A Telling Time For San Diego
Bob Casagrand has the latest on the San Diego housing market. “Second Quarter 2006, Single family detached and attached homes: June home sales were 2,947, down 33% from June 2005. The second quarter sales were 8,822 homes sold down 30% from the second quarter last year. As a matter of fact our second quarter sales were slightly below the fourth quarter of 2005.”
“Who would have thought that the peak April, May and June months would have lower sales than the winter/holiday months of October, November and December. The inventory on July 1 stood at 22,049, up from 20,635 a month earlier. For the past few months we have been adding inventory at a rate of about 1,500 homes per month.”
“I did a rough check on July to date (July 9) to see where it stands, I debated about putting this in this writing because the numbers are scary and they will close somewhat by the end of the month. The first 9 days of July have 303 homes sold for an average price of $559,577 and an average size of 1781 sq ft; the first 9 days of July 2005 had sales of 933 and an average price of $629,168 and an average size of 1749 sq ft.”
“Last July’s 933 sales represented 25% of the month’s sales, if that were to hold this year, well suffice it to say that would be a disaster.”
“Junes’ average price was $638,380 up 3% from last year. However, this increase is explained by the fact that the over $1 million sales represent 10% of June total sales where they were only 8.5% of last Junes’ sales. There are neighborhoods already showing price declines of the 4% to 5% region.”
“Markets can not sustain 30% declines in demand over a period of time and not have price erosion. Here is a trend to consider; sales in the fourth quarter of 2005 was down 10% from prior year, sales of the first quarter 2006 was down 20% from prior year and the second quarter of 2006 was down 30% from last year third quarter of 2006.”
“Another issue that will impact price pressures is that about 30% of our listings are vacant and heaven help the Fed continue to raise interest rates.”
From the homebuilders association. “Most major markets have now entered into a relatively mild slowdown that will stabilize conditions as levels of existing inventory are worked down, according to representatives from the industry. ‘The next two to four months will be a telling time for us,’ said Layne Marceau, chairman of the California Building Industry Association.”
“Comparing today’s predicament to one faced by car dealers every year, the association leader said that builders will be busy ‘moving’06s off the lot so we can get ’07s in.”
“The departure of speculators from the housing market and high prices are forcing builders to market completed homes more aggressively, Marceau said, creating ‘a short-term buyers market, probably the best buyers will see,’ before things return to normal.”
“Although single-family production has slowed in most parts of the state, with the most significant declines in Sacramento and the San Joaquin Valley, multifamily starts are holding up in Los Angeles, San Francisco and Orange counties, said Alan Nevin, CBIA’s chief economist, with San Diego a notable exception.”
Thanks to the readers who sent i these links and this breaking news:
‘A potential financial disaster that could have shaken the housing market was averted because regulators discovered accounting failures at Fannie Mae and Freddie Mac, the new head of the agency that oversees the mortgage giants said Monday.’
‘It still will take years to repair their internal problems, James B. Lockhart said in an interview with The Associated Press. ‘The housing market is so important to this country,’ said Lockhart, who has headed the Office of Federal Housing Enterprise Oversight for about two months. ‘And to have it built on what turned out to be a shaky foundation could have caused significant financial problems.’
Whew! I’m so glad that Fannie Mae and Freddie Mac thing is all straightened out now. Silly me, I thought they were still sorting things through with that army of auditors while the public waited for their financials since ‘04.
This flimsy attempt at confidence building actually makes me less confident. Accounting irregularities discovered…and? What were they? How big? He doesn’t say, but declares all is well.
Ditto to the above.
Puhleeze. If you add to that the flimsy lending standards outside of FRM and FAM the housing market is in for some terrible times.
Year over year price declines in San Diego have finally arrived!! Its about time! Article here: http://www.homepricebubble.com
i doubt the averted anything.when they open their books i bet we see alot of fraud.
ditto that bottomfeeder1:
What I would like to know is what reversal contract did FNM get with the Bankster- lke Chase , Morgan & Goldman…so they could stand there and tell us that FANNIE is solvent?
I had a controller tell me once I don’t care if the whole world consolidates, as long as we have the correct numbers.”
So who gets to book profits NOW for losses over many years…in a duplicate replay of ENRON, but with government intervention!?
“It still will take years to repair their internal problems, James B. Lockhart said ”
Uhhh, perhaps he means it’ll take years to cover everything up so no one will ever figure it all out. Look, no problems here now… Really, none.
These are the typical tactical steps of a person and/or industry facing disaster or who has just been “exposed”:
1) Deny it
2) Try to put a positive spin
3) Quietly minimize your own losses asap
4) Run like hell
5) let the chips fall after YOU are out of the game
It is all about damage control and buying time……
You forgot plan escape/legal defense.
“The departure of speculators from the housing market and high prices are forcing builders to market completed homes more aggressively, Marceau said, creating ‘a short-term buyers market, probably the best buyers will see,’ before things return to normal.”
As most of us on this blog know, this should really read: Marceau said, creating ‘a short-term seller’s market, probably the best sellers will see,’ before things get even worse and a recession sets in.”
“normal”…right. Gotta love that idea. Normal apparently means 20% a year increases ad infinitum. No more jobs, no problem. We’ll just trade Beanie Babies, I mean houses and all get rich.
“The departure of speculators from the housing market and high prices are forcing builders to market completed homes more aggressively, Marceau said, creating ‘a short-term buyers market, probably the best buyers will see,’ before things return to normal.”
Can you believe these guys! RE is cyclical, once it turns it’s not like its a speed boat which can quickly turn in either direction. These excesses will take years to work off.
he can’t even visualize that normal is “maybe” the inflation rate + 1% with buyers actually being to afford the houses they live in for the long term.
It will not be pretty in SD.
I, like many bears, can’t wait to see order restored.
But at what cost?
My good friend (I’ve spoke of him before… makes about $35k/year, bought a $450k+ condo using a toxic loan, didn’t know any better), just decided that SD isn’t as nice as he thought, and is moving back to SF.
He can’t sell his condo for even close to the original loan amount. But he owes more than the original loan amount now anyway (due to the negative amortisation).
He is trapped. He’s going to try to rent it out…
It’s sad to see that he will be financially ruined for one mistake. Yes, it was a mistake. Do I think he should be ruined for it. Nah… he’s a great guy who trusted the wrong people.
It’s sad.
The ONLY people who can’t see that the SD market is imploding is the SD Union Tribune. If I read one more story from their home section I think I’m going to vomit up my testicles.
clouseau.
If I read one more story from their home section I think I’m going to vomit up my testicles.
That couldn’t have been any fun eating them?
Mountain oysters in some parts of the country are a real delicacy.
It’s sad to see that he will be financially ruined for one mistake. Yes, it was a mistake. Do I think he should be ruined for it. Nah… he’s a great guy who trusted the wrong people.
Well, what’s the alternative? You want the rest of us (taxpayers) to bail him out, and millions of others like him?
Agreed. One mistake isn’t really one mistake when you’re making the largest financial decision of your life. The captain of the Exxon Valdez only made one mistake too.
Ah, but you can only captain one ship at time. I’m sure there are many others in similar situations with multiple condos. I think the bubble-heads who’ve made only one mistake will be minimal to the aftermath. It’s the 10-20 sfr/condo flippers/liars that will wreck the economy. I say ‘liars’ because most lie out their ass to get the mortgages.
“I say ‘liars’ because most lie out their ass to get the mortgages.”
