Potential Homebuyers ‘Wait-And-See’ In California
Some housing bubble reports on California. “Brookfield Homes said late Thursday net new orders for the second quarter totaled 255 units, down 49% from the same period last year. Brookfield said the decline in new orders continues to be primarily in the San Diego/Riverside, Calif., areas and Washington D.C. markets.”
“The decline results from an overall more competitive market environment as resale inventories increase and potential homebuyers take a wait-and-see approach, the company said.”
The Fresno Bee. “‘We have a glut because [property] is not moving as fast,’ said Amie Sterios, who in January sold a 12,000-square-foot house on Van Ness extension for $3.69 million after dropping the price from $4.39 million.”
“‘If we close 80% of what we did last year, we’ll be fortunate,’ Fresno builder Gary McDonald said. ‘We could sell more homes if they could sell theirs,’ he said.”
From a press release. “Having completed all the planning and permitting necessary to convert a former Chevron property in the heart of San Diego’s trendy Gaslamp Quarter into an architecturally striking 26-story condominium tower with 200 units, regional developer TC Holdings is now turning to auctioneer Inland Real Estate Auctions to auction the development opportunity to someone else.”
“‘More and more, as the market changes, developers are seeking ways to share the risk and reward of significant developments in red-hot markets like San Diego and Chicago,’ said Frank Diliberto. ‘In the last 18 months, the number of permit-ready development projects that have been referred to us for auction has substantially increased.’”
From the Valley Voice. “Visalia and Tulare home builders continue a torrid home building pace in mid-2006 while the number of unsold homes on the market continues to grow. Something’s got to give here but it’s not clear when it will.”
“As of July 1, there were 1,801 active listings in the MLS that includes both Visalia and the town of Tulare. That’s up from 1,690 on June 1, 2006; 1,005 in November of 2005; and 437 in July 2005.”
“But builders of new homes don’t appear to be adjusting their pace here despite a slowdown in building activity nationwide. So far this year, Visalia has permitted 737 homes, about the pace they did in all 2005 when permits for 1,450 homes were pulled, a record year. ‘We don’t see any end to it,’ says the city’s top building official Dennis Lehman.”
“If the city is buoyant, existing homeowners trying to sell their houses are not. Realtor Brad Maaske says his office is seeing fewer qualified buyers looking for homes. ‘The speculators are gone,’ he says, leaving available buyers to come from the local markets in a town with only limited job growth prospects.”
“A report done by Icenhower Real Estate pointed to a key insight into what is happening in Visalia: competition in new homes and the volume of product ‘has driven down prices for both new houses and existing homes’ with the coming of a score of new big home builders to the local market.”
This link has more detail on how much California markets fell off for Brookfield.
The Central Valley
‘ On the year-to-year comparison, only the Chico, Merced and Visalia-Porterville areas showed increases. Chico saw 118 permits “pulled” for a 13.5 percent increase. Merced was up 32 percent, with 338 building permits. The Visalia-Porterville area in Tulare County was up 12.7 percent with 239 single-family home construction permits, the CBIA says.’
‘Bakersfield’s hot housing market cooled compared to a year earlier. The number of single-family housing permits issued in May was 553, a 30.3 percent drop from May 2005.’
Fresno, -27.2 percent (319 permits);
Hanford, -18.3 percent (67 permits);
Madera, -28.8 percent (141 permits);
Modesto, -32,6 percent (300 permits)
Stockton, -20.8 percent (350 permits);
Sacramento, -41 percent (917 permits).
Recently saw a stat claiming that California real estate counts for 25% of the national RE dollar volume.
“The decline results from an overall more competitive market environment…”
Lies, lies, lies. A more competitive market would mean the same or more transactions going to other suppliers at existing sales rates. As we know the market is far LESS competitive as it isn’t maket SHARE but market SIZE that is shrinking.
“developers are seeking ways to share the risk and reward of significant developments in red-hot markets like…”
Lies. lies, lies. Whyinthehell would anyone want to share the rewards of their efforts? They are selling risk to the lowest bidder. This is nothing more than the greater fool theory at the wholesale level.
“…lowest bidder.”
Why not to the highest?
perhaps because the emerging trend is that the highest bidder is also the lowest bidder, if you’ve got a bidder at all.
You could call it highest or lowest depending on from which side of the transaction you view it. I meant lowest as in “We’ll take 10% of the proceeds from the auction to dump these houses.” The FHB would take that low bid instead of “We’ll take 30%.”
Alternate Rio Lindo answer to “Why not to the highest [bidder]?
If you found yourself graced with a big stinking pile of manure starting to ripen in the warming gentle rays of the July Fresno sunshine wouldn’t you higher the lowest bidder to cart off those steaming logs before the flies got too thick?
there is a $4M house in Fresno? Ugh. Go figure.
