural western Washington, as I have on so many occasions, is to look right into the mouth of the bubble. It is a horror, this bubble. Poor people stretched beyond their limits, entering into purchases they could never dream of paying off, and that they had no business getting into. But unfortunately, as is so often the case, the poor people were not financially savvy. They were an easy target, talked into poor decisions by fast talking, cunning realtors and lenders; greedheads looking to make an easy buck off the back of a life full of hardship. After all, it was their last chance before being “priced out forever.” And so it goes. The poor get poorer. Not such a funny thing really, but a sickening, sickening truth….
Gotta admit I even see that in NJ, trailers - old trailers - which don’t even own the land they’re on selling for over 100K - Co-Ops (sometimes advertised as if they’re condos) for 150K (this isn’t NY, Co-Ops are rare in central NJ and make no economic sense and can’t use a mortgage to finance here)…
When the average household income of the area in question is 24K, it makes no sense to have a 150K Co-Op which then requires co-op fees in the several hundreds and for which you receive no mortgage interest deduction (co-op structure has no mortgage). Not including any bills, that Co-Op would eat up 62.5% of gross income - even a generous EIC won’t help that, good luck on surviving for bills and food and everything with the remaining 9K.
I live in Hawaii, and a co-worker just bought a 950K house on 80K. Your basic 10x annual income. so much for mainland math.
“The heated market inspired a lot of novices to jump onto the landlord scene. And those people often had little, if any, understanding of what…”
… they were doing. Just tell it like it is.
“‘Although the median price in the state and in several regions hit an all-time record in August, we expect softer prices toward the end of the year,’ said C.A.R. Chief Economist Leslie Appleton-Young.”
There you have it — any price declines we see from now until the end of the year are due to normal seasonal fluctuations. Please ignore those declining YOY price changes, as they are irrelevant.
“There you have it — any price declines we see from now until the end of the year are due to normal seasonal fluctuations. Please ignore those declining YOY price changes, as they are irrelevant.”
Exactly what I thought when I read this statement.
Let me add, I earlier asked whether price fluctuated by season and the answer came back, not much if at all. Can Appleton remind me why PRICE trends downward at the end of the years. Numbers of sales I understand but price? Can someone tell me if this is a COMPLETE lie?
I’m glad you caught that. Why would prices fluctuate seasonally?
They don’t. Here’s a chart showing the median prices in Los Angeles County over the past year. I don’t see any dips:
http://www.benengebreth.org/housingtracker/location/California/LosAngeles/
What I see is a steady runup, followed by a steady run down.
first of all, I would suggest that the last year has been anything but a normal one. Secondly, those are asking prices, not closed escrow sales prices.
Liquidity/buyers dries up. Sellers who need it sold have to cut. Same thing as the crash, but on a yearly basis. There really is a ’sprint selling season’ in normal years.
But both sides of the market must expect a slowdown around the holiday season. Why can’t sellers hike the prices up, forcing anyone who is desperate to buy over the holiday season to pay a premium?
I’ve definitely noticed a seasonal difference over the past few years. When I first noticed it slowing in fall 2004 (after selling our house in the spring), I got a bit too happy, thinking the market was tanking. Found out the spring selling season is a reality.
During the fall/winter months, inventory is pulled off the market, sales dry up and prices drop. It’s true. Things start picking up again in February and it’s off to the races by March or April. Each year might have slight variations, but there is a definite trend.
because in most years, the majority of people selling around the holidays are those who are desperate, and the only people buying are those looking for deals. I think it’s pretty common knowledge that you can get a better deal if you don’t mind closing escrow around Christmas and uprooting your kids from their schools mid-year.
“I think it’s pretty common knowledge that you can get a better deal if you don’t mind closing escrow around Christmas”
I’ve always heard that, but I have *never* seen any data to back it up. Can you point me to some?
More likely a NAR sales tactic to get buyers looking during the slower months.
That theory is fiction especially in SoCal.
I think that DWR may be right, since those transactions are the only ones posted and therefore they make up the statistical base for the month(s). That they are aberrations is neither footnoted nor remembered.
Check out the NAR press release today:
median price
Aug 05 229K
Sep 05 225K
Oct 05 229K
Nov 05 225K
Dec 05 222K
Jan 06 220K
Feb 06 218K
seems like a price fluctuation to me.
“seems like a price fluctuation to me.”
Wait a minute, that’s not even one year of data, and it encapsulates the supposed top of the megatrend right in the middle of it. No dice. We need several years of data, the more the better…an *not* an inflection point.
Things came right back in the spring:
Apr 06 222
May 06 229
Jun 06 229
Jul 06 230
You don’t have to be satisfied with 10 or so months of data, maybe you should do some research and prove yourself wrong or right.
“maybe you should do some research”
I wasn’t trying to be mean, I was just pointing out a flaw I saw in the methodology. Apologies, and yes, I will research it to see if indeed it is true, or an urban legend.
check out this link, it has a few years’ worth of data for the Bay Area:
http://www.viewfromsiliconvalley.com/id264.html
Here are some historical numbers for San Diego County. They go back a few years. Check out the new listings/sales data over the years and the prices of individual zip codes can be found in SFH detached numbers (or condos, if you’d like).
http://www.sandicor.com/
Yeah, I don’t get that either. First, I don’t really buy the seasonal price fluctuations argument she makes (why would prices be affected? I understand that sales volume is affected by season, but not price). But, more importantly, if seasonal price fluctuations really did exist then they wouldn’t cause YOY declines because the price fluctuations would have been built into the prior year’s prices for the same month.
And, has “softer prices” replaced “soft landing” for LAY? Is this her new moniker?
that is a good point, if prices drop every winter, then that wouldn’t explain YOY price drops.
dwr,
This is exactly why they use YOY numbers — it takes into account the seasonality.