Are you kidding me? Haven’t you heard that “getting a mortgage should be as easy as ordering a pizza”. There is no lying required. In fact a good friend of mine was mugged walking in downtown Seattle as he passed a bank and when he came to….he had a toxic loan. He remembers nothing.
Unfortunately, if enough millions (of people) complain about it, then we the taxpayers will bail them out. That’s what tax is for: taking the money from the meek (those of us who save & live below the means) and giving it to those who complain the most….
9/11 victims made off with billions, Katrina victims made off with billions (less $ per person but still money out of my tax dollars), so what’s to stop the politicians to pay for the mortgage bailout?
Folks keep talking about bailout. It won’t happen, at least not in the manner that the gov’t threw billions at the Katrina issue. The first hint that a gov’t in the red almost $9 trillion is creating trillions more to give to underwater borrowers, the folks holding that $9 trillion will be sending them back in short order. Maybe in a clandestine manner they could subsize major banks, but not possible to openly say they are creating trillions to bail anyone out. You just can’t do that when you are a debtor nation to the magnitude that we are.
It is no different than saying the out of work uncle in debt $100,000 (with no income and going further into debt by the day) is going to bailout the family by getting another credit card. Not going to happen.
If anybody doubts whether tax payers will be used to rescue all the FBs, liars, floppers, etc., read “S&L Hell” by Kathleen Day. Several years before the bailout begun many people (senators, FHLB board, S&L community, etc) all new the only way out of the mess was to have tax payers pay. Making matters worse they knew the bigger the bailout the easier it would be to get congress to pin the bailout on tax payers. I hope it doesn’t happen this time around but this blog knows how history has a habit of repeating itself…for better or worse.
LostAngels,
It sounds like you’re of the mindset that the bailout will be in the form of tax increases? The folks who have the money to pay the taxes are the connected ones with the money/power to ensure they don’t raise their taxes. Their voting numbers are small. The rest don’t have the money (living off the house/paycheck to paycheck/in debt up to their eyeballs). They do have the voting numbers. Are they going to vote for the guy who says they’ll have to buckle down and pay more for the folks who are on the verge of bankruptcy? That is why I feel the tax increases to bail folks out aren’t an option. That is how we got here to begin with. Elect the folks who promise to give everything to everybody, and tax the foreigners (by debasing the currency which the foreigners are holding…yes it’s a tax for sure). It’s exactly what got us here in the first place, and unscrewing this collosal mess isn’t going to be as easy as a bailout from increasing taxes, or a bailout by creating a few extra trillion.
“Katrina Victims” meaning the insurance companies. They made out great since BushCo used taxpayer money so the insurance guys wouldn’t have to cough up anything.
No, not insurance companies - Katrina Victims.
They lived below sea level and didn’t have flood insurance. So the gov’t bailed them out. Insurance companies only pay (recluctantly) for stuff you’re actually insured against, not whatever might happen. They had NO insurance, so the Fed’s (us) payed for it instead.
An alternative is unnecessary. It can be sad, even though it’s the least worst outcome.
OT The Daily Reckoning had this today:
The Daily Reckoning PRESENTS: Money is disappearing, and that’s not good
for stock prices, home prices - or what’s left of the Mogambo’s sanity.
Read on…
PONZI ECONOMY
by The Mogambo Guru
My hands were shaking as I looked for the latest report of Federal Reserve
data, especially Total Fed Credit. This is always an awkward moment for
me, as I know that I am going to hate the news, no matter what it is. And
my family hates it, too. That is why they lock themselves in the bathroom
in anxious anticipation of this very moment.
If Total Fed Credit is up, then I am angry that the Fed is creating more
inflationary credit in the banks. If Total Fed Credit is down, on the
other hand, I am not happy either, since this means that credit is not
being created, which means more money won’t be created, which is (as we
professional economists refer to it in our scholarly research papers), The
Big Freaking Bloodthirsty Horseman Of The Economic Apocalypse (TBFBHOTEA)
when you are operating (as we do) a Ponzi economy (financed by inflation
in money, prices and debt) and a Ponzi system of governments (financed by
increasing debt, size, taxes and spending), based on a derivative currency
(electronic digits) that is, in itself, based on a mere fiat/paper
currency, with a banking system that allows itself an infinitely low
reserve ratio (zero retained cash on hand as reserves against additional
deposits or loans).
This brings up the embarrassing fact that in last week’s exciting issue of
the Mogambo Guru, I made a Big Mogambo Mistake (BMM) as was tactfully
pointed out by several readers, which was (as embarrassing as it was),
actually a delightful change of pace from the usual e-mails from readers
(e.g. “You’re stupid! I hate you!”).
Well, what was this big mistake? I inadvertently used figures for loans
and deposits of New York banks, and not the total for U.S. banks. The real
figures, in December 1996, are bank credit was $2,769 billion, and savings
was $2,214 billion. Now, in the here-and-now, July 2006, loans and leases
are $5,738 billion and savings is $5,457 billion.
The interesting thing, which was (and is) the whole point, is that also in
December 1996, required reserves were $48,935 million. Today, 10nyears
later, and with twice as many loans and twice as many deposits in the
banks, required reserves are only $44,139 million, down about five billion
bucks!
This means that every dime of debt and money created by the banks for the
last 10 years was literally created out of thin air, as there is no
fractional-reserve backing (in cash) as a rainy-day fund for one thin
dime’s worth of the doubling of loans created, or the liability created by
doubling of deposits! Zero reserves! In fact, reserves are about 10% less
than they were 10 years ago!
But this is not about how I make mistakes due to chronic laziness,
inattention to details, or slovenly work habits, but about Total Fed
Credit and how it creates the credit, which creates the debt, which
creates the money that creates the bubbles. And not only do they create
bubbles, but actual spending cash, as we learn from Stephen Church, of
Piscatasquaresearch.com, in his essay at PrudentBear.com entitled:
“Consumer Crunch Update.” He writes, “The latest 2005 economic statistics
show that consumers depended on new debt for more than 90% of their cash
flow during 2005. Most new consumer cash flow now comes from new debt.”
Intrigued, I urge him to go on. He does so by saying, “Consumer liquidity
has resumed its downward trend. Liquidity has fallen to 3 weeks of funds
on our preferred measure. Consumer money supply now flows backward.”
I’m thinking to myself, “Hmmm! I wonder what this ‘money supply now flows
backward’ thing means? And, more importantly, will I have to do actual
work to find out?” Luckily, Church immediately went on to explain:
“Historically, household incomes were sufficient to generate a cash
surplus after consumption and debt service. Now, households have a large
cash deficit.”
But I have stalled looking at Total Fed Credit long enough that out of the
corner of my eye I can see that my wife and family are timidly peeking
around the bathroom door, wondering if it is safe to come out. With a
chuckle I fire off a couple of quick shots from my .45 ACP out through the
window. They immediately duck back inside, slamming and locking the door.
I can hear them praying to Jesus to protect them. That ought to hold them
for another 20 minutes or so.
So, imagine my conflicting emotions upon seeing that Total Fed Credit was
actually down by $1.1 billion last week. I look at the chart. I note that
in 2000, Total Fed Credit, astonishingly, also stopping growing,
admittedly for a little longer time than this. But it caused the stock
market to crash, and the S&P500 lost about half its value over the next
couple of years. There have been a couple of other short times since 2000
when Total Fed Credit stopped growing, and the stock market was not
pleased, but it did not actually crash. Mostly because, I assume, all the
other central banks and “investors” were taking up the slack
But things are a lot different now. There is a growing consensus that
global liquidity may be drying up, just like it seems to be doing in our
own Federal Reserve.
