‘We’re Like Our Own Country’ In California
A pair of reports from California. The Union Tribune, “Shares of Brookfield Homes dipped yesterday after the company cut its full-year forecast for home sales, mostly because of slowing markets in San Diego and Washington, D.C. The company, which also builds homes in the Bay Area and greater Los Angeles, blamed the bulk of the sales decline on the San Diego/Riverside region and in the nation’s capital.”
“For the first six months of the year, Brookfield had orders for 94 homes in San Diego/Riverside, where it has seven communities actively selling. That compares with orders for 342 homes in six communities for the same period last year.”
“‘Those numbers are very consistent with the year-over-year decline in home sales,’ said Peter Dennehy, VP of a real estate advisory firm. ‘I think we’re all used to it now. Year-to-date sales levels, whether you’re looking at the new or resale market, are off about a third.’”
“Rising interest rates and buyer uncertainty are driving the slowdown. San Diego County’s median sales price was $490,000 in May, down from a peak of $518,000 in November, according to Dataquick.”
The Tri Valley Herald. “A chief economist for the California Association of Realtors said the housing market isn’t a bubble ready to burst, but more of a souffle with prices of higher-end homes coming down more than others.”
“Marian Norvis, president-elect of the Central Valley Association of Realtors based in Lathrop, said Leslie Appleton-Young confirmed the differences between seller expectations and market direction.”
“‘A lot of that seller expectation, in our neck of the woods California and the Central Valley in particular, (they) think the national (real estate) news applies to us,’ Norvis said. ‘But it doesn’t. We’re like our own country.’”
A reader posted this from Jon Lansners blog:
‘the median price for an Orange County home for the 22 business days ending June 22 is $633,000, says DataQuick. That puts the median below May’s record median of $635,000. Of course, the median for the entire month of June could edge up.’
Or go down…
“For the first six months of the year, Brookfield had orders for 94 homes in San Diego/Riverside, where it has seven communities actively selling. That compares with orders for 342 homes in six communities for the same period last year.”
“‘Those numbers are very consistent with the year-over-year decline in home sales,’ said Peter Dennehy, VP of a real estate advisory firm. ‘I think we’re all used to it now. Year-to-date sales levels, whether you’re looking at the new or resale market, are off about a third.’”
Ummm - is this new math or something? Last I was taught 94/342 is almost 72% drop - and he says it’s off by a third???? That is a CRASH by any math I ever learned.
I just thought the same thing! Problem is, most people just accept the “third” thing and don’t question it. To be down 72% is a crash I believe…
No, its a soft landing. A crash would be anything over 100%.
LOL! Good one!
I’m thinking 1/3 of what they were, not off by 1/3.
I’m thinking less than 1/3 of where they were 1 year ago is a crash.
Yup, it’s a crash, big-time. And they know it. Vultures, please don appropriate attire.
But… But… A souffle is mostly egg whites that have been whipped up into an enormous bubble!
High end homes will come down the most and have the most room to drop. They begin to look attractive to suckers as $100K-$200K reductions entice. Brings the median up too. The real suckers are buying the high end PoS now. They will get creamed.
My mom, who has been in the RE biz for over 20 yrs here in Cali says she watches the more expensive homes, in her experience that’s where the decline begins.
She was soo spooked by what she saw in the last bust that she never bought another home. Still rents today. I’m hoping I can get her to buy with cash come the bottom this time.
I thought I was the only one who thought like that. I sold in 1989 and never bought again either. It’s like people who lived through the depression.
LA Notary — now THAT is a telling story. One of the best I’ve read, relative to sock-in-the-gut impact.
It’s not a bubble, not a balloon, it’s a souffle. Yeah, that’s it. Ok look, it can be a bird, or a plane, or anything dang they want to call it, the imagery still works. OK, call it a souffle. Well, like a souffle can fall, so can the market, when a souffle gets put in an oven that is overheated it get burned, and useless, and soon, just like a souffle, they’ll be able to stick a fork in it too.
a souffle, froth, upside-down cake, whatever… the housing bubble is starting to make my stomach rumble.