Correct, the seasonal price fluctuations do not explain YOY declines.
But the fluctuations do exist; perhaps many of you are from areas that don’t have hard winters.
Granted, I’m in OC so we don’t have hard winters here. However, it still does not make sense to me that there would be seasonal price fluctuations. I get that people don’t generally want to purchase or sell a house during winter, so volume tanks. However, there shouldn’t be much change in price unless the drop in supply was a lot less than the drop in demand during this period. I checked the OFHEO site (I realize that their information is not perfect as it only tracks conforming loans, but it was the only thing I could find that had a long sample of statistics broken down by period - here quarterly), and I don’t see that prices generally dropped in Q4 or Q1 through the years, although it does appear that price appreciation is generally slower during these times that Q2 and Q3.
http://www.ofheo.gov/media/pdf/2q06hpi.pdf
If anyone has good monthly pricing data going back many years (preferably at least back to 1995 so that we could see market conditions prior to the bubble), I would love to see it.
I predict a hard winter in The OC for 2007, regardless of weather conditions.
Just ask the chief economist for the realtors group: ‘The price correction is a welcome development,’ he said, because it stops the bleeding. ‘Sales have hit bottom,’ he said. ‘Sellers are finally getting it.’ ”
Given that Realtors routinely describe tiny apartments as “cozy,” and manage to use the phrase “Handyman Special” to describe houses which you and I would call “shit-holes,” perhaps we shouldn’t be all that shocked by any spin from the group’s chief economist
“‘There’s a lot of people in negative cash flow, who reached pretty far in trying to take advantage of this market,’ said Dan Holbrook, president of a mortgage brokerage and real estate investment firm in Carlsbad. ‘If we’re cruising along at 110 miles an hour and we hit a bump in the road, we’ll go careening off to the side.’”
So where was ol’ Dan when he had those clients who “reached pretty far” when they were in his office last year looking for money? Probably on his Bluetooth, rounding up another round of cruisers and careeners.
There’s been a lot of comments about how these buyers are supposed to be responsible for their decisions, but what about all the realtors, brokers, lenders, etc. who all of the sudden have amazing 20/20 hindsight.
Sheesh.
‘If we’re cruising along at 110 miles an hour and we hit a bump in the road, we’ll go careening off to the side.’”
I think NHTSA’s Vince and Larry might be able to find a new gig with the NAR.
“So where was ol’ Dan when he had those clients who “reached pretty far” when they were in his office last year looking for money?”
Good question, Catherine.
I’ll say this till I’m blue in the face. The only one who has to make the payment is the borrower. He alone is responsible for his fate. No one else.
WRONG! The coming lawsuits that will expose the fraudulent practices of these lenders, mtg brokers, agents, etc. will be amazingly profitable for us attys. These weasels sold a payment and not a house. I’m sick of hearing about the borrower’s fault on these liar loans where the mtg. broker said “Oh we’ll list your mom’s social security income on the application even though she doesn’t live there.” Also, “but the applicant signs his/her own application” is about the most moronic argument under the stars. Who is in the best position to read, understand and advise regarding a loan?? I heard one radio Mtg. guy say that a loan application is over 270 pages of information, disclosures, waivers, etc.
I’m sorry. As an attorney, I can’t say: “well you signed it!!”. My standard of care requires me to advise re: inform as to the procedures, the alternatives and the risks of a contemplated action.
The Mtg. brokers are legally held to the same standard. To say otherwise in this market is, at best, naive, and, for anyone to say otherwise, stupid.
BkLawyer-
“The Mtg. brokers are legally held to the same standard.”
Since when, Since when did the state of the market change the rules of the game.
Now I understand your frustration because of what you see on a daily basis. I enjoy your posts and I’m not trying to get in a flame war with you. But I’m going to respectfully disagree.
“Caveat Emptor” is the rule of the day here and unless the courts do a flip or grandfather new legislation. You’re blowing smoke. Especially in regards to agents. I have yet to see “well my agent told me” win a case. 98% percent of the contracts signed buyers sign away their right to go to court without going through mediation and arbitration. Very very few go to the big show. And if this market falls out like we all suspect very few will be able to afford to get there
In regards to the lenders and mtg brokers 1003 mortgage app at the end of the very first 8 pages of the 270 is a paragraph below each signature that states it’s a federal crime to mistate information on the app and you declare that everything is true and correct. If someone added their mothers SS then they are responsible. Anything that was “said” prior to during or after has no relevance and you as a lawyer should know this because all agents and mtg brokers do. The lawyers that work for their companies have coached them on how to avoid lawsuits. The only thing that counts is what is on the paper at the end of the day.
Now the recent lawsuits that are coming down the pipe you speak of may create new legislation but as far as making anyone pay I highly doubt it.
Sorry, MIS, but I’m going to agree with BK lawyer here. I’m “officially” a speed reader and score in the 99th+ percentile on reading tests WRT comprehension and speed. I’m also a Mensan (not bragging, just making a point). Even I have missed certain points on the loan documentation and I **annoyed the hell** out of the notary because I was trying to read everything. If I think it’s too confusing (and BK lawyer, who also has above-average intelligence and legal understanding, seems to agree), the average Joe Schmoe (not to mention Jose and Maria who crossed the border yesterday with a third-grade education in a foreign language) is being exploited by those in the REIC.
We can “Caveat Emptor” this thing to death. Fact is, those in the REIC are involved with these transactions EVERY DAY and do it professionally. The layperson might enter into these contracts only once or twice in a lifetime. They are of the belief that they are paying commissions for the guidance received by those in the REIC. As you know, once upon a time, lenders would turn you away if you could not qualify. That is no longer the case, and the average folks out there were never notified that the rules changed.
test
In financial services we have prudent man law: you can sign all you want or say caveat emptor, but if you sell something which is inappropriate to someone, you can be liable. In contract law, to my knowledge, one-sided contracts cannot be enforced or contracts which grossly benefit one side (huge commission for poor loan?). Additionally, if one side did fraudulently misrepresent, same thing.