So, if you have forgotten The Infallible Mogambo Market Indicator (TIMMI),
it is that if Total Fed Credit is going up and keeps going up, then stocks
and the economy will go up. If Total Fed Credit is not going up and keeps
not going up, then stocks will not go up. They will, instead, go down,
just like everything else when money is withdrawn from any overheated,
highly inflated, grossly overvalued, monstrously over-indebted market.
Now, combine that Classic Mogambo Sign (CMS) with the dismal fact that the
Fed only bought up a miniscule $52 million in government debt last week.
And then, combine that with the ugly fact that foreign central banks only
put a stinking, piddly $830 million into buying more U.S. government and
agency debt.
Money is suddenly disappearing, and this is not good for stock prices,
housing prices, or my wife’s natural homicidal belligerence toward me when
she realizes that some of her money has, likewise, disappeared from her
purse because she stupidly left it unguarded on the hall table. I mean, I
was just standing there. I see the purse. I see she is nowhere around. I
notice that neither she nor my tattletale daughter can see me. I have no
impulse control. So, who is the real victim here?
But this is not about what my wife believes versus what she can prove, but
about how the lack of new money means that the Ponzi-stock market, the
Ponzi-bond market, the Ponzi-real estate market, and the Ponzi government
program market are going to be too, too, too starved for funds to continue
rising in price.
Except gold, which will soar when people (by which I mean those whose
retirement funds were stupidly entrusted to these markets) will be panicky
and desperate to make up for their losses as they realize that all their
other stupidly inflated stock assets, and stupidly inflated bond assets,
and stupidly inflated real estate assets are almost all destined to fall
mightily in price from their current hugely inflated prices.
Everyone will look around for someplace safe to put their money, and they
will eventually look at gold and silver. They will discover, just as all
other people have discovered through time and space, that there is no
other asset that has ever performed like precious metals. Nothing has even
come close.
Soon, gold and silver will be rising, rising, rising, because all the rich
and smart people will cash out of stocks, bonds and real estate to buy
gold and silver, making the price rise and rise, month after month, year
after year.
And as we slower, intellectually impaired, low-level, gutter Mogambo-type
trash (if you know even who The Mogambo is, that is you) will also look
around for someplace, anywhere, anything, to make a lot of money fast,
because nobody will be hiring. In agony, we real morons out here
accidentally get sober enough to realize that we have watched other people
constantly making big profits in gold and silver, and now we want in, too.
The rush will become a stampede, as the stories of the fortunes made in
gold and silver will fill the newspapers, airwaves, newsletters and
popular magazines.
And that, my Adorable Mogambo Darling (AMD), is how gold and silver will
have a spectacular bull run. That’s why you should buy gold and silver
now.
Until next we meet…
The Mogambo Guru
for The Daily Reckoning
Mogambo sez: The way that the gold lease rates have just collapsed tells
me that the gold market manipulators are going to try to manufacture a
sell-off in gold. Get ready to do some bargain buying! Whoopee!
Editor’s Note: Richard Daughty is general partner and COO for Smith
Consultant Group, serving the financial and medical communities, and the
editor of The Mogambo Guru economic newsletter - an avocational exercise
to heap disrespect on those who desperately deserve it.
The Mogambo Guru is quoted frequently in Barron’s, The Daily Reckoning and
other fine publications.
Make the guys who sold him the toxic loan pay. I think it’s time to bring back usury laws. It’s tragic the way these companies cajole college kids to take on credit card debt when they have no jobs, they charge them 30% interest. It’s criminal - Tony Soprano would be ashamed of what these sharks are doing to people.
I don’t want to speak for clouseau here but I think you guys may be missing the point. Many people enlist the help of so-called “experts” when negotiating difficult and complex financial transactions and trust said professionals to give sound advise and observe a code of ethics (as the commercial goes.) What I got out of the post was that there are a lot of unscrupulous scammers out there, or perhaps just unknowledgeable RE folks that shouldn’t be (appraisers, mortgage brokers, Realtors, etc.) What will their accountability be in all of this when the millions of people that they advised are now bankrupt?
Of course, this doesn’t abdicate personal responsibility for anyone, but I believe some heads need to roll and the industry needs to be cleaned out and exorcized. In other words, if you go to a CPA or a lawyer or a doctor and get royally screwed over due to incompetence or errors, there are channels available to address your concerns, but not in this situation. In the biggest financial decision of most people’s lives, any mistake and you’re pretty much on your own regardless of how much money these so-called experts are making on every transaction. In fact, the standard stock-broker disclosure about risk of loss doesn’t even enter into the discussion with most Realtors or mortgage brokers (RE never goes down, right?) I’ve never felt sorry for flippers or scammers, but I feel bad for the regular Joes that aren’t RE-savvy and are now nothing more than another FB.
Exactly my stance, Darth Toll. RE brokers/agents are described in the MSM as the experts. When buyers use a buyer’s agent, they assume they are getting good financial/RE advice from a knowledgeable, licensed source. No way these people are innocent in this mess.
Additionally, it used to be that lenders would not lend if they had any reason to believe the borrower could not pay back the loan (back when they actually cared if the loan would be paid off). Borrowers knew this, and assumed the lenders had more knowledge (along with mystical formulas and such) and experience — and relied on these people to inform the borrowers if they could not qualify based on affordability models. The buyers were never informed of the shift from lenders (who wanted to be paid back) to salespeople (who made money on the originations and couldn’t care less if the loans were repaid).
These RE “experts” do what they do, day in and day out. Most people only buy houses a couple of times in their lives. They are not aware of changes in the system, or why housing prices rise, etc. except for what they are told. Even I, who asked many people (2003 & prior) and tried to research the reasons for rising prices, had a difficult time finding out what happened (toxic loans/EZ credit). Unless you were looking for an EZ loan, you wouldn’t necessarily know about them (we only considered standard 30-yr, fully amortizing FRMs).
We can’t expect “average” people to know everything about every field (finance, RE, medicine, automotive repair, etc). The people/companies who do this (tell people which house to buy, for what price, and how much they can borrow) for a living need to be held liable, IMHO.
Ouch
Sorry, Jim! As I’ve stated before, both my parents were RE brokers (only mom was active) and RE investors. Many agents/brokers have been honest, but there are a whole bunch of them (the majority, from what I’ve personally seen, heard and read about) who were not honest (perhaps they were ignorant, but I find this hard to believe).
You’ve seen all the RE “experts” in the MSM — not to mention those on RealtyTimes.com. Read them…they’ve all been saying things would continue to go up, and that the reason for the price increases were because “EVERYBODY wants to live in XXX city/state,” which we know is total hogwash. Then, they scared ignorant buyers into taking on suicide loans and maxing out their monthy allocation to housing costs. Not good info. Potentially devastating advice. A lot of families are likely going to be working for a lifetime to undo just one financial mistake which they made based on the (false) belief that they could trust an “expert”.
You are NOT included in my rant against those in the lending/RE community.
It’s sad to see that he will be financially ruined for one mistake. Yes, it was a mistake. Do I think he should be ruined for it. Nah… he’s a great guy who trusted the wrong people.
It’s sad.
I hate to be harsh, but it is important that people like your friend get burned. Why? Because this market has to cool off (and fast), because it is harming the economic health of this country when the prudent, educated, hard-working can’t make enough to live in areas where they are needed. Jobs are being outsourced because companies are refusing to pay middle-class wages, partly because the cost of living is throught the roof.