From the article:
‘It is believed to be the most expensive single-family-home transaction recorded in the Multiple Listing Service operated by the Fresno Association of Realtors. The house was one that pop singer Britney Spears, whose husband is from Fresno, was rumored to be buying. The rumor turned out to be false; the house was sold to a local businessman.’
house was sold to a local businessman.’
Local farmer maybe….What “Businessman” with with a ounce of brain would pay 4-mil for a Fresno Pad ???
He only paid $3.7!
How Fresno was named:
“Blech, tastes like Fresno!.” (Spoken by an early Spanish explorer tasting the local produce and promptly spitting it out. From the infamous 1986 miniseries.)
LOL.
Fresno = ash.
My favorite: Manteca = lard.
my granny used to put lard on bread and it it.she lived to be 96.manteca is good cholesterol.
But this house is special because it’s the only one in Fresno that was falsely rumored to have been purchased by Britney Spears.
Scott Peterson?
Ha! Britney Spears found a husband from Fresno? Now that’s the only thing that makes sense in all of this!
And we thought she was smart! She is about as smart as the buyer of the $ 3.7 Mil house and they both might end up in court. But only one of them in BK court.
Who thought Britney Spears was smart????
Britney = trashy bimbo
I am waiting for her to star in the B flics! She is almost ready!
yes, that ‘lolita’ look is well in her past. she looks like a trashy hausfrau now.
cheetos, anyone?
To heck with the B flicks - I’m waiting for the soft porn.
I was under the impression that there were no more greater fools in CA that could still get loans that there was no way in hell they could pay for them. Let me clarify, there are still MANY GF, but I am sure the ability to get $1.5 M loans to buy some shitbox in Watts, East LA, or Oakland has been reduced. And only the biggest fool in the world would be willing to drive 2.5 hrs on some smoggy congested freeway to go to a dumbass job that they hate (eg, San Bernadino and Riverside counties, or the Central Valley). The automatic $100K increase each yr is gone and buried. Now it is the expected $100K decrease each yr. LOL
my co worker asst mgr just moved to his 1300 squ ft house in lake los angeles.his commute to thousand oaks is 90 miles one way.it took him 2.5 hours to get to work and 3 hours to get home and school is out.wait till fall he will spend an extra houra day .6.5 hours on the road a day to live the american dream.he paid 270k on a 5 year i/0 80/20 loan.i warned him he would lose his ass but he thinks he will make money in a few years.now he is talking about a new pool.
The ‘American Dream’ is a dream as long as you are sleeping. If you are awake it is a nigthmare.
Hope so…coz right now the we have a severe infestation of CA equity locusts munching the high end of the market and driving up median prices in the “nicer” areas.
Seattle will not start to sink until the CA spigot is turned off. It is mind numbing that so many CA equity locusts have migrated all over the country driving up prices. Even more mind numbing is…where do all the SUCKERS come from who keep buying the homes that have allowed the equity locusts to migrate?
This is the biggest Ponzi Scheme of all time….bar none.
Looking at the inventories grow here in SoCal, the number of suckers looks to be drying up. When you see 5 open signs on a corner in Rendondo Beach that’s a sign this is just about over.
this has been a big Ponzi scheme, no doubt, but it doesn’t even come close dollar-wise or the number of people it effects/will screw as to Social Security, which is the grandest Ponzi scheme of them all, one that’s been in the works for decades not mere years!
‘We could sell more homes if they could sell theirs,’ he said.”……..and what should that tell you dumb-sh*t
Susanne must be on vacation in Redding this week else she could have researched this.
“We could sell more homes if they could sell theirs,’ he said”
Exactly, nnvmtgbrkr. I was talking to a housing speculator in my neighborhood who said people were gushing over the unsold houses and were ready to buy - but the sellers won’t accept their contingent contracts ’cause the buyers’ own houses have been on the market too long. Hmmm.
About 10 yrs ago, $4M would have bought the entire city of Fresno. Who would spend $4M for some McShitbox there? Yea, and Britney is moving there. Right after all other celebrities leave Hollywood and Malibu to go up there
Is Britney thrown in along with the house? About the only way it could be worth $ 4 Mil.
Maybe she is included, that’s why they had to drop the price an extra $700,000.
rotflmao
you just can’t get much worse than Fresno - nothing going for it whatsoever. even the airport code is FAT
As far as the central valley, Fresno is the best of a bunch of bad options.
Yosemite is close
CSU Fresno has a good athletic program
Agriculture is nearby
OK I am out of positive attributes but that is a longer list than Bakersfield, Visalia, or Stockton.
City Mottoes:
Fresno, only 3 hours from everything.
Bakersfield, at least we aren’t Fresno.
Stockton, Bakersfield’s class and Fresno’s weather.