Either way, there goes housing prices.
Well CA Renter all I can say is we’ll agree to disagree on this one. Especially since I know for a fact in regards to foreign language speakers your analysis is way off base. “I didn’t understand” or “my agent told me” doesn’t fly in court. In fact if a foreign language speaker doesn’t understand the english version he is entitled to receive a copy in his language but he still must sign the english version whether he truly understands it or not.
biggest arnson Holloween ever !
you heard it here first
tell LIErah
burning your over priced pos doesnt cancel debt does it
My question is, if sales in many of the formerly “hot” markets are off anywhere from 20-40%, who are the rest of the idiots that are still buying at this point?
People who hadn’t heard of a “housing bubble” in June, or who believed “prices never go down”. Something tells me the number of such people has been siginficantly reduced over the last few months. Could we have the lowest sales volume ever recorded in the fourth quarter? I wouldn’t be at all surprised.
a realtor customer told me 2 weeks ago that sales were off 80% in his office in westlake village ca.
I just checked in “real time” the Sales in Las Vegas for Sept, 2006. This will be reported nationaly around Oct 25…It’s deader than dead. Could be the lowest sales total in 5 years. But the Newspaper and most realtors haven’t got a clue as to doing the research to keep up to date. In this 27/7 cable news cycle and internet, 2nd quarter reports are useless with days of being released. I need my info as close to real time as possible, and any economist who uses 1 month old government data is old school.
WOW! Thanks for the update!
David, did you see my response on the LV thread?
Anyone know what happened to LV_Landlord? When the last time she posted?
Westlake Village is one of the areas I monitor, I am not at all surprised.
I’ve been monitoring Westlake Village for a little over a year. I still see a sold sign once in a while, but I would guess at least a 50% decrease since spring seems pretty clear.
so wait a second… if Zip Realty shows 521 homes for sale in my zip of 91362 and only 3 sold in August, does that mean there’s a 173 month supply of inventory? I’m obviously not good at math because that sounds outrageous. By the way, my parent’s neighbors have been trying to dump a house in Westlake Village for over a year now. Every so often I’ll stroll over & check out the open houses for a good laugh. This last time was pretty funny. The realtor just seemed so pathetic and burned out… a destroyed human being. My girlfriend & I actually felt really bad for her. She said the owners were stubborn with the price and there was ZERO interest. She even divulged a little info about her very painful recent investment properties. A friend of mine is also selling in Westlake. He’s not having a good time. I hope he makes it out unscathed. It really seems like the market has completely dropped out of Westlake & Thousand Oaks. Any locals know of the 2 new houses for sale on the corner of Hillcrest & N. Conejo School Rd.? These big pigs have been sitting for sale vacant for about a year now. The carrying costs must be a dandy because they’re now offering each one for lease for $5,500. Good luck!!
Here’s the data quick august sold figures:
area/zip/#of sfh’s sold/ price/ YOY
Westlake Village 91361 4 $925 -34.6%
Westlake Village 91362 3 $720 -4.6%
All of seven homes sold. Just for comparison
purposes Bev hills showed 13 sold in it’s 3 zips
Bottomfedder1 posts “a realtor customer told me 2 weeks ago that sales were off 80% in his office in westlake village ca.”
I know the area well….. Man Oh Man! a world of hurt is comming this way. This area is ground zero for the all show no go folks! My guess is that this is “funny money” heaven or “HELOC Heaven”
An 80% pay cut for the high rollers is not going to be easy to take either…. and down the line Lenders, Escrow etc etc not a happy story.
My sister for one. No fact will get in her way once she makes up her mind she wants something, there can be no delay or consideration of her actions. I suspect she will lose her shirt on this next deal and better not come running to me for a bailout. The fact she has had to lower the price on her own place doesn’t ring a bell that the market is on the way down nor does the fact that open houses aren’t working. The homes she looks at are old tiny, overpriced, on tiny lots on busy streets and she still won’t wait. The fact she may not have a job in a few months does not deter her. The fact that sellers bought at 130K and want $800K doesn’t ring a bell with her. She really has been brainwashed over the past years that it doesn’t matter, it’s always going to go up. “Zombie Buyers” can only describe this insane behavior.
Mo Money,
perhaps your sis,
Giantess Diffidence, Despair’s wife. She appears in the Second Part, and is slain by OLD HONEST (Read: what the property is worth in the real real world)
“that the market is on the way down…”
to the:
Slough of Despond, the miry swamp on the way to the Wicket Gate, one of the hazards of the journey to the Celestial City. In the First Part, Christian falling into it, sinks further under the weight of his sins (his burden) Read: ARM Mortgage)) and his sense of their guilt.
“Zombie Buyers” makes me flash back to one of my favorite movies…. “Dawn of the Dead.” Perhaps we will see a sequel entitled, “Dawn of the Debt” coming to theaters near you in 2007.
It will be the inverse of the previous Dead movies, in that the zombies won’t be trying to get into houses; instead, they will be repeatedly trying to get out while waving mortgage deeds clutched in their sweaty hands.
“Dawn of the Debt”
LOL.
WA Renter,
I asked the same question and about a month ago, got it answered the next day. I bought a refrigerator from a guy who just bought a new house. He no longer needed it. Why? He stopped into a new subdivision “just to check out the models” and this Sacramento builder cut him this deal: $507,000 purchase price, 0% down, $10,000 “rebate” for closing costs, new BIG screen TV, stainless steel refrigerator, W/D, and appliances. This GF/FB says proudly, “It only cost me $305 to close this deal and get a new home!” Wow, except for the minor fact your stuck with $4,200/month for then next 30 years.