Do I think he should be ruined for it. Nah… he’s a great guy who trusted the wrong people.
Boy, am I on the fence about this sentiment. Yes, there are terrible, terrible sharks out there. A couple of weeks ago, I actually overheard a real estate agent at an open house in my building telling a prospective buyer that the condo they were standing in was “actually on the first floor of the building. In fact, you enter the building on the second floor and then walk down to the first floor”. In fact, the apartment they were in is about half below ground (the fact that it’s on the same level as an underground garage should have been a dead giveaway) and has the nasty history of plumbing problems to prove it. Nevertheless, someone bought it. And if they didn’t check the minutes or have the place inspected, it’s their own damn fault. And no, I didn’t stop and let the prospective buyers know that this broker was lying through his teeth, and knew better (given that he’s owned a place in the buildng for years). I made the assumption that they, like me, are practicing adults and would execute due dilligence once the sales pitch was over.
What makes someone making $35K a year think they can afford a $450K condo? An aggressive realtor in cahoots with an equally carnivorous mortgage broker? Or willful ignorance coupled with capitalistic longing (i.e., greed)?
When I was making that kind of money (pretty much right out of graduate school) I never for one minute thought I could afford that much real estate. Or any real estate, for that matter.
If the brokers are at fault for your friend’s screw-up, does that mean that if the guy at the 7-11 talks me into taking up smoking again, he’s at fault if I get lung cancer?
I don’t think so. I think your friend needs to sell asap and chalk up his losses as the price paid for a valuable lesson in good money values.
Your good friend making $35k bought a $450k house?
I got no pity. I know how to spend money like an idiot too, but I stop myself.
I make over $130k per year including bonuses, and I *know* that I can’t afford a $450k house. Why some bozo making just over 25% my salary thought he could, is utterly beyond me.
Amen to that….
1) .28 mortgage to gross income ration
2) 20% down
3) credit/debit history analyzed
4) proof of income
What happened to the strict lending standards that used to prevent people from committing financial suicide?
Unless I’m missing something, someone making 130K, even under stringent lending standards and with prudent fiscal responsibility, unless in a really horrid interest rate environment, can afford a 450K home, let alone if they brought a really nice DP greater than 20 percent. Now if the bonuses make up a sizable percentage and are somewhat random, then yeah…. that changes the mix.
Oh, and by no means is this an endorsement to buy
I’m waiting with my nice DP until after a 450K home can really be bought for 450K or less. Value != Price.
Your friend caused quite a bit of pain.
Sure it was spread out - in the form of other buyers that will buy based on his comps - sellers that will sit their homes on the market and chase it down based on his ridiculous price - brokers / realtors that think milking this gravy train will last forever - he LED them on just as much as he was led on himself.
By swallowing the kool-aid and not doing his homework he hurt many others.
He would gladly have taken $100,000 on the upside. Why shouldn’t he be willing to take $100,000 on the downside?
I think this will have some upside, though, folks having to stay put. I blogged about this, but my thesis is that in typically ‘young person’ neighborhoods where usually people rent for their 20s then move out to the burbs, with the influx of ignorant buyers getting into loans they cannot afford, my hope is that the bubble popping will require them to put down roots and turn these towns to more established, family-oriented places.
Closeau,
I’m sorry to hear about the big mistake your friend made. I recommend that he sits down with a financially savy person who doesn’t want to sell him anything and determines if and how he could swing it. If not, he should send the keys to the bank rather sooner than later. Disliking SD alone doesn’t seem sufficient cause to me though. In California, I have heard, the bank can go either after the house or after his money but not both. Any savings of him outside his 401(k) will probably be lost (and he deserves it, if you think about it), but maybe he can avoid bankruptcy, and if not, he should do it now and work hard to never do it again.
Regards,
Peter
he may be a nice guy but he is no financial wizard.do not buy a property you cannot rent out for your payment.and that means the worst possible scenerio on these adj loans.
The folks who bought at or near the top are the saddest stories. I was almost one of them. Thank God for this and Patrick’s blog.
“The first 9 days of July have 303 homes sold for an average price of $559,577 and an average size of 1781 sq ft; the first 9 days of July 2005 had sales of 933 and an average price of $629,168 and an average size of 1749 sq ft…”
Significant drop in both volume and price …
I love the people who think they will just “rent it out.” All these people want like $3k to rent the house they can’t sell, when prevailing rent for a nice big apt. with pool, tennis courts, gym and stuff is like half that. Welcome to the world of renting, folks. Here’s a little tune we like to call, Supply and Demand…
Agree.
$450K loan + fees, he probably needs to rent $3200/month just to break even on a I/O loan , 7%. The market of renter willing to pay $3200/month to live in a condo is very limited.
Making $35K/year he doesn’t seem to have the deep pocket to be able to to take a monthly loss for the next 10 years until the market returns to last summer’s price.
Making $35K/y he can’t even afford to cover the note if every single dollar he makes goes directly towards it. How did this bozo even get the loan? After taxes in CA he makes $25K. That is barly enough to eat. He can’t afford to rent shelter. He has no business buying RE. No wonder RE is so expensive The barrier to entry is a ditch.
No wonder RE is so expensive The barrier to entry is a ditch.
Classic!
I like the way he is comparing same size /sq footage properties .
From these numbers it looks like prices are already down.
This guy sounds like a big time bear. It should be the last time he writes anything for RealtyTimes… Maybe he’ll be posting on this blog instead.
Actually, he does read here.
Ben, You can tell who reads here? Do you see our emails when we log on…or just when we blog?
Never ever assume you are anonymous anywhere you go online. The host of the site can see your ip address (essentially the same as your computer’s phone number) possibly a computer name (probably the same as a username and domain) and plenty of other info (which if logged could be compared with the same information as used to post (if you post using the same user name/email address from multiple computers it doesn’t take a whole lot of work to link them). Being able to link these on a massive scale is what makes Google very rich.
If you want a small layer of anonyminity online go do some research into anon proxies.
As best I recall he sent me an email once.
I LOVE that he reads here!!! Bless him for telling the truth! He is brave!
Bob has been pretty bearish for some time. He is one of the few realtors who’s analysis accurately reflects the available data. As such, he has earned respect from many as a straight shooter. I am curious though if he has suffered any retribution from the RE community.
Accuracy check here.
Bob didn’t factor in how lazy agents are in reporting closed sales. You really can’t use the recent sales data from the MLS unless you go through the tax rolls to check the pendings that have sold, but still show pending. Today’s count is 367 closed for the same time period, and there’s probably another 50-100 that’ll report in the coming weeks and months.
Admittingly, it’s still disasterous, no matter how you look at it. The Jim ratio (actives/pendings) is way over 5:1, and that’s after I checked the tax rolls for accuracy. I said that once it gets to this point, the buyers have won.
It’s over, the buyers won.
Sellers either need to scramble on price to get out, or plan on having the kids inherit the house. Because we’re not going to see today’s prices again in the foreseeable future, and I’m using my telescope.
Click on my name (above) to link to http://www.bubbleinfo.com
Jim - is this a sizeable slowdown even compared to months past ?
IE: is this thing accelerating ?
I’m about as bearish as they come - but the speed of this downturn has me a little nervous.
Well then, on that note. Oh waitress! A round of painful ass-poundings for the San Diego Flippers at the corner table please!
Uncle git,
Is this thing accelerating? You better believe it.
The Jim ratio measures the overall health of the marketplace. Specifically, are the actives overwhelming the pendings? Do pendings decrease just because of the volume of unsold active listings?