Visalia, because Northeast Oxnard is too hard to spell.
Redding, further from Sacramento than Red Bluff.
Red Bluff, but those trains create gentle breezes.
I drove through Fresno over the July 4th weekend on the way to the mountains. Lots of the houses have bars on the windows. Mini malls (even newer ones) have bars on the windows and barricades across the entrances.
I did see a billboard for new homes on Highway 99 north of Fresno (Madera or something). “Starting from the $200’s” had been sloppily painted over and now read “Starting from the high $100’s”
I have spent some time in Fresno since my good friend grew up there. That place has some serious problems. Lots of crime and violence, gangs, drugs, and to the max degree. Some nice people here and there but no thanks. What a pit.
My college roomate was from Fresno. He said they had the highest stolen car rate in the entire nation. I would have thought a border town near Mexico would get that honor.
Not much to do in Fresno but cook Meth I guess.
Get a picture??
Share please.
I didn’t get a picture - I was too eager to get home! I thought about it though . . . high $100’s does sound really low, even for a central valley farm town. I looked online and couldn’t find anything that low in Fresno or Madera, but Centex is advertising new homes in Visalia from $213,900 (on homebuilder.com).
FAT…lol They changed to FYI (Fresno Yosemite International Airport). The market around here has been really screwed up by all the speculators. Now that they are mostly gone a lot of people are gonna be in a lot of hurt in the coming year/s even the HB’s they are still building.
they changed the code?! It used to be FAT!!!!! Really!
Yeah they changed it when they remodeled it a couple of years ago.
Ok. I was born in Fresno and lived there most of the years from 1959 to 1985. If not for the smog, Fresno is a great place for a bedroom community. But with the smog, it’s the PITS! Unemployment at double digit percentages for the last 40 years, due to seasonal farm labor. The unemployed folks tend to committ crimes, and the crime rate is high. Every college bound high school student in Fresno is aware the only way to success in life is to leave the farm areas and go to either the San Francisco Bay area or Los Angeles / Orange County / San Diego. There are many nice people in Fresno, very down to earth. That’s the upside. Don’t insult the law abiding people there.
“Brookfield Homes said late Thursday net new orders for the second quarter totaled 255 units, down 49% from the same period last year. Brookfield said the decline in new orders continues to be primarily in the San Diego/Riverside, Calif., areas and Washington D.C. markets.”
The slight change in net new orders indicates the market is beginning to level out,…
Yeah, I like how they expect to sell 1200-1300 homes when during the Spring selling season they sold 255. These guys are looking at us with a straight face assuming things don’t slow down further and that they will be able to sell as well in November and December as this Spring. 4 X 255= 1,020. I doubt they would even break 1,000.
So they’ll be stuck with 400x $300,000 houses (their cost $200k). What’s the carry rate on $80 million? Ans: at 7% short term construction, bridge rates it is $1100+ per hour.
“Statewide, 12.5% of all home sales in California in 2005 were for at least $1 million, London Properties reported.”
One in eight sales were for at least $1 million? That’s statewide. In California. That’s a staggering number of homes to sell for more than $1 million. I’m sorry, but the people here in California cannot afford to pay that much. Even including those who had large amounts of equity in their homes and sold to trade up, there are simply not enough people making enough money to justify 12.5% of sales statewide being over $1 million.
It’s obvious why so many Californians have used the suicide loans, as these were the only loans that would let them get into their houses. But, they won’t be able to stay there. As their loans re-set, they are going to run into some serious trouble. Defaults are going to skyrocket, as people are unable to afford the higher payments and are unable to re-finance because rates are higher and values are flat or down. The sheer magnitude of this bubble amazes me.
Property taxes and insurance will eat them up too. Last I saw there were almost 300k tax liens in CA. That is not the sign of people who are “rolling in it”. I have also noticed that many of the so-called “equity locusts” are getting mortgages on their new places. This also does not indicate a group that is rolling in dough. I think many had already spent much of their equity before they moved or invested it in other flips.
How long before the State/county/city can sell for delinquent taxes in California?
According to the Orange County Assessor’s office, non-payment of taxes for 5 or more tax years. I’m not sure if this varies by county, but that’s what it is in OC.
However, they have to clear up the title before they can sell. This little snag could cause some sales to fall through and consequently the house falls into foreclosure to the mortgage holder(s).
Actually, they can get an expedited lein foreclosure in 3 years, or 18 months for mello-roos. More likely they will go in lender lein foreclosure before then.
While there may be a lot of tax liens in CA, it is important to remember just how much of CA is still open, empty, land (much of which has liens). San Bernardino county alone is larger than a number of states. Every auction (5 years or more pastdue) they sell 3k properties.