And get this….he has to rent out his old house, because the sale contract price WOULD NOT APPRAISE and the new buyer cancelled. His wife won’t sell for less, so add now $600/mon NEGATIVE on to his monthly costs!! The guy is V8 running on 3 cylinders. He was selling his refrigerator to me, so “I don’t have to be responsible to the renter if it breaks. He can bring his own.” I was buying it for one of my rentals. It was a 4 year old top of the line product he paid $1700 for 2 years ago. I got it for $320.
Here is the PUNCH LINE. The guy is a floor covering manager for HOME DEPOT. Declining sales leads to layoffs….leads to two foreclosures about 120 days later.
I don’t understand the market these days. There are too many GF’s walking around….I keep thinking we will run out and another one shows up to $750,000 for a $400,000 house. And when I talk to them, they are ALL 30-days away from financial ruin. THAT IS WHY THIS MARKET IS SO DANGEROUS.
I’d tell his wife to shag her ass out and make up the $600/month, either by going to work if she doesn’t, or working OT or a second job since it’s her stupidity that’s causing the deficit.
Well, if she’s doing that, she’ll probably make way more than $600/month. Husband might not be too happy about it though.
TxChick — thanks. That’s exactly what I’d do, too. Sometimes you feel really bad about a divorce that you witness — not sure about this one, if it happens.
Great story!!! It really shows the magnitude of the bubble and gives insight to the mentality of some people. I think the next wave will be people selling all of the extra furniture they purchased fot their big house that will no longer fit in their new smaller one. $1700, 4 year old refrigerator for $320. I am envious I didn’t step into that good deal. I think I will comb the papers and craigslist for similar ones. Thanks!!
So, Shakes, are you saying that the value of storage-unit companies should rise, as HB bloggers like ourselves buy up the best of this throw-off and store it until we’re back into homeownership?
I wouldn’t buy any more then what I can put under my own roof . Storage units cost me more money!!! I have a 25 year old refer in the garage that uses way too much electricity and want a newer Energy Star one to store my cold beer and Red Bull!! I think we will have plenty of time to buy up everyones extra stuff for 10 cents - 50 cents on the $1. My advice wait, buy your home then go searching for that perfect whatever to fill it with.
YSI is one of my few remaining longs. I bought a little while back after a big insider buying spree (that has continued) and there’s a little divvy.
I have bought 2 BMW’s, 1 Kitchen Aid stainless fridge, front load washer/dryer and a select comfort bed all basically new for bargain basement prices - all off of Craigslist!! The two cars were purchased from people having trouble making their real estate payments the other items were real estate related as well! This is all within the last year and a half! These people are SCREWED!! CASH IS KING!!
I didn’t realize the purge had already begun!! The first to go is the toys, then when they can’t sell anything else they don’t really need they will admit they are in over their head and will be forced to sell their home. It is only going to get worse since most ARM’s haven’t even reset. Cash is King!! To everyone who rents their home save every last penny for your downpayment on a home once prices come back to reality. California RE will rise again and it is best to get into it on the ground floor but to be able to get on at the ground floor the banks will demand at least 10% and maybe even 20% should things get really ugly.
-
“I feel totally safe playing polo on a field full of pros. But when amateurs are all over the field, someone can get killed. They have more guts than brains. They charge after every ball and don’t know when to hold back. It’s the same with U.S. real estate right now. There’s too much money chasing too few good deals, with too much debt and too few brains. The amateurs are going to get trampled taking seasoned horsemen, who should get off the turf, down with them. That’s why I’m getting out.” - Tom Barrack, Colony Capital, LLC - http://www.fortune.com/fortune/investing/articles/0,15114,1117911-2,00.html
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correct link
http://money.cnn.com/magazines/fortune/fortune_archive/2005/10/31/8359143/index.htm
“Home sales decreased 30.1 percent in August in California compared with the same period a year ago. ‘We experienced the greatest year-to-year sales decline last month since August 1982, when sales fell 30.4 percent,’ said C.A.R. President Vince Malta.”
1982 was the year of the second dip in Reagan’s “double-dip” recession. How did it get so bad so fast, especially given the underlying strength of the overall economy?
Because it really is different this time?
The speed of the psychology change (at least among people I talk to) has been astounding…I’d expected them to hold on to “real estate always goes up” mantra *much* longer. I’m actually flabergasted by the speed of change (wow, did I actually use the word ‘flabergasted’?).
Yes, but I think it has 2 “B”s -
“1982 was the year of the second dip in Reagan’s “double-dip” recession. How did it get so bad so fast, especially given the underlying strength of the overall economy?”
I always thought it was 1984, after Reagan allowed the joint and several liability act into law paving the way for frivolous “deep pocket” law suits, and the end of profitability for many father and son businesses.
Not sure if previous post posted. However, this market is way overheated. TRich is right. Homes have tripled and quadrupled in just 7 years. Absolutely non-sustainable. I have wondered where all the jobs are that can sustain this market. Forget buying a home, I would rather live in my car and stash the cash from all those 6-figure incomes. However, I don’t think all those people are making as much as they would like us to believe. Anyway, saw my first home for less than 500K listed last week, even though it was 499K. That’s a 33% drop from 750K. In any even we still have along way to go before fundamentals kick in again.
My wife saw a listing for a “Poway-area” house for $399k in the paper yesterday. I haven’t seen a ‘3′ in that position for a while. I suspect those people really want to sell their house and are trying to position it ahead of the (painfully downward-heading) curve.