Look at these stats for North SD County:
(Carlsbad, Oceanside, & N. Vista)
Feb 28 1,197 Actives/394 Pendings 3.03:1
May 3 1,417 Actives/353 Pendings 4.01:1
June 10 1,715 Actives/303 Pendings 5.66:1
I think there’s a relationship here - the more unsold listings there are, the fewer pendings.
If some sellers give up in the coming months, it might help, but I’m pretty sure there will be more foreclosures to pick up the slack - they know no seasons.
This market has Humpty Dumpty written all over it.
http://www.bubbleinfo.com
If you have not checked out Jims Blog, its really an intersting and unique window into the workings of Real Estate in San Diego county. I cannot applaud Jim enough for taking the time to put that kind of information together, and to go against the grain to put out the real story.
Thanks Sig - now I owe you and GetStucco a beer.
For those not in San Diego, I think you’re getting a glimpse of what’s coming to your town soon.
San Diego is the bubble leader!
Bob is a true professional, smart, hard working, insightful, and has an understanding of the markets that is a result of a long career running businesses in several continents. I had the chance to meet him, and he’s a real nice guy too! His business savvy is amazing, and he takes that understanding to his role as a buyers’ consultant. Each month, he spends many hours putting the MLS data into an Excel spreadsheet, to make his reports. The guy is amazing. As far as retribution, I don’t think so. Although a realtor posting in the forums over at piggington.com (sdrealtor) is insanely jealous of Bob’s success and calls him names everytime Bob’s name is brought up. This realtor hides behind his pseudoname and is a real coward.
And a significant drop in the price per square foot. The 2005 psf was $359.73. and the 2006 psf was $314.19.
Approximately 10% lower house price, and 12% lower square foot price.
$359/sq-ft (in 2005) vice $314/sq-ft (in 2006).
That is about %13 drop in price per sq-ft.
Sorry OlBubba, I did not see your post.
The major news outlets will ignor this article. Maybe some crazed upside-down owner going postal at the local home loan branch will get their attention, but generally I’ve been surprized at the lack of in-depth reporting (as if it exists) on this coming implosion. Markets like these will be shortly the norm. Screwed, blued. and tatooed.
Yes, the main stream media will ignore it because the news business is entertainment these days, and ratings are king!
Nobody wants to watch bad news; plus it’s all about keeping the people calm as long as possible so they keep on spending!
btw, anybody else get a chuckle of this guy’s name? Casagrand…as in ‘big house’..the irony! lol
> Nobody wants to watch bad news; plus it’s all about keeping the people calm as long as possible so they keep on spending!
Hollywood did well in the thirties, because nobody wanted to watch the bad news all the time, which they could see everywhere around them. That didn’t stop the depression though.
The major news outlets will ignore this article, because , so far, only local markets fall. If housing looses on a national base, they should take note.
What we’re witnessing, independent of housing, is the death of the middle class due to productivity increases (thanks to cheap computing and the internet). From a great article on the phenomenon…
There is no easy fix for this short of banning technology. Wages for the middle class and poor are rising slower than inflation, rates are going up, forclosures are about to get out of hand.
Maybe meritocracies aren’t compatible with the American Dream.
Low-skilled workers are, or should be, “middle class” in your opinion? Why?
Because the alternative is living in Mexico.
I shouldn’t be that flippant. Clearly, there are some low-wage workers who never have been, and shouldn’t be in the middle-class. But the issue for me is…will there even be a middle-class 20 years from now, apart from a few lawyers and doctors here and there?
http://en.wikipedia.org/wiki/Neo-luddism
Earlier there was a KB Article posted I tried to comment but it wouldnt go so here it is:
Remember the business week article from March 6, 2006:
http://www.businessweek.com/magazine/content/06_10/b3974141.htm?campaign_id=search
KB Homes said - KARATZ: I don’t see a fundamental slowdown other than in the hottest markets. Things don’t continue through the roof forever. This is a breather in prices, and that takes some steam out of the market. In some markets, 10% to 15% of buyers were speculators. You take them out, and the market drops 10% to 15%, and it takes three to four months for whatever overhang there was to be sold, and then the market stabilizes. That’s where I think we will be three to four months from now.
3-4 MONTHS LATER! Now they say things are $hitty until the end of 2007!?!??!
“In some markets, 10% to 15% of buyers were speculators.”
LOL! Me thinks you’d need to go deep into the heart of West Virginia to find a market where speculators are only 1% to 15%.
By the NAR’s own admission, 28% of all homes bought in 2005 were purchased by investors. The 2004 number was only slightly lower. And I can almost guarantee that the actual percentage was higher in all years — lots of folks probably lied through their teeth on their mortgage app. on this issue, to get a better rate. And how many of the addtional 12% who bought in 2005, saying they bought a “second home”, had little intention of keeping it long?
Those percentages are scary as they are, and even scarier when you realize that they’re basically bullsh*t.
Didn’t the NAR admit that the combo of investor and second home purchases were 39% in 2005 ? If this is true you know it was more like 50 to 60 % speculation and second home purchases in 2005 .That’s what scares the hell out of me .
They have one Subdiv here in NE Atlanta with houses in low $400s. Told my wife and I that if we would close by July 31 they would reduce price by $40K and throw in $3K for closing. Atlanta area was not supposed to be one of the “overbuilt” areas?
My friend makes 35k/year and bought a 450K condo with no money down. Um, your friend is a speculator. He won’t suffer nearly as much as he ought to.
Too bad I’m not looking to move to SD. I would definitely use Bob C’s services. The only problem is that a person who is that straight shooting is probably going to be drummed out of the NAR.
The NAR is digging their own grave if they try to muzzle the few honest agents in their midst. They go from “mostly BS” to “total BS”.
‘The next two to four months will be a telling time for us,’ said Layne Marceau, chairman of the California Building Industry Association.”
Are we ever going to see an end to quotes like this? “The next (insert time frame here)_______ are going to tell us where (insert area/market here)________ is heading.” Every RE talking head seems to throw this in so they don’t have to admit the market is heading downward. Just admit it. The next 2,3,4,5-12-24 mos is not going to change the direction of this market. It is and will be heading downward. Just CYA yourself and fess up.
I am on a vacation back to the Midwest from San Diego right now and I think that the folks back home could use a good dose of Midwest sensibility. Folks here drive American made cars, or at best a Toyota and the occasional BMW. I have yet to see a Hummer, Porshe, Mercedes, Jag. Homes in this city average 120k and are very nice, and for 400k you live like a king. Salaries are just slightly less than San Diego. My neighbors on three sides are a doctor, another doctor and a lawyer, and all three live in 150k homes, drive modest cars. And the other neighbor owns his own business that does 60+ Mil in sales a year and he is probably worth over 25 Mil himself. He lives in a 150k house too - for 25 years. Three doors down the neighbors are also loaded, having just sold a 40 employee family business for millions. They drive a 1994 Toyota minivan and live in a 120k home. Our neighborhood is very average around here (prices etc), and even though these folks could afford bigger and better, they simply choose not to. Come to a place like this and you will quickly realize how insane San Diego has become!
I’m not sure that driving an American car is demonstrative of any sensibility. That aside, I spent a year living in the mid-west, but could never do that again. Why? The weather is terrible most of the time (horrible hot humid summers, very bitterly cold winters, really only a few nice weeks in spring and in autumn). Also, the place is swarming with insects, including stinging ones. It’s a mystery to me that anyone ever thought that place was suitable for human settlement. Without artificial heat and air conditioning, everyone would die.