Froth upside-down cake, that’s funny!
This could degenerate. Into Froth-ty. The Snowman.
“Froth-ty the Snowman
Was a dour, Fed-speaking soul
With a printing press, a monetary mess
And currency made of coal
“Froth-ty the Snowman
Was a dour, Fed-speaking soul
With a printing press, a monetary mess
And currency made of coal”
A currency made of coal, Describes with great precision, where we are today.
LOL!
Or more appropriately, in honor of recently-retired Fed chairman Easy Al, The Speculator’s Pal:
“Froth-ty the Greenspan
Was a dour, Fed-speaking soul
With a printing press, a monetary mess
And currency made of coal”
With a printing press
Uncle Al’s Magic Money Machine
More souffles pop than survive in my experience.
When a souffle starts to collapse, there is nothing can stop it. The results are unappetizing and likely inedible. Sounds about right to me.
Mole Man — great analogy. Someone was trigger-happy to have used “souffle” as an example. Not that me or my boys would ever try one ‘o them thangs, mind you.
I would say that whipped egg whites are more aptly described as froth — lots of little bubbles which add up to a mass of fluff.
I think the journalist might might have typo-ed and substituted the word shuffle for soufflé. But soufflé does more accurately describe the collapsing situation.
maybe a better description would be an “eclair”
did anyone see the movie “National Lampoon’s Van Wilder”
We’re like our own country.’”
What country are they like? Egypt? France? My vote goes to Turkey, home of the 20% interest rate.
Ya know, it’s different there!
Mexico
The State of Denial is more like it.
…Argentina comes to mind, though anywhere in the third-world would do…
Actual Argentina facts. I have inlaws who live there.
They have a great housing market now, with huge gains since the crash in 2001/2002.
Then again, mortgages are virtually unavailable—-loans, if you can get them are maybe 2-3 years, and you need 50% down. Most people buy in cash.
I mean literal cash. It’s a bizzare system but I guess nobody trust the intermediaries so the buyer actually brings a briefcase of physical banknotes to the closing, and the seller and agent count them and then sign over the deed.
A country simultaneously very sophisticated (the nicer areas of Buenos Aires are indistinguishable from say a nice part of Italy) and completely screwed up.
There is a tax on bank transactions—yes if you buy something by check or visa, the government takes its cut. Apparently there is enough fraud that they need to do this to raise revenue because they can’t find the money otherwise—but then of course this means that honest people get taxed and those running a black market all-cash operation get away with stuff.
Why buy today when you know the price will be lower tomorrow?
THIS is the cruz of housing’s problem for about the next 5 to 10 years.
Ken — you’re right — this is the crux of the problem for buyers, including myself. Since I am going to want a place with space for my grandchildren to visit, I may well buy before the bottom of the market, but it most certainly will result from a low-ball offer that will embarrass my agent and potentially piss off the neighbors.
‘But it doesn’t. We’re like our own country.’”
You wish.
Marininte. Good one. The Succinct Expression of the Evening award to you.
I guess The Fed’s rate hikes do not apply in California?
Rhodes Island is like their own country too.
“Why buy today when you know the price will be lower tomorrow?
THIS is the cruz of housing’s problem for about the next 5 to 10 years.”
I’m hoping it will be just be 3-5 years but 10 years may be right. Former Fed Governor Wayne Angell said that the US housing market could suffer something akin to Japan’s 14 years of deflation. The “they aren’t making any more land you know” argument REALLY applies in Japan but look what happened to their real estate prices.
We’re like our own country.
Pitiful. Norvis should come up with some fresh material. Where have I heard that before? Oh yeah, “Texas, it’s like a whole other country.” Well, Texas may be willing to put up with a lot from the people of CA but I doubt stealing their credo is on that list. Like they also say: “Don’t mess with Texas”.