Must be one of the older small places in the down town area. Still point is well taken, there was nothing in Poway last year at under $500K in terms of houses.
posted this on another blog… seems appropriate here too…
“WTF is with L.A.?!?!? Went to a couple random open houses yesterday near the Grove. #1 “reduced” price 1.45 Mill. HUH? looked it up on the internets… purchased about a year ago for 1.25 million. Insane! #2 new listing 1.8 million. Purchased less than a year ago for 950k. completely redone/landscaped but uh… WTF?!?! Both OH’s gave out, in addition to the usual MLS sheets, lists of “comp” homes and houses in escrow to justify the prices. Now, I know prices are “sticky”, and I know there are reductions happening in the same neighborhood, But can anyone tell me who on earth is buying any of this crap in this market? On the surface, it seems to be business as usual. Prices keep going up. People don’t believe that prices will ever fall more than 10% or so. Thoughts? I really need some encouragement!”
What does an open house with an asking price have to do with “prices keep going up”? I’ve been to lots of open houses on the westside over the past few months and things are dead. Those two POTENTIAL sellers you mentioned have probably watched too many episodes of Flip That House where the people at the end talk about their “potential” profit. Funny, the show always seems to leave out how much they actually sold for.
I did mean “asking prices”… as I said… I do see some reduced listings… but more often than not new listings are just silly. And I guess my frustration stems from being in a “desirable” area where everyone still refuses to believe what is pretty much obvious now. The party is over. But a lot of folks here are still drinking…
you said prices are still going up, and to support that you offer a couple of asking prices and alleged contract prices for places in escrow. Point to some houses that actually sold for 20% more than they did last year and you might have a point.
The desirable areas experience the downward pressure normally later than e.g. those houses with 2h commutes.
if you can afford 1.45 mil who cares.
Did they have cookies and juice?
hehe.. no, sadly they didn’t. And dwr… hope ya don’t think I’m trolling… It just irks me that people are *still* asking stupid prices. In my hood, there’re more stupid prices than realistic ones…
I agree with you that many sellers are asking for 20% over last year. But that does not mean prices are still going up.
Boycott all open houses until they bring back cookies and
juice:-)
I only go to open houses in the morning that serve breakfast with Starbucks coffee, and for lunch barbeque tri-tips or top block and cole-slaw or salad. No lower caste hot dogs or cookies. Leave a card with a comment about the price where the salesman host can’t find it and throw it away. That will soften up the P’Od owner. Some one posted a biblical saying that ,after 7 years of fat there would be 7 years of lean, or words to that effect. If the top (In Ca) was Oct ‘05, then we will have until fall of ‘12 for the bottom.
We just happened to stop by an open house at 3:45 PM last week in Sacramento. We knew the listing agent and wanted to day “hi”. She was not there. We stayed for a bit and chatted up the lonely RE agent for about 15 minutes. When we were leaving, she handed us a gift bag with a $25 Target card. We won the raffle….. by default…..we were the only “clients” to visit the house in FOUR HOURS.
We should let everyone know when there are great treats
at Open Houses…That way we could generate a crowd and the realtors will get more and better things!!
Yeah, I’m in the hood (Westside) too
Besides the ridiculous asking prices I’m also seeing less and less places coming on the market. And very few price reductions either.
Its almost as if the house sellers of L.A have turned into rabbits caught in the headlights…
for 1.45 mil i want a lap dance from that girl on mil dollar homes that sells homes in malibu.
bottomfeeder, you give her WAAAAAAAAAY too much credit. 1.45 mil lap dance would be the most expensive in history!
The grove area you are referring to must be the fairfax district, right by CBS studios/farmers market. Those prices are close to what prices are now for SHF’s in the hi-end coastal enclaves such as Pacific palisades,Malibu,palos Verde,Manhatten beach,Santa Monica,Hermosa Beach. Fairfax not a bad area at all:a lot of Apts mixed with a relatively scarce supply of available SHunits. Maybe that is the driving factor in the high price runups. In this current slumping RE Market i do not think that those homes will go for those asking prices, Maybe about a million tops.
There’s a lot of Hollywood money over there and it’s a very very desireable area. Even in a tanked market they call for a premium. I remember selling a gutted out 3 & 2 REO over there for 700k right on the border between there and Hancock Park. Multiple bids the day the bank listed it. Crazy
You are not crazy. I am seeing very little evidence of the bubble collapsing here in LA. Go on Loopnet.com, most of the motivated sellers and price reductions are in Sacramento or other undesirable areas. If it affects LA at all, we’ll probably be last.
LA will be hit, worse than it was hit in 1990, but exurbia will be hit first. If the housing crash sparks a big recession as I suspect it might, LA is likely to experience rioting again five or six years down the road and I think the burn zone will go west of the 405 this time. The disparities are becoming unsustainable. LA’s economy is amazingly diverse and even if film production mostly runs away during the next decade and there is a big quake, it will recover eventually.
Doesn’t Loopnet list commercial property? If so, that’s a pretty different market — where far fewer amateurs are at play.
It’s coming home to roost! Quick gain = future pain. I have no sympathy for those caught up in the get rich quick mentality. Nobody who buys should be ignorant to basic economic principles. I think every american should keep up with thier local conditions before they even commit. If wages and home prices aren’t in sync that should tell you you can’t afford to buy. No one with any sense should buy a home over 3x thier income. These prices in the last 4-5 years were way out of sync. Do you remember when only exclusive high income areas fetched these prices? Now trying to justify 500k in South Central LA area is insane! I’m a So Cal native and I left in Jan 06 got sick of the cost of living. I will return but it won’t be until prices adjust to income. I can easily see a 40-50% decline it may take a few years. I lived in the IE for twenty plus years and nobody is going to pay 400k for a home in the worst part of Pomona, Ontario,Fontana. It’s not San Marino or Santa Monica folks!