Also, there are many religious people there, and there isn’t much diversity. Coming from the coasts, many people would feel quite uncomfortable in the mid-west.
It was definitely cheap though, and during the all too infrequent good weather, it was pretty pleasant.
Born and bred on the east coast and I love, love, LOVE the midwest!!! Then again I also love, love, LOVE winter - that bitter cold builds character :-). Lived in Chicago for seven years and would move back tomorrow if I could. Have even considered moving to a nice little town called Dubuque, Iowa (have a friend from there).
Personally, I don’t understand the draw to California. Wouldn’t want warm weather year-round (I like my Christmases white, thank you). And other than weather, there’s really nothing else to offer that I can’t get in other places (IMO). Well, except for the highest real estate prices in the nation…
Why? The weather is terrible most of the time (horrible hot humid summers, very bitterly cold winters, really only a few nice weeks in spring and in autumn). Also, the place is swarming with insects, including stinging ones. It’s a mystery to me that anyone ever thought that place was suitable for human settlement. Without artificial heat and air conditioning, everyone would die.
Also, there are many religious people there, and there isn’t much diversity. Coming from the coasts, many people would feel quite uncomfortable in the mid-west.
Please…I’m from Ohio and out here in SD there are many more stinging DEADLY bugs (spiders, scorpions) and snakes here. As for the religious nuts, while we have some, no one would ever think of pulling a “cross on Mt. Soledad” series of votes, rejections and court cases.
I have found San Diego to be generally less open, less welcoming, more judgmental, more conservative, and much more selfish and rude than back in the Midwest. Also, the location/climate/weather is often insanely hot, on fire, and definitely more toxic.
Oh, and there’s that overpriced housing thing too.
I think the people out here could most definitely use a good dose of Midwestern frugality and politeness.
In other words, the whole line about “everyone wants to live here” is crap. It IS a great place to visit, absolutely, but living here is not worth the price. I’d move if my husband didn’t HAVE to be here.
And yes, of course, there are good things, but I’m only bringing up the bad to remind you that it’s not the paradise it is portrayed.
I’m with you.
Me too. I lived in the midwest and really enjoyed it. People are modest for the most part and friendly. I will admit the weather rarely cooperates, but that’s hardly a steep price to pay for living among normal sensible people.
I’ve never owned a foriegn car and I won’t buy one. As long as cars are being designed and built in the USA I am going to buy one. My choice and I don’t judge anyone for not following. Just creeps me out to see huge American flag stickers on rear windshields of foriegn cars or trucks,,,
Lived in SD county for 30 years. Moved to Colorado then Arizona and have absolutely NO desire to go back to SoCal. Crowded, rude, “e habla espanol”, low pay-high prices, Camp Pendleton, North Island…You can keep the whole place.
You must live east of the 5. Going inland, San Diego is all those things you described. Living on the coast, though, the weather is balmy, the breeze always present, no snakes or scorpions…
(Grew up in the Midwest, been in San Diego for the last five years…)
…HA HA HA….Couldn’t have said it better. My year in pergatory (N.W. Illinois) included eau-de-hog and “praise the Lord” as routine responses to weather comments in the check-out line… I’d live in a yurt in a state park before I’d slink back there for lower housing prices. Meanwhile, I watch our MLS for Jackson County (overlaps Josephine a bit) steadily rise: 1312 listings in January (a nosebleed high for our small, southern Oregon valley) to today’s 2523…. “Price reduced” signs are proliferating…. Wile E. has run off his cliff… just not looked down yet.
This self-satisfied rant, and your several posts describing your outsized salary, fulfill all the insufferable stereotypes of of the coasts. Namely that everything east of the Sierra Nevada or west of the Poconos is a super-religious, siberianesque hell-hole. Not true. It is not that much better on the coasts. Sure there are amenities, but having to deal with annoying, materialistic, mincing, terminally egotistical people is certainly a negative in coastal settings. Not to mention gangs, traffic, and smog. The midwest is full of nice people and beautiful places. Sure, it is no Big Sur, but neither is most of the West Coast.
Bottom line is there are two types of people. There are those who live for living in their houses. These people love the midwest since the cheap housing gets them a palace with a bigscreen. Then there are those that live for outdoor activities and cultural events and the house is not so important. They are attracted to the big cities. Neither is better, just a matter of choice.
Yes, we are all horrible, materialistic people here in Cali, especially So. Cal. and our weather is terrible and we have tons of pollution and stand still traffic. Can everybody please spread the word so that people will stop coming here from other places?
Thank You.
Jay-
Yes, I know exactly what you mean. I have family in Mn, and they’re refreshingly unassuming about income, and far less concerned about status than Californians I know. Not that I want to endure their winters, but we could stand to take ourselves less seriously here.
Sing along with me now…
I feel the Mercedes Bends coming on.
Jay…sounds just the like the sort of place I’m looking for. Where is this place exactly??
I basically agree with you in concept that places like SD have gone crazy with the expensive life style and need of status. If you live in the midwest, however, you learn quickly, if you are a successful professional or business owner, that you will be despised if you show any enjoyment of wealth. Many people will go to their grave with piles of money not enjoyed (as if they could die and take it with them). People on the coasts have learned to enjoy their money a little with homes, cars, vacations etc. To each his own.
> If you live in the midwest, however, you learn quickly (…) that you will be despised if you show any enjoyment of wealth.
If you need to show off your wealth, I’d pitty you; if you do it obnoxiously, I might despise you, too. If you enjoy life and show it, I feel happy for you. As you might have guessed it already, I like it in the Midwest
he uses the phrase “god help us” at the end
whoops sorry… “heaven help the fed raises rates”
Read about I need your assistance on the OC Register Log.
Please
I meant blog… pretty please
Melody:
Log was appropo.
Too many impersonators and childish behavior gets past moderation.
Joe Six pack is too stupid to get it even in OC and must resort to ad hominem attacks rather than debate the concepts.
No thanks.
Usually you post there and you do damn well, but I totally understand
Can’t resist a “pretty please” and a smile!
Gave it a shot… we’ll see if my post gets past the censors.
Melody: Where is that foreclosure in LN (if you dont mind)? I live in Mission Viejo and am interested in tracking it.
Oh and I am game if you and other Orange Countiers want to do a bubble party.
First American forecasts over 100,000 defaults in the next 3-5 years in LA/OC:
http://tinyurl.com/phzp4
(I think this link could deserve it’s own heading.) Personally, I suspect this forecast may be on the low side. There could be 100,000 defaults in the worst year of the next 3-5 years.
That is interesting since their last Mortgage Payment Reset study was significantly more benign.
First American is slowly moving to be more bearish over time.
This is worthy of a stand alone post.
(Nobody wants to watch bad news)
Haven’t watched local news much have you.
Greed sells.
Sex sells more.
Fear sells most of all.
Especially mixed with schadenfreude (lots on this blog) or misery loves company (see, I’m not the only FB, it’s not my fault!)
He would gladly have taken $100,000 on the upside. Why shouldn’t he be willing to take $100,000 on the downside?
Amen
Sidenote:
Why can’t executive compensation work this way too? If a CEO gets paid a 5 million dollar bonus in a good year, why doesn’t the CEO have to give 5 million back if he makes a bunch of stupid mistakes and the company loses a sh*tload?
This is something I agree with to an extent. Why is there only upside potential for CEOs but very little downside risk? If you screw up shareholders value you only make 10 million a year as opposed to 50 million. I fully believe that someone like Bill Gates who has generated huge value deserves the money he’s made. But not those CEOs who’ve done the opposite leaving their shareholders to pay the costs.