I give it another 1-2 years in California and the media won’t care what the CAR economists have to say. They’ll be too busy covering the sad state of buyers losing their homes, jobs and the dramatic slowdown of the economy.
side note from my significant other’s sub prime lender, she had to do 10 foreclosures last Friday, which is a big jump from the 2 per week they were doing around San Diego prior to last week. It has cometh…
In HOME GALLERY magazine , they are now listing “Home Liquidation Sales “and out of state bank repo and short sales foreclosures etc.( volume 5 issue 7) . They even mentioned “Flipper” sales ,( strange for a rah rah real estate magazine . You can also go to http://www.HomeGalleryMagazine.com.
Goes to show that out of State people are trying to get the California people to invest out of state by scoping up their problem loans .Don’t know if they are good deals or not .
I went to the site and checked out their “Featured Home”. It was a McMansion in Murietta listed at $1.9mil. For those outside of So. Cal., Murietta is a long-distance commute town for San Diego. People move there when they can’t afford it here, and drive an hour each way. It’s not hell, but you can see it from there.
The actual magazine has forclosures in it .I think you can pick up the magazine at markets for free .
“the housing market isn’t a bubble ready to burst, but more of a souffle”
No wait, it’s more like a balloon…no, wait, it’s more of a watermellon…no, I know, it’s more like and onion - it has many layers. Or maybe a cake! Cakes have layers! Or maybe it’s an ogre…
Keep on whistling past the graveyard if it comforts you…
You can make all kinds of fancy salads whilst’ chopping up home prices on the permanantly high plateau.
Actually the culinary term for a souffle’s untimely demise (due to frothiness or perhaps too many cooks) is a “collapse” so it’s very appropriate.
As long a Realtors are using “Culinary” terms to confuse people who eat at Waffle House/IHOP and have never seen a souffle how about being realtistic and call the market “Burnt Toast”
“Marian Norvis, president-elect of the Central Valley Association of Realtors based in Lathrop, said Leslie Appleton-Young confirmed the differences between seller expectations and market direction.”
“‘A lot of that seller expectation, in our neck of the woods California and the Central Valley in particular, (they) think the national (real estate) news applies to us,’ Norvis said. ‘But it doesn’t. We’re like our own country.’”
Boooy! Where are thinkers like this when I have something to sell. People like this are the very reason we have bubbles in the first place. They will get burned and badly when this market comes apart next year. Job losses,bad credit,unqualified borrowers!!! Where will the buyers come from?
“‘People that have money have a wonderful area that they can come to. And it’s close enough to San Francisco and the peninsula that they can get away for the weekends,’ Young said.”
“There is nothing more attractive right now than Nevada.”
‘People want to move here. People want to live here. There’s never going to be a housing bubble in Florida or California because the demand here is too great.’”
“So despite the cooling of the market, do not expect real estate prices to return to the halcyon days of the late 1990s. Too much outside money is lined up, seeking to move here and often retire here. These dollars will hold up the market, allowing softness but keeping prices relatively stable.”
‘We are not Reno and Vegas where they’ve overbuilt and it’s rampant speculation.’”
This guy sounds delusional. I think he needs to be committed. Would someone please call for the men in the white coats.
I have been in California for most of the last 22 years, and I must admit, I am now quite sick of it. I honestly wish I could talk my wife into getting out of here, at least for a few years to live somewhere sane.
That being said, I am seeing more homes with “Sold” signs on them. I am going to be very interested to see if they go back on the market, as getting a loan in an era of falling evaluations is probably going to be a bear.
On a sad note, one of the larger houses in our neighborhood that has been on the market for a couple of months caught fire early this morning. I think at least one of the elderly couple who live there was taken to the hospital. Seems it started in the garage and spread to quite a bit of the house. These were nice old people, it’s a shame it happened to them.
Not that it has any bearing on your neighbor’s fire, but somehow, house fires become more frequent in a declining market. They seem to happen often at businesses that are failing too. I guess insurance companies will be increasing the ranks of their fraud investigators now…
If the fires are being deliberately set, it makes no sense at all. The insurance company - if they don’t catch you - will simply pay for the house to be repaired, at which point it can be put back on the market. By which time the price will have gone down some more.