My brother in law and his wife did. They bought my house for 400K and we cut a little off for family. They used an I/O loan and now he is on diability. If not for a raise she just got they would not have been able to keep the house because their loan officer forget to add in the impounds. Nice job!
I would not recommend Pomona to my worst in-laws. Gotta be the crappiest deteriorating slum-burg in all of LA county.
Oh no, there are MUCH worse.
Yea, you’ve lived a life of silver spoons and polo matches if you think Pomona is the worst that L.A. County has to offer.
“Some sellers are still clinging to price expectations that are no longer valid in today’s market”
BINGO!
Should sales really tank this fall, a couple predictions:
1. Rolling layoffs/resignings in the RE/broker crowd. At this point, a 50% drop in sales makes bottom feeding impossible.
2. Out of 1, the compression of sales stock into the remaining sales force will greatly increase time-to-sale, as seller compete for ‘attention’.
3. Total for-sale stock will continue it’s build on into spring ‘07, with buyers very reluctant to bite.
4. I could see sales off 50-70% by April, and total for-sales up 200-300% nationwide.
My one bit.
I predict September is the last month where we can have good sales, so I think they will tank. Mostly due to bond buyers losing their willingness to buy bonds backed by exotic mortgages without better provisions for loses (either by higher interest rates or larger loss provisions).
I’m not sure what you mean by “ a 50% drop in sales makes bottom feeding impossible.
Do you mean that seller cannot find any more GF’s? For if sales drop by 50%, that means inventory will break the “magical” 8.7 months. Thus, the only ones who *can* sell will be the best priced homes on the market. In such a market, smart sellers realize being the best bargain on the block will move their home and they will be some who can/will discount.
Look at it this way, right now anyone who bought before 2004 would make a fortune selling their home 5% or 10% below market (ensuring a sale).
With the relocations that are just starting to less costly areas… I cannot believe my company is the only one with employees demanding to be transfered to lower cost of living locations. (Ironically, Pheonix is their #1 choice…)
I do agree with your points #3 and #4. It wouldn’t take much of a drop in sales for inventory to force inventory up to previously unknown levels.
Neil
OT–and begging your indulgence–do any of you have opinions on which “brand” of new home construction is superior or even “the best?” The question which is academic in nature for me; I prefer older houses but I recently stopped by an open house for an almost new home built by a nationally known co. and was appalled by the quality of the materials, workmanship, etc. So, if one were compelled or required (imagine with me) to purchase a new home, to which builder would you gravitate?
So, if one were compelled or required (imagine with me) to purchase a new home, to which builder would you gravitate?
Most HBs use the subs (subcontractors) with the lowest bid, most subs are using labor that shows up to work, all build with one thing in mind-profits.
It’s all illustion….
yoy decline in OC. Great! My brother officially owes me 100.00. If he pays up, I’ll send it to Ben’s Blog. I was off by 2 months, thought it would be November, but he was off by never.
Didn’t Feepness have some sort of bet with a gal friend of his? I wonder how that came out.
doodlebug,the quality of construction for even $1m plus homes has been very poor for several years.if you seriously look at a home built 2001-2006,at the very least get a really good home inspector to go through it,i would also consider having an engineer,and soils man look at it depending on the area.site prep in some area is very important,and these builders have cut a lot of corners.
See I wouldn’t buy any house that was built in the past 3-4 years, anything that was put up in the teeth of the bubble. Most flippers and frenzied buyers didn’t give a hoot about workmanship and materials and the builders adjusted themselves to this mindset. There is also the disgusting (IMHO) trend of putting new homes on the smallest possible lots. I drive by new developments near my home and I wonder to myself whether those POS homes will last even 10 years before falling apart.
Mrs. Fantome & I were looking at a house on the market for sale (Chico, CA) about 1 month ago. It was built and sold in 2003 for 429K. Others in this new neighborhood were selling for 329K-389K. It was the only house built by the original property owner where these 65 homes were built. Nicest house, biggest lot, beautifully finished = no comps. The buyer in 2003 increased it’s appeal with plantation shutters, beautiful built-in spa, Sunset Mag backyard.
In July, it went up for sale for 529K. Nothing. Then in late August, reduced to 499K. We thought if it floundered there for a month or so, we might offer 450K or less. Not likely to happen as it’s sale pending now, but the neighborhood is showing itself as flipper central for Chico. There are now over a dozen homes for sale in this small development, with prices ranging from 505K to 555K, all inferior to the ‘pending sale’ house. We looked at an open house Sunday for 539K. The young agent thought they were priced right for the neighborhood. I would agree, if any of that crap at 505K-555K was actually selling!! Her listing is easily worth 60K below that pending house. When the “gem” of the neighborhood sells for less than 499K (I would guess), none of the rest of these should APPRAISE for any more than 400K-450K, but there they all sit.
And when Mr. Clueless from SF comes to town and wants to buy one, watch it get the needed appraisal. This in my opinion is where the lawsuits need to start …..
(ps: Our nice little rental house just went on the market ….. crap)
Whoa - when did prices in Chico get so high? My dad and some of his family live in Paradise, CA so I’ve been to Chico quite a few times. The median income in Chico is around $30K. I understand that you’re talking about one of the nicest homes in the city, but still that seems like a lot for that area.
Not the nicest, those are about 800K-1M, but only about 30 of those on the MLS, and they’ve all been there since January. We sold one in the Canyon Oaks Golf Course in 6/05, and the market has stopped at this price tag ever since (whew!).
You can’t beat Paradise for beauty, and it is not far behind in price. A nice home there is about 20%-30% behind Chico. You are right about the incomes ….. sad and hysterical at the same time when you look at the RE prices.
We’re like a community theater ….. if people with money don’t keep coming, we’re back in the soup line.