Because typically — not always, but typically — the CEO is one of the largest (if not THE largest) shareholder of the company. If the stock goes down (or is worth less in terms of a private company valuation), so does the CEO’s assets… so CEOs have a lot of incentive to keep the company going well.
Don’t forget that most CEOs are owners of small or medium businesses. We’re not all making $10M a year. (I WISH!!!)
And in principal stocks may fall, but options can expire worthless. Many compensation packages only vest is the stock is above a certain price by a certain date for a certain amount of time. Hence, the great motivation to cook the books.
I am not a conspiracy theory nut or anything, however, lately I really feel that ALL of the markets are rigged, and this also applies to top level executive compensation. About 5% of the population controls ALL of the wealth in this country and the rest of us are pawns in the game. Sure, they will keep us in line by paying some mid-range executives a nice little six-fugure salary and paying the workers enough to subsist on or be able to obtain debt to buy toys (plasma T.V.s, ATVs, etc), all while rewarding each other with tens-of-millions of dollars while doing very little. Who approves the millions of dollars that loser CEOs “earn”? It is the Board-of-Directors. How do you get on the board of directors? By being buddies with the other elite robber barons. They all simply play the game rewarding each other with the big money, while sucking everyone else dry. Individual investors in the stock market have no power and it is simply luck if you can make any money. When the BIG money folks want to stick you, they can pull out, cause the markets to go down (the money you lose), then re-enter at the lower price. That’s why most big stocks are cyclical. I am a conservative capitalist, but it makes me sick to my stomach at what CEO compensation is in this country. Something must be done, but there is absolutely no control or accountability. It must be gut wrenching for highly skilled, highly degreed personnel who slave away at a company who will never, ever, be considered for top level positions, even though they know more about the business, are more skilled, etc. They just aren’t in the elite group that are CEOs or Directors. It is a different form of a monarchy, either you are a “royal” or you aren’t. Rant over.
I certainly agree that the markets are rigged. So does this letter writer:
from BARRON’S:
Those Bond Bums
Barry’s Bulls Newsletter
5509 Monroe Rd., Charlotte, N.C. 28212
June 30: No one buys a bond anymore for the interest coupon. The reality is that the bond market is dominated by big purchasers like banks and government entities that are only interested in currency manipulation and market contrivement. They are not investors per se. Now, [stocks are] under the same spell. If the economy is as good as the government says and the stock market is such a great place to put money, why so much need for intervention? I have to believe that when investors spot real values, they buy them. Investors don’t need government meddling to coax them into asset acquisition. Else, we lose our balance.
Speaking of balance, did you check out Thursday, June 29? Yeah, the Fed raised the fed-funds rate to 5.25% as everyone expected. Naturally, the markets exploded higher. That’s right — higher rates from the Fed instigated a huge market rally. Don’t bother me with slowing housing numbers, inflation concerns, $73-per-barrel oil, pension elimination, Iraq, North Korea, budget deficits, consumer debt or any other piece of trivia. Sure, there are still some good things going on, but all that matters is the wall of money that floods the market on magical days like [these].
Which sectors did best? Does it matter? They were all up. Every ETF on the planet was up…Why would you buy a five-year U.S. Treasury at 5.1% when the fed-funds rate went to 5.25%? This is the new era, baby! Thanks, Santa…uh, I mean Ben! What do we do now?
– Barry Ferguson
It is a different form of a monarchy, either you are a “royal” or you aren’t.
Interesting observation.
I know a few individuals from childhood who are now
members of the “royals”.
So what, if anything, do they have in common?
Perserverance and focus. Street smart. Gifted
with an undefinable “X” factor.
Otherwise, a very diverse group.
So many outcomes in life seem to be based
on random chance..
That X factor is luck. Most rich people readily admit it - just ask.
Let’s all remember the “Maestro” of this debacle. Sir Alan Greenspan. He’s the one who orchestrated the fiasco and knew full well what the consequences would be.
> (Greenspan) knew full well what the consequences would be.
Don’t let the media hype blind you. Greenspan was often clueless, like we all are somtimes, e.g. about the speed of the slowdown in 2000, and sometimes even admitted it, e.g. the “conundrum” of low long-term rates. I still think Greenspan bears part of the responsibility for the housing bubble, by not putting higher weight on inflation in asset prices. The CPI stayed low under Greenspan not due to low inflation but its systematic miscalculation, now the CPI is catching up and Bernanke must increase rates into a recession.
I don’t think Greenspan was clueless when he hinted that variable interest rate loans were the way to go when buying a house.
The Fed isn’t responsible for monitoring or controlling human greed. Liquidity in the marketplace can go up and down, but its your choice whether or not to snatch up those easy-to-come-by dollars and invest in something hairbrained. The hope of the Fed is that increased liquidity leads to investments that benefit the economy, but if you choose to sink $$ into fixed assets that are already overvalued, then so be it. The alternative would be a restrictive form of government paternalism. People have to accept responsibility for their own actions. If you see a market getting overheated, stay away. If someone tells you a certain market “always goes up”, laugh in their face.
Here is an interesting little bit just found about the levees in CA, potential for flooding, and development in the area.
http://www.pbs.org/newshour/bb/science/jan-june06/levees_3-06.html
‘a short-term buyers market, probably the best buyers will see,’ before things return to normal.”
How many people rushed in to buy SUNW as soon as it fell below $95/share in 2000, thinking it was a short-term buyers market, probably the best buyers will see?
Oh, you don’t have to tell me. I just sold my last xxx shares of SUNW a couple weeks ago. Bought at 8.25 a few years ago. Sold at 4. Pfft.
Although I suppose, on second thought, that I should be fair and mention that I also bought xxx shares at 31.25 and sold at 59 in 11/2000! (Bought a new car with the proceeds. Still drive it. Worth a lot more than that stock would be! hehe.)
But I’m betting that you don’t have many Suns in your racks….
The ridiculous runup in housing prices over the last 6 years is attributable to an industry out of control. Crooked brokers, realtors, agents, and whatever else they call themselves, in bed with pet appraisers have destroyed the long-term market for short-term gain with blatant fraud that everyone knows about, but noone does anything about.
They are continuing to build more. What is the total number of homes in SD now?
San Diego
http://sandiego.craigslist.org/rfs/180574970.html
I had to respond to this… thanks.
it is gone
Txchick,
That is absolutely hillarious! No offense to those in San Marcos (my dad also lives there), but no way this thing is worth more than $600K — even in today’s bubble market. In a “normal” market, it **might** be worth $300K or so, IMO. Wouldn’t put my kids in that school district, either. Major gang-land there.
couple of things about the Casagrand report.
#1, things are accelerating. 10% drop in sales in 2005Q4, 20% in 2006Q1, 30% in 2006Q2. Carlsbad Jim attest to this too with his Jim ratio.
#2, there’s 30% vacancy in all of the inventories, now at 22,800. that means roughly 7,000 homes are creating serious negative cashflow for a whole lot of folks. I just looked at a tract in San Elijo Hills. 50% of the homes for sale are vacant. And that equals roughly $5000 drained out of a flipper’s pocketbook every month for each of those vacant properties. Guess where those vacant homes are going to end up if sales continue to falter?