The higher it goes, the greater the fall. No equity cushion the fall. Nothing but clear air on the way down. Better ask Lereah what lies at the other end of this imaginary plateau. I hear a sucking sound from down below…
Into the distance, a ribbon of black
Stretched to the point of no turning back
A flight of fancy on a windswept field
Standing alone my senses reeled
A fatal attraction is holding me fast,
How can I escape this irresistible grasp?
gota keep my eyes from the circling sky
Tongue-tied and twisted Just an earthbound misfit, I
Iceisforming on the tips of my wings
Unheeded warnings, I thought I thought of everything
No navigator to find my way home
Unladened, empty and turned to stone
A soul in tension that is learning to fly
Condition grounded but determined to try
gota keep my eyes from the circling sky
Tongue-tied and twisted just an earthbound misfit, I
Above the planet on a wing and a prayer,
My grubby halo, a vapour trail in the empty air,
across the clouds I see my shadow fly
Out of the corner of my watering eye
A dream unthreatened by the morning light
Could blow this soul right through the roof of the night
There’s no sensation to compare with this
Suspended animation, A state of bliss
gota keep my mind from the circling sky
Tongue-tied and twisted just an earthbound misfit, I
Alrighty, then:
I might be movin’ to Montana soon,
Just to raise me up a crop of
Dental Floss
Raisin’ it up:
Waxen it down
In a little white box
That I can sell uptown
By myself I wouldn’t…
Have no boss,
But I’d be raisin’ my lonely
Dental Floss
Raisin’ my lonely
Dental Floss
Well I just might grow me some bees
But I’d leave the sweet stuff
To somebody else . . . but then, on the other hand I would:
Keep the wax
‘N melt it down
Pluck some Floss
‘N swish it aroun’
I’d have me a crop
An’ it’d be on top (that’s why I’m movin’ to Montana)
Movin’ to Montana soon
Gonna be a Dental Floss tycoon (yes I am)
Movin’ to Montana soon
Gonna be a mennil-toss flykune
I’m pluckin’ the ol’
Dennil Floss
That’s growin’ on the prairie
Pluckin’ the floss!
I plucked all day an’ all nite an’ all
Afternoon . . .
I’m ridin’ a small tiny hoss
(His name is MIGHTY LITTLE)
He’s a good hoss
Even though
He’s a bit dinky to strap a big saddle or
Blanket on anyway
He’s a bit dinky to strap a big saddle or
Blanket on anyway
Any way
I’m pluckin’ the ol’
Dennil Floss
Even if you think it is a little silly, folks
I don’t care if you think it’s silly, folks
I don’t care if you think it’s silly, folks
I’m gonna find me a horse
Just about this big,
An’ ride him all along the border line
With a
Pair of heavy-duty
Zircon-encrusted tweezers in my hand
Every other wrangler would say
I was mighty grand
By myself I wouldn’t…
Have no boss,
But I’d be raisin’ my lonely
Dental Floss
Raisin’ my lonely…
Dental Floss
Raisin’ my lonely
Dental Floss
Well I might
Ride along the border
With my tweezers gleamin’
In the moon-lighty night
And then I’d
Get a cuppa cawfee
‘N give my foot a push . . .
Just me ‘n the pygmy pony
Over by the Dennil Floss Bush
‘N then I might just
Jump back on…
An’ ride
Like a cowboy
Into the dawn to Montana
Movin’ to Montana soon…
(Yippy-Ty-O-Ty-Ay)
Movin’ to Montana soon…
(Yippy-Ty-O-Ty-Ay)
Etc, outro….
Gosh that makes me SMILE!
What will libs like Meredith Brace in Santa Barbara do when they get thrown out of their fancy house and have to move back in to the Mexican school district?
hey, when you cannot afford a house, you need to be honest with yourself. the sheer volume of delusional people astounds even a cynic like me. i am doing well and would never think to buy a 750k home let alone 1M+.
stupid, stupid sheople.
Yep. I’m in the same boat. I make a good salary, but there is no way that I can afford to buy a $750K home unless I use a suicide loan - and I won’t do it. Eventually, the prices will come back down to reality, and then I’ll buy at a price that I can actually afford using a 30 yr. fixed rate mortgage.
Yes - good idea.
Hint for buyers who CAN afford to do more than rent and who want a home. Look at the shittiest houses 1st. Seriously. Start at 100k and work UP to what you will accept. Do not start at 350k because your banker thinks you can afford that. This is truly the best advice I would give someone. Maybe the 100k house is not for you, but a 150k one is. You just “saved” yourself a ton of $$$….. even if you make 200k/yr, BUY LOW!!! There is no real reason to buy these huge homes. Do not succumb to the big lie! Only stupid sheople are impressed with those homes!
MBA, Thanks for the pep talk. I’m a card carrying RE bear, but now and then I think “maybe I should take the plunge on that $1.3M NB home”.