Not to mention the title showing a burn history…
California is a world of it’s own, but the time has finally come — the house market bubble is here and it’s serious. The bottom dropping off is being denied, but just take a look at the inventory of homes not selling. Sellers never to rethink their pricing and not be so greedy — it’s turned into a buyer’s market now and it’s going to stay that way. Outrageous house prices in CA — buyers need to stop buying and stall the market — then you will see prices drop. Don’t buy now…..you’ve waited this long — you can wait long for that deal of a house that’s just ahead. Another six months should throw some panic into the market of sellers. Realistic house prices are way overdue in California. With all the other problems CA is facing, you would think that buying here is very undesirable — people are moving out of state these days, especially retirees to more affordable living.
“it’s turned into a buyer’s market now and it’s going to stay that way. Outrageous house prices in CA — buyers need to stop buying and stall the market ”
I think buyers are not buying. But I’m thinking of the South Bay part of LA, since I lived there 3 years until this April and visit the area every few weekends or so. I think prices will drop there by 55% in the next 6 years. Meanwhile I’m loading up on short term US Treasuries and precious metals. Many people are doing the same. Also the Fed is raising rates. Out of economic common sense, buyers are refusing to buy. I’ll go out on a limb and tell you of places in California that will most likely NEVER recover from the RE bubble burst. The cities in the farm belt of California, Fresno, where I was born and raised. Prices are about 70% overpriced. There is no reason why prices have gone up sharply since late 2003 in the Valley except specuvestors. They are going to take a hell of a debt bath. Plus, those valley cities are merely commuter towns (even Fresno) to the Silicon Valley. Gas will go up above $5 per gallon in a few years and people are going to return to the big cities. Maybe doubling up in rentals, returning to having roommates just like in college days! But I know that LA is desirable. I can find great paying jobs and don’t have to be a mortgage slave. I can find rents far below mortgage payments. Don’t need a house. A roof over my head works the same, whether I pay rent to a corporation or rent (in the form of property taxes and mortgage interest) to the government and loan company. Add to that, LA has been improving its mass transit over the years. In north Redondo Beach you can catch the light rail and take it downtown and go to Pasadena. Public buses are pretty good there in the South Bay. I even saw people using Segways from time to time while living there.
I agree with you especially about Fresno. I’ve lived in Fresno my whole life and I don’t get the rise in prices. My wife and I were looking to buy in late 2000 when we first got married. The house she liked was selling for $100,000 that same house now would be listed at around $300,000. Why? Nothing has changed around here to justify the increase other than speculators. I will rent until it gets closer to those prices again.
“‘A lot of that seller expectation, in our neck of the woods California and the Central Valley in particular, (they) think the national (real estate) news applies to us,’ Norvis said.”
More like the California real estate news applies to the rest of the country, as we are the proverbial canary in the coal mine. When California’s real estate market sneezes, the rest of the country will come down with pneumonia, as there will not be any more California investors to buy up the sea of newly built condos and McMansions in the craton.
A little ego-centric perhaps. Almost the reverse of it’ll never happen here. Your view is, if it happens here it will happen everywhere. It may pull back nationally, but only a little bit if you factor out the true bubble areas.
CA will crater - big time - since that’s where the bulk of the extreme debt is. By extreme I mean in raw dollar terms and the degree of leverage on the absurd property prices. It may cause an overall economic pullback but id you look back at ‘90-’95 the stock market didn’t crash then. Economic activity slowed during that period but overall nothing financially near the housing debacle that gripped CA. This time could very well be different but I hope not.
Cali is going to be worse than other places. most of the places Cali people are going are bubbles on their own anyways. they just threw a little more gas on them.
As the Chinese wished for us, we live in interesting times.
Beats re-runs.