.
Title should have been:
‘We’re In The Initial Stages Of Denial’
Let’s take a look at Orange County from a mathematical perspective. Say you buy at 600K with 0 down and a great fixed rate of 6%, you will pay three times for that house: 1 for principal and 2 for interest. That house just cost you 1.8 million. Now let’s add in taxes, say 6,000/year at 1% and another 1,000 for insurance (mortgage and fire). Now that house has cost you 2.1 million. Now let’s add another $250/month for upkeep and personal work (i.e. mowing the lawn, etc.). That adds another 90,000 to the pot, so now the house, which “cost” you $600K, has really cost you 2.2 million. Finally, if you pay HOA dues of even 100/month, that adds another 36,000 to the total, bringing your house to 2,236,000! Wow!
Please tell me homeowner, how in the world are you ever going to recoup that money? Even if the house appreciates at 6% annually, it will only double every 12 years using the rule of 72, which means the house will be worth 2.4 million in 24 years. However, who would be able to pay that much or want to for that matter. Additionally, how does it feel to know that you spent millions on a home that only cost, maybe 100K to build and another 50K for the land?
Now, if we rent for the same 360 months, even at an astronomical 5K permonth, you would still only spend 1.8 million with the difference of 436,000 that you could have saved. And that is assuming that you rent for 5K per month. Housing fundamentals are waaaaaaaay out of whack.
The problem with your math is you do not account for inflation. Unless the median you pay in rent over 30 years is 5K. which, I think it is way low for a median. Real Estate will always be a better purchase LONG TERM. The 2 dates that matter are the day you buy and the day you sell. Right now the prices are out of historical relations so it is right to show it is not a good time to buy. In a few years once the coorection happens then it will be a great time to buy on a fixed conventional mortgage. Your costs will go up slower then inflation will since the main factor in the equation (home mortgage monthly cost) is fixed. If you do buy after the correction then you will be much better off then if you rented your entire life.
Think it has to be mean (average) rent of 5k over time, since median is simply the middle. With high inflation in the last years of the rental, you could pay a median of 5k, but a mean of considerably more.
Janna, Did I say median, I meant mean. You are absolutely correct and a good explanation as well. Good catch and I appologize!!!
Paying off a mortgage is like a forced savings plan, for most people. Sure, they might pay less to rent, but then again they’d probably blow the extra money on toys. Better to overpay a little and own an asset when you’re ready to retire, unless of course, you refi, refi, and refi like everyone’s been doing.
Forced savings play? That’s right. Too bad that many of these folks who drank the toxic mortgage koolaide will never, ever be able to muster the amount of forced savings required to repay $500K+ in debt, with interest payments all along the way…
Scratch ‘play’ insert ‘plan’
Dear OCDan,
You touch on something that’s been bothering me for awhile.
My folks purchased a 3 bed, 2 bath in Orange in 1974 for $34,000, now supposedly worth $725,000 32 years later…that’s…x21.5 increase…so timing the next sale opportunity in the last part of the next 32 years (2038) (I won’t be here, by the way)… $725,000 x 21.5 = $15,587,500… that’s Millions right? I mean to say, history repeats or is an echo right? Been drink’in that red red wine again, so my math my not be quite that accurate…but why not just maintain and texas hold’em until that glorious day? Is this not a possibility? I know, I know: to quote Alfred Whitehead: The impossible I believe, it’s the improbable that I have a trouble with.
Timothy
PS, I gone wrong here somewhere I just know it.
Moreover, in 1974, he was a 1st year schoolteacher, she was a MOM ;-)… (3 wonderful kids)…will that be the job demographics for those who qualify to buy in 2038?
America the Beautiful …
O beautiful for spacious skies,
For amber waves of grain,
For purple mountain majesties
Above the fruited plain!
America! America!
God shed his grace on thee
And crown thy good with brotherhood
From sea to shining sea!
O beautiful for pilgrim feet
Whose stern impassioned stress
A thoroughfare of freedom beat
Across the wilderness!
America! America!
God mend thine every flaw,
Confirm thy soul in self-control,
Thy liberty in law!
O beautiful for heroes proved
In liberating strife.
Who more than self their country loved
And mercy more than life!
America! America!
May God thy gold refine
Till all success be nobleness
And every gain divine!
O beautiful for patriot dream
That sees beyond the years
Thine alabaster cities gleam
Undimmed by human tears!
America! America!
God shed his grace on thee
And crown thy good with brotherhood
From sea to shining sea!
O beautiful for halcyon skies,
For amber waves of grain,
For purple mountain majesties
Above the enameled plain!
America! America!
God shed his grace on thee
Till souls wax fair as earth and air
And music-hearted sea!
O beautiful for pilgrims feet,
Whose stem impassioned stress
A thoroughfare for freedom beat
Across the wilderness!
America! America!
God shed his grace on thee
Till paths be wrought through
wilds of thought
By pilgrim foot and knee!
O beautiful for glory-tale
Of liberating strife
When once and twice,
for man’s avail
Men lavished precious life!
America! America!
God shed his grace on thee
Till selfish gain no longer stain
The banner of the free!
My figures may be considerably off, but I believe a “good” job such as engineering in 74 would have paid around $12000 a year, with a house price at 3X which sounds about right. Today a “good” job such as engineering pays around $90K so with a house price of $725K this puts it at 8X which is obviously rediculous. By the same standard the house is now worth $300K maximum, which would also put it on the 40 year curve… Just another view of the bubble…
GH,
Thanks, I could not agree more with you. These housing costs are directly linked to the requirement now, that there are at
least x2 incomes being applied to the purchase price. income #1 = >$60,000 + income #2 = >$35,000 plug in whatever numbers make sense for a national average, and their you have the reality of the situation. What will America housing look like in the next 32 years when my kids are my age (49)
Life, Liberty and the land of the FEE.