Same here….sort of. Self employed, was making 130k and debt free couple years ago and went house shopping. Thought prices were stupid then, and wasn’t willing to make the payment required. Cut back my work, got a degree, and am just kind of floating now at 70k or so. Taking it easy, working on things that interest me but probably won’t pay.
Quite honestly, I’ve been thinking about just bailing on the whole rat race and going parasite. Government takes so much of my money, yet spends me farther in debt each day, blowing up people I’m not sure need blown up, giving cash to others I’m not sure need it, and making up new reasons to put me in prison every day.
Voting just hasn’t been working, so I think I may have to become a fiscal drain instead of a revenue source. My allegedly fat income is looking more and more like bait for a debt trap. If I save the cash, you can damn well bet they will tax and inflate it out from under me somehow….I could come out ahead just taking handouts and spending my life doing as I please.
I wouldn’t mind playing the game, if they would quit cheating.
I’ve wanted to buy a home for some time, but simply could not, would not buy at these prices nor using voodoo financing. I’ve a good income, almost no debt, cash for a down and a 800 FICO. And I am sitting this one out until I see prices drop to a level where a 30 yr fixed PITI is close to my housing budget line item, aka rent.
A colleague of mine is a millionaire and told me he would not buy a house over $200,000. I agree. On the other hand, another colleague, also a millionaire, is having a house built in Jamaica, owns real estate in Florida (I think a condo), and 160 acres of good timber in Iowa. That one has over half his assets in real estate. For myself, I agree with the former. My 30 year outlook on America is that it’s in decline. Taxes will have to be higher to pay for the entitlements of people today who took big gambles in real estate and are going to lose. The social security and medicare will have to be paid for (by law). Half my own assets will be out of the United States before our tax rates double, and they will. American public wants someone else to be responsible. Chickens will come home to roost.
MBA - Thx for the advice, but here in San Diego there is no way I can even think about buying a house for 100K unless I want to live south of the border.
right. But wait! In a couple of years the slums in your area will be that! What I mean is start looking at the cheapest RE offered. Period. Then go up.
However, I would not buy in SD at this point for any reason. Wait 4 years and see what they lowest prices offer….!
These homebuilders are going to build all the way down. Even if you cut the cost of housing 1/3 they would still make a nice profit if they bought the land a few years back.
In some ways it makes sense. Most of us feel real estate is going to have a long recession, with home prices falling for several years to come. If you were a homebuilder and you thought the same thing, why not sell all the way down? Sure your profit gets smaller and smaller, but what other options do you have? Go out of business? These guys will squeeze their suppliers, workers, renegotiate the land deals, and keep adding inventory all the way down. They may slow down a bit, but that’s it.
The prices they can get this year, even with the incentives, will look great this time next year. And the year after.
Should get ugly.
Joe — I agree. For those with the stomach to endure building a home, I think good times, relatively, lie ahead. Builders will want to stay alive and will cut deals that in recent times people thought impossible, in order to keep their valued subs employed.
The cost of land already bought is a sunk cost. Some of them will keep building as long as they can cover their variable costs and get something back on the land. Since the variable costs will drop as building slows, new home prices may have a long way to fall.
Except for the data from homebuilders that shows sales are down 50%. Maybe it’ll take some time for them to adjust down, but I have friends who work for a HB and they’re nervous.
Fresno - $3.7 million. WOW!
Currently the most expensive listing in Bakersfield (the other Central Valley Shit hole) is $2.9 million:
http://bakersfield.rapmls.com/scripts/mgrqispi.dll?APPNAME=Bakersfield&PRGNAME=MLSPropertyDetail&ARGUMENTS=-N124861161,-N133748,-N,-A,-N3674902
Bakersfield is hot as hell! For $2.9 mil you don’t even get a pool?
The other thing people miss. Let’s say you built equity in your $300k home and now it is worth $600k. So you take the $300k and roll it into a $800k house.
Now even a mild drop in prices will not only eliminate any equity you have in the new home, but it erases all the equity it took you years to build up in your previous one.
One bad move takes it all back.
it is like a gambler in a casino - they always do one hand too many…they never quit while they are ahead and walk away from the table. i really think it is the same concept
Yep. Good analogy.
I concur, great analogy.
We have a coworker in danger of losing his house. Why? The $150k home he bought now has an additional $450k of mortgage ($600k total) due to the power of refinancing…
Now we’re cutting overtime (we expected this, no big deal…). Well, he simply cannot sustain his mortgage on his normal paycheck (after car insurance, gas, and food. Nothing else.) This shocked the *ell out of me… and he wonders why we aren’t going to help him (rent a room, etc.). So one doesn’t have to move to throw it all away.