California has turned into a 3rd world socialist lousy place to live. I spent 16 yrs there. And it has gone downhill so much that I couldn’t begin to describe it. And I have lived in both No and So Cal. The infrastructure is falling apart, taxes are high, crime amuck, prices of most things outrageous, most people in debt beyond their eyeballs, failing schools, so many undocumented people that social services can not realistically service the needs of the actual tax paying people, dirtiest air in the country, lousy water, etc. No wonder people are leaving in droves. We packed up and left. Best thing we did. No more rant.
If you want to see falling apart infrastructure go live in OR.
I will take the roads, sewers and water system of So Cal anyday over OR.
Did anyone see the real estate houses for sale section of the LA Time’s today? I counted at least 5 bank owned forclosures!! First I have seen in a while! I guess it is starting!!
Maybe the sky is already falling, but here in my area (Pasadena) there a lot more houses for sale that are STILL waaaaay overpriced compared to 2001. I’m talking about 799,000 homes that don’t even have air conditioning (and this place is HELL without it, let me tell you). Yes, some are quaint, but some are not, and there still “offered” at that price. These homes were 200,000 5 years ago, so not even 50% reduction will do.
Well said Marie,
Yes, things are still insane up here in S. Oregon too (median home price ~$550 k, median income ~$50k!). I agree with the person above who said don’t buy ANYTHING for a year or two. Let the greedy bastards fry. After a year or two ( or three) of basting in some 1-2k monthly shortfalls on their “investments”, the flipper/specuvestors tentacles will loosen around the West and allow us normal folks to regain footing in this part of the world. Patience until then..it will come to pass.
Just saw this in the OC Register
http://www.ocregister.com/ocregister/money/homepage/article_1206268.php
That is a very interesting article.
Our own country? Hell, California is it’s own planet! I’ve lived in a lot of places, but nothing like this. Irritating sometimes, but beautiful and entertaining if you stay north or on the coast. The central valley, however, is on our sister planet…Planet Suck.
Ah California, home of convertibles, wine, beautiful beaches, hot babes, and the best climate in the country.
Unfortunately the “California Dream” that originally brought many to CA has been its own undoing as the population swelled, freeways became parking lots, mountains were eliminated by smog, crime soared, and property values/taxes shot up. And then there was the invasion from south of the border.
All of this “pressure” caused people to consider leaving the beloved “good life”. The basic “gotta get out of here” urge was implanted in many.
Then the stock market crashed, 9/11 happened, and the groundwork was laid for the “perfect storm” in RE and the birth of several new “species”.
Suddenly the only “safe” investment was RE. Investment clubs sprang up fueled by books (Rich Flipper, Poor Renter) and TV ads (”anyone can make tons of money just buying and selling RE with no money down!”). This gave rise to the first new species called “flipper”.
Pretty soon EVERYTHING in the country was being bought up flippers. This huge demand for “investment properties” drove prices up. Way up.
The FED kept lowering rates. And the banks chipped in with sub-prime suicide loans. Appraisers were bought. RE commissions rocketed. City property tax collections put city budgets into the black. It was a big party. And house prices had nowhere to go but to the moon.
Suddenly those disgruntled Californians had homes worth 2 or 3 times what they thought they were worth just a few years ago. And all these equity-rich folks decided it was a good time to get out. And it was.
So they sold and pocketed enormous gains giving birth to the second new species, the dreaded “CA equity locust”. They took wing and flew in great black clouds to Phoenix, Florida, Oregon, Washington, Idaho, New England. No place was safe from infestation. And wherever they landed they drove up prices in all their “target areas” and spawned the third new species, the lesser nonCA equity locust.
And who enabled all these CA ELs to take wing? FBs who bought at the top thru “creative financing”.
CA EL: Would you like to buy my POS for top dollar?
FB: Sure, but I can’t afford it
Bank: Let me help
CA EL: Thanx for funding my early retirement…….ciao
FB: Now I can live the “California Dream”
And they all lived happily ever after?
Well not really.
The CA EL bought at “the top” and eventually saw most of the CA equity eroded
The FB was just that
The bank no longer exists
There are a lot fewer RE agents and appraisers
The cities frittered the tax money away and are now back in the red
Moral of the story….to be continued.
nice little morality tale.