Anybody consider that because the statistics are lagging by ~2-3 months the CAR shills are able to manipulate their message. The fact that they are talking about the “initial stages of a long-anticipated adjustment” means that the current stats are much worse and they need to adjust expectations downwards. It is also likely that given the lag they were hoping against hope that by delaying the message they could cover the bad stats of a few months by the “seasonal” adjustment. “revised” estimates etc…
I think the current month stats are so much worse that it just was not possible for the CAR to continue the old messaging. The current numbers must be very very bad to force such a change.
Good thinking. It allows them to spin the future before it arrives.
The map is starting to look like a locust invasion
http://www.emailforeclosures.com/
Can FEMA deliver some Advil to Florida?:
______________________________________________
ForeclosureS.com: Party’s Over in Florida
Foreclosure activity in Florida is skyrocketing and “the party’s over” for real estate speculators, according to ForeclosureS.com, a Fair Oaks, Calif.-based investment advisory firm.
http://www.sfgate.com/columnists/lloyd/
Article from SF real estate shopper ….. not for the same foreclosure reason as Florida, but what caught my attention was the following commentary:
“What most people don’t understand is that banks don’t want to foreclose on properties,” says Sharga. “They want their money.” Sharga says the foreclosure process may involve tax payments, rehabbing costs, title fees and, most important, a lawyer to act as the property’s trustee. “I don’t know about your town, but around here lawyers don’t work for free.” According to some estimates, a foreclosure sale can cost a bank from $20,000 to $50,000.
“This fact is good news for homeowners facing foreclosure: If they can negotiate a new loan, they will probably have more bargaining power than they imagine…..”
This has been on the news quite a bit lately. If lenders are indeed willing to do this as a cheaper alternative to foreclosure, then I don’t think it would be much of a stretch to add FB’s and distressed owners, which then encourages phony acting distressed borrowers, to all request to be added to the foreclosure crowd list. Could have some impact in dragging this thing out…..
Interesting they should mention investors who purchased apartment buildings for condo conversion, in the last year. I see it all the time — buyers of apartment buildings intending to convert to condos massively overpay and necessarily have horrible cash flow, but it does make sense if they do the conversion and can sell off each unit for hundreds of thousands. But if they can’t, and have to actually rent the apartments out, wow, they’re in some trouble.
Wow — prices really are not going up forever. Lots of real estate investors are not going to get the capital gains to make up for their initial negative cash flow. This is going to hit the masses of individual real estate investors at the same time it hits the masses of condo conversion real estate investors, and I will be happy to say “I told you so…”.
I have never bought or sold RE, but the few times that I entertained this idea I was never able to find a small multi unit rental that was cash flow positive. I told myself this would be “industrial strength stupid.” (Bruce Williams’ famous line.) I was so afraid of being the last fool holding the bag, glad I never jumped in.
People who thought that was their ticket to paradise in Los Angeles were fooling themselves. Once upon a time you could not give those things (apartment conversion condos) away out here. Banks would bend over in hysterical laughter if you even hinted at financing one. Some people have very short memories.
All that buying at 3-5 cap is going to get very painful very shortly. I have 2 on the radar now that the owners are begging someone to take off their hands, 3-5% cap in the “hood” wtf were they thinking.
One guys list price is already 50k less then what he bought it for a year and a half ago, the income has already dropped 2000 a mo. and the bangers won’t let him on the property. Funny stuff
His agent is begging for an offer, but I only buy at 15% cash on cash or more, which equates to him losing about 70% of his downpayment money. I wonder how he’d feel about that right about now. Maybe I should wait a few more mo’s.
$277 per week–the average United States worker weekly wage- according to the BLS
Now really how much debt do you think j6p can really handle?
Only in a mania will you get people paying the prices they did . The prices seems so silly now . 200K houses going to 800k in 5 years ,lenders making no down loans to anyone ,people sleeping in sleeping bags just to get a chance to buy pre-construction condos that they wanted to flip to someone else ,vacant houses everywhere with a limited amount of buyers now .
Well ,it’s easy to get glued to this story of the Housing Bubble . I remember just 8 months ago the realtors were talking about how great the 2006 selling season was going to be while the people that post here knew the party was over .
The prices seems so silly now . 200K houses going to 800k in 5 years ,lenders making no down loans to anyone ,people sleeping in sleeping bags just to get a chance to buy pre-construction condos that they wanted to flip to someone else ,vacant houses everywhere with a limited amount of buyers now.
It’s all every bit as stupid as pets.com, a fact which will become blatantly obvious to everyone in a couple of years.
i was driving around today,sebastopol to santa rosa to oakland/piedmont,and back.i saw five open houses.1 in sebastopol,2 in santa rosa,one each in oakland and piedmont.i was not driving around randomly,but was runing necessary errands…also heard an ad from a santa rosa builder offering to pay the mortgage for the first year “for a limited time only” has anyone else seen open houses on a monday?
Yes, I have see it every day of the week . Goes to show you sellers are really hard up for buyers.
My favorite day is now September 25th, 2006.
Someone needs to throw a parade, or shoot off some bottlerockets.
Pretty quiet here in Huntington Beach, CA, though.
Must be getting ready for all the upcoming arsons, suicides, and rapid crime increases.
As for me…I’m just wearing a big, shiteating grin.
Today is a wonderful, wonderful day.
And, it looks like your purchase at the top in 1990 worked out in the end for you, as it for my mom, who sold her condo in 2004.Imagine being a Kennedy. Stop, Now imagine being stuck in a condo for 15 years next door to a neighbor who blast punk rock! Ouch! I think I’ll go out and mortgage myself to the hilt for the privilage. NOT!