Note: I think he did refinance into ARM’s along the way… what a GF. BTW, Joe Momma, I think both home buyers are SOL. Why? The 1st time buyer in the $600k home won’t be able to keep up and the $800k home is going to be a mile under water…
I know from here we have something 2.5 trillion worth of mortgages due to reset between now and then end of 2008. But how much in the way home equity loans? Oh I bet they are just waiting to reset.
Much much worse than that. If you look back to previous price declines, the more expensive homes took a bigger hit even in percentage terms, possibly because $$$$ got tight and interest rates jumped. In DOLLAR TERMS, what normal people use to pay for such non-essential items like FOOD and GASOLINE the price drop was staggering…
guess what. unless you sell your 600k house now and sit on your 300k profits, that equity is going to be wipe out anyway.
“As of July 1, there were 1,801 active listings in the MLS that includes both Visalia and the town of Tulare. That’s up from 1,690 on June 1, 2006; 1,005 in November of 2005; and 437 in July 2005.”
That inventory spike is very typical of the entire Central Valley - and the builders are literally piling on new stock. The homes-for-sale numbers plateau at the end of each month, then jump another 15 - 20%. Can’t go on, won’t go on.
Hmmm, am I a buyer taking a wait and see attitude? Or a person with good income and no way in hell of making payment on a house i can rent for $1400? Oh, #2.
I wonder if they seriously think people like me will decide next week, crap, hon, let’s lie on a mortgage ap and buy an 800k house!
People who didn’t buy in the last few years, ain’t going to be galloping to the rescue I don’t think. O wealthy foreigners i forgot…
Those wealthy foreigners are NOT wanting to go to Fresno. Who will save places like Fresno and Bakersfield?
“I wonder if they seriously think people like me will decide next week, crap, hon, let’s lie on a mortgage ap and buy an 800k house!”
LOL
But one good earthquake and Fresno will be ocean front property! :O
If that’s the case they’ll just rename it New Oxnard. No one will notice the difference.
MIRAGE
Moneyed Immigrants, Rich Ancestors, Generous Expatriates
They will all save us.
LOL - Nice construction!
I keep hearing about the Fed and how they are trying to engineer a soft landing in housing. One reason I question this theory is because in the insane run-up in RE prices, they ignored the problem COMPLETELY. Why would the Fed all of a sudden take a special interest in this topic after sticking their heads in the sand for years?
well, the wealthy foreigners aren’t buying in Costa Mesa either, and we’re right next door to newport beach. In fact, nobody’s buying. O it feels nice to be right after how many years of being wrong dammit…
I know the feeling. I’m in Costa Mesa, too, and I’ve been predicting the crash for a couple of years. It’s gotten bigger, and taken longer than I expected. But it looks like it’s finally going to happen. I have to say that I have somewhat mixed emotions about it, since I have friends and a brother that both bought last year. My brother tried to convince me to buy, and I tried to convince him not to. We both stuck to our positions, though. So, now I continue to bide my time until the prices fall to an affordable level and it makes sense to buy. Kinda sucks, though, having to wait so long. I’ve been tempted to rent a house to at least be able to enjoy having a yard (and getting a dog), but instead I’ve continued to rent my one bedroom apartment in order to pay off debt (student loans) and save for a down payment. In the end it will be worth it, and so I continue to try to do the right thing and wait for the inevitable crash.
Hang in there. You are doing the right thing. I’m in Costa Mesa as well and I think for the hardest part has been holding on to what I believe is the correct fiscal position in the face of so many people who have indeed made a bundle by playing the high risk ARM/IO/NEGAM financing game. I just could not bring myself to do that. Every time I looked at a property the Agents would push with the voodoo loan as the affordable route. Friends and Family all were on the voodoo loan express. Some made money, some are on the egde of becoming FBs. And I have had a ring side seat.
Having a dog is highly overatted!!!!
I disagree! I have 4 dogs and they are the best!
It is difficult living in a 800 sq ft duplex while waiting for the market to crash though…especially since my 9 birds use up the spare bedroom (I used to have a huge outdoor aviary when I owned a house).
Being able to delay gratification is the #1 indicator of financial, emotional, and relational success in life. Hang in there, our day will come!
Because it was Greenspan in charge while they were ignoring it, and now Bernanke is possibly paying attention to it.
The speculators are gone,’ he says, leaving available buyers to come from the local markets in a town with only limited job growth prospects.
Soon to be the future everywhere.
Soon to be the future everywhere
Betamax — succinct, accurate.
BHS new order decline is actually accelerating.
My memory of Fresno is kinda distorted since I lived there 1992-95. But I remember there was an abandoned office tower about 15 stories high that sold for $600,000 during that time. Fresno can REALLY bottom during a real estate bust.
OT, but it seems that fire season has started in So. California. Six fires burning around LA according to the radio. Castiac, Pomona, Thousand Oaks, Lark Sherwood, Chino.
it’s early july and already reports of fires all over Scal foothill regions. The Fire season usually does not kick in till late august sept so this could be a disasterous year for wildfires, especially with the abnormally warm temps and low rainfall this year.
There are reports of fires in the gorman/castaic area along the 5, along the 15 fwy near werrick exit(temecula valley), in chino area(phillips ranch),and other areas. The Castaic area has seen some recent construction of new housing. Also the trangle of the 15/215/30 fwys in San bernardino has seen tons of new residential construction and that area, especially near devore off 215 is fireprone.
Another area is the Temecula valley/southwest riverside region(already there have been at least two fires along the 15 in about a week. Lots of new homes built in this area also.
na, devore’s ok. But only cause it burned a couple three yr ago. Overall, the plant moisture in SCal is MUCH better than it was then. BBLake close to full, etc.etc. For SC, the spectacular burns will continue to be in the areas with the tall pines. Rugged terrain, limited access, etc.
The Lake Sherwood (Thousand Oaks) fire was only 165 acres. Barely a practice blaze.
No one sees the “train wreck” coming until it happens. In my line of work (credit counseling) I’m seeing alot of local OC FB’s who still don’t quite get it! There just now starting (slowly) to realize that the buyer pool has shrunk considerably and that very few can afford a $ 1 million house.
There are still lots of exceptions though…..I’m working with a couple that bought a spec home in Oct 05 for $ 1.2 million - a $ 10,000 deposit was used to secure the deal. Instead of forfeitting the 10 k in June 06 (my recommendation) they finalized the deal and are now the proud owners of a $ 1.2 million dollar home that is soon going to be listed for $ 1.35 million in a neighborhood that covers comps at around $ 1 million (and falling). Monthly carrying costs for the house are in the $ 7 k range.
No amount of logic or reasoning with this couple could convince them of what they want to see. Worse, I think they were primarily motivated by the idea of losing $ 10 k of “real money” (it hurts when you have to walk away from that much) versus the wishful thinking of further price appreciation in the new house.
What’s funny as i go thru Ziprealty for Costa mesa, are all the big new houses shoehorned on tiny lots for like $1.2 mil. Meanwhile, big 4/2s from 60s on great big lots go for 700k. Let me see, what is the better deal…
don’t burst a blood vessel on that tricky one there…!
Not!
Exactly, that’s what I’m looking for. Give me a modest house with a good size backyard. I just don’t get these new houses that are huge and have no yards. I don’t want a house where I’m five feet from the property line, looking into my neighbor’s house.
I just had a coworker arguing with me why homes will keep going up… it took me ten minutes to walk away…
Cest la vie,
Neil
Amazing. Even in today’s loose lending environment, they must have a fairly high income to have qualified for the loan. But they were already in credit counseling and closed anyway? How can such idiots make that much money?
Quick question -
Not to be dense, but if
A) Speculators represented 25% of the home sales market last year; and
B) Speculators are now gone from the market; then
Why is no one concerned that housing starts haven’t dropped by at least 25% across the board?
Seems to me that A+B should equal lower construction numbers . . .
Because HBs don’t figure out how many houses to build based on actual demand. Look at Tulare and Visalia - way too many houses being built. The building process takes several years, from getting the land, to processing and permitting, to actually building. So, HBs are kind of like big ships - they are slow to stop or turn. Once they get to a certain point in a project, they have enough sunk costs that they need to complete the project regardless of demand, because they can’t get any of those costs back unless they sell the homes, and it is almost impossible to sell a partially completed project to another builder. So, once they reach that point of no-return, they are going to complete the project and sell it for what they can.
Add to that, the big HBs have to report to Wall St., and Wall St. demands that they continue to build. If they don’t, then their share prices get hammered (and the executive’s shares lose value and their options may become worthless). And, while it would make sense for all HBs to reduce by 25%, no one wants to be the first to reduce, because the others might no follow suit (trying to gain market share and add revenue dollars), and then the HB that actually acted prudently would again get hammered for losing market share. Kind of like OPEC trying to curtail production - they know everyone is going to exceed the quotas. And, here, the HBs can’t get together to agree to cut production, because then they would face anti-trust suits.
So, they simply keep building all the way down.
I agree with you–HBs take a few years to build out existing projects, since many don’t go through the mapping process anymore, the ability to start quickly is more prevalent than in past cycles (meaning that ultimate slowdown could happen faster than in past cycles), but the buildout of subdivisions still takes a couple of years.
Major homebuilders though are scared (despite what they say in the media). No question about it. They have stopped buying land, and many are walking from option payments and purchase and sale deposits.
My question is to the media–how come no one in the media is seeing how speculators leaving the market, rising inventories, and continued building will lead to falling home prices? It’s not complicated.
Waiting - nice that you had the patience and took the time to explain to WaitinginOC. Kudos to you for that.
Let’s not forget what builders do exactly….builders build homes. If they stop they have to go BK, lay everyone off, and become a shell company waiting for the next upturn a decade or more away. Their stock prices, already down 50% from last years peak, would probably fall an additional 90% of the remaining value within a month. Remember…they all have stock options!
Would you want to be one of the VP’s telling the big boss to “STOP BUILDING”? Ain’t gonna happen.
Because builders are like a dog chasing its tail. Except the dog has more sense and will eventually stop.
These folks will chase the market all the way down until it totally dies or they do. Whichever comes first.
Look, it is entirely sensible for producers to keep producing in a declining market. Look at the gold bear market in the early 1980’s. Sure, production stopped at some high-cost mines, but others kept going.
The market would go down even if the builders illegally colluded to limit production. As long as marginal revenue exceeds marginal cost, producers keep producing. Note though that since the supply curve slopes up, supply will reduce with declining prices until a stable equlibrium is reached.
Until the next bubble.
I’ve got NO PROBLEM with builders making more houses. The more supply, the lower the price.
I don’t get it… how can rich Californian’s be “wait-and-see”ing in California, but buying like gangbusters in Texas? My guess is “Californians” are that mythological stream of endless money that cajoles FBs in Texas to buy an overpriced Texas condo with the expectation that they can sell to rich Californians who will inevitably buy it from them later. I think “Californians” in Texas serve much the same purpose that “rich Chinese” do in the Bay Area.
nope not mythical. One guy JUST sold his place here and is driving to TX right now. Sayonara OC.
Another is in Oregon checking out places. That’s in business of about 200 people.
I have a friend who is trying to sell his home in Oakland and drove up to Portland this week to look for work. He is a teacher and needs to get that job now. He bought in Oakland some 4 or 5 years back for aboiut 200k. Watched the comps go up to about 400 or maybe 500k. HELOC’d out enough to add a room and a deck. Adopted a kid and then his perception of the neighborhood changed and he decided to move to Oregon. This poor FB may not break even. His belongings are in storage in Oregon and he will have to try to sell this house empty from a distance. And yes, I did give him the heads up last year to sell, but … so not all of the migratory Californians are bringing greenbacks.
The job market in Oregon has been tight for a long time, and with the continuing slowdown in the tech industries there, those relatively high-paying jobs are becoming rare.
Good luck moving to Oregon to start a new carrer.
More than one guy. This time last year, I was on a flight to Austin with a guy from SFO that was running down to check it out for his fellow flippers. Austin is old news at this point.
I warned him… but he was clearly not listening. BTW, I was going there on non-RE related business. Austin was clearly (to me) already overbuilt at that point.
Sry… I probably should have put this in the Texas thread.
Good obsersevation! I do often wonder how there can be enough Californians with good credit and perhaps a little capital for a down payment to drive up every imaginable RE market in the nation. What about internationally? Maybe rich Californians are causing the boom in China?
Well.. regarding the San Diego Chevron property now approved/designed/permitted for the development of a 26-story 200+ unit tower upon it, yet being auctioned off… the project listing can be found at…
http://www.ccdc.com/index.cfm?fuseaction=projects.projectDetail&propertyID=568
I find it interesting that the press release goes to the efforts of saying the property is in the Gaslamp District when in fact it is no wheere near it. Sure, it’s within walking distance… but it’s 10-12 blocks away.
Can anyone post links to the major builders in Visalia/Tulare (BHS? CTX?)
FB1, FB2, FB3. As in FsckedBuilder1, FsckedBuilder2, ….
An earlier posting talked about some fool enduring a hellacious commute to buy some shitbox in Lake Los Angeles. I remember reading an article in the LATImes around 1992 that there was no phone service. The only phone was a payphone that the few residents living there took turns using. What sane person would be speculating in such a remote area? Look for their BK date, and a sob story about that they thought RE only goes up.
I just posted a comment on my south bay housing bubble blog last weekend that the bubble seems to be leaking in the ultra-pricey beach areas (in general) but surrounding areas, like Torrance and Inglewood, are benefiting from the beach bubble leak. A housing project called Inglewood Renaissance is doing quite well (one sub-development called Aria is sold out), as are some mega-condo complex projects in Torrance. By the way, the June zip code charts are posted.
The buyers in this area are starting to snub the beach cities and/or are choosing to buy elsewhere and have not fled entirely. It has truly been amazing to see how long it’s been taking for the bubble to unwind here.
My gut feeling is that nobody can run and hide from this bubble, as it has engulfed everything. Buying in Inglewood instead of Redondo Beach might make your dollars go a little further but it’s still bubble money being plunked down on waaay overvalued stuff. So shifting the buying locale might delay things a bit longer, but ultimately fail to avoid the consequences.