Bubble Markets Inventory Tracking
OT, but eye-opening… So, Cheney is betting on a weak dollar, and Bush has the greatest part of his assets in RE…who do you think i smore financially savvy?:
Cheney’s Betting on Bad News
“Vice President Dick Cheney’s financial advisers are apparently betting on a rise in inflation and interest rates and on a decline in the value of the dollar against foreign currencies. That’s the conclusion we draw after scouring the financial disclosure form released by Cheney recently.
“As of the end of last year, Cheney and his wife, Lynne, held between $10 million and $25 million in Vanguard Short-Term Tax-Exempt fund (VWSTX, news, msgs) (it’s impossible to be more precise because the disclosure form lists holdings within ranges). The fund’s holdings of tax-free municipal bonds mature, on average, in a little more than a year — meaning that the fund should hold up well if rates rise.
“The Cheneys held another $1 million to $5 million in Vanguard Tax-Exempt Money Market fund (VMSXX, news, msgs), which is practically risk-free and could benefit from continued increases in short-term interest rates. And the couple had between $2 million and $10 million in Vanguard Inflation-Protected Securities fund (VIPSX, news, msgs). The principal and interest payments of inflation-protected bonds rise along with consumer prices, making them good inflation hedges.
“Expecting dollar drop?
The Cheneys also had between $10 million and $25 million in American Century International Bond (BEGBX, news, msgs). The fund buys mainly high-quality foreign bonds (predominantly in Europe) and rarely hedges against possible increases in the value of the dollar. Indeed, its prospectus limits dollar exposure to 25% of assets and the fund currently has only 6% of assets in dollars, according to an American Century spokesman.
The Cheneys’ total assets could be as high as $94.6 million, according to the disclosure form. The vice president’s advisers say the vice president pays no attention to his investments. His lawyer, Terrence O’Donnell, says outside money managers supervise the investments. “He has nothing to do with it,” O’Donnell says.
“As for stocks, the couple held between $1 million and $5 million in Lazard International Equity (LZIOX, news, msgs) and a like amount in Lazard Emerging Markets (LZOEX, news, msgs). The Cheneys’ relatively few U.S. stock fund holdings include $1 million to $5 million in GMO Tax-Managed U.S. Equities III (GTMUX, news, msgs).
“Bushes’ investments meek
President Bush may be bold in his public policies, but his private investments appear decidedly on the meek side. Bush and his wife, Laura, reported on their disclosure form that they held combined assets of $7.2 million to $20.9 million.
“As of the end of last year, the Bushes’ two largest assets were their Texas ranch, valued at between $1 million and $5 million, and a blind trust, also valued at between $1 million and $5 million. Of course, it’s impossible to tell how the trust is invested, so it could be heavily in stocks. The White House would not make the trust’s managers available for comment.
“Beyond the trust, the First Family’s investable assets are largely in super-safe Treasury notes, money market funds and bank certificates of deposit. The Bushes’ holdings in these instruments totaled between $1.7 million and $4.4 million. The president also listed a health savings account worth between $1,000 and $15,000.
“The Bushes confine most of their stock investing to their relatively small IRAs and to the president’s retirement account from when he was governor of Texas. As of last December, that account was worth $108,016 and was invested entirely in Vanguard Wellington (VWELX, news, msgs), which owns stocks and bonds. The president’s IRA, worth $87,074, includes $30,142 in Capital Income Builder, a balanced fund that’s part of the American funds family; $30,866 in Growth Fund of America, another American fund; and $24,219 in zero-coupon U.S. Treasury bonds. Nearly all of the first lady’s IRA, worth $8,556, was also in Capital Income Builder.”
Hey y’all…
Regarding my friend from above (the $35k/yr bought $450k condo)
Yes I know that my friend made the mistake, and yes I know that he is responsible. And I realize there is no other palatable option but for him to be financially screwed. So screwed he must be. But it doesn’t mean that I think he SHOULD be screwed. And I will never feel happy about it either.
Sheesh, you’d think you guys never ever made a mistake ever before!
FWIW: He can’t sell. He can’t afford to sell, after realtor fees, etc. Besides, NOTHING is moving around him anyway. He’d have to probably price his place 10% under what he bought it for (maybe even less than that!). Adding in Realtor fees, neg. am. we’re looking at near $80,000 he’d have to bring to the table.
He’s an honest guy, so he’s going to try to hold on. (yes, I realize it’s a mistake, but he has no other option at this point- and he doesn’t believe in BK… and besides it would kill him to go BK because he’s self-employed, and needs to raise capital for that intermittently)
He drank the KoolAid big time. The problem is: so did almost everybody I know in San Diego, at ALL price levels. My old partners (who make in the low $200’s range) were buying $1-2 M dollar homes.
In the end, they all used the “formulas” of the time… given to them by the “experts”.
If my friend has to go down, then so better WaMu who sold him that crap. (which of course could start the collapse of the entire American Finanical system)
In the end NOBODY knows what will happen with the housing collapse. Which goes back to my original point:
“I, like many bears, can’t wait to see order restored. But at what cost?”
This bubble may be big enough to cause the big D. The stupid will take us down with them, like a drowning man who tugs you under water.
Are you sure YOUR arms are strong enough to keep treading?
(this is why a bailout is possible, maybe even probable, because unlike the simple dotcom crash this permeats EVERYTHING. This may be LTCM x 100000000000)
clouseau
clouseau …..You can’t tell me your friend didn’t know that he was in over his head on that loan amount ,based on his income ,in spite of the lender allowing the loan . Your friend was a speculator . Anytime I have lost money regarding speculation ,nobody bailed me out .
I don’t even know how the government could bail out up-side- down investors . If the government bails out up side down banks it still isn’t going to help the speculator . Correct me if I’m wrong but wouldn’t the bail out be for the investors in loans,(retirement funds etc. ), not the speculators in real estate .
“Your friend was a speculator”
Agreed
“Anytime I have lost money regarding speculation ,nobody bailed me out .”
First of all: are you sure? Have you ever deducted losses on your investments from your taxes? (investments are not too dissimilar from speculation). If so, you’ve been BAILED OUT.
Secondly, I never said anybody should bail out my friend. Read above: I wrote:
“Yes I know that my friend made the mistake, and yes I know that he is responsible. And I realize there is no other palatable option but for him to be financially screwed. So screwed he must be. ”
I think you’re missing the point:
The point wasn’t whether or not he is a speculator (although I put him in a different “speculator” category than the people buying 10 homes, and the flippers)
The point wasn’t whether he should be bailed out or not(I don’t think he should be bailed out)
The point is that HE IS MY FRIEND AND IT IS HARD TO SEE A FRIEND IN PAIN. I empathize with his situation, even though I recognize it is much of his own doing. That said, if he must pay, then I want WAMU to pay as well, as they were speculating on him.
You can all feel happy and secure and superior that he’s gonna get royally screwed. And that’s your right. But I don’t have to be happy that he’s going to be screwed. And in the future I’ll bet that YOU will find that there are people that YOU don’t think “deserve” the harsh punsishment that they are going to get, right or wrong. who knows? it might even be you. And then others will say “ah, caveat emptor”.
clouseau
clouseau . During the last turn down in real estate , I had a few really good friends that lost a good amount of money in real estate . I have lost money in stocks from time to time .
I do not wish any bad on anyone and I am not gleeful about the pain this correction is going cause . I understand your empathy .
I fully agree that the loan officer/realtors in your friends case did not have his best interest at heart . Its likely that they will get off free regarding how they set your friend up for a big fall .
My point was that a bail out will be for the banks/retirement funds that go under ,not the individual
investor ,like your friend .
It was hard watching my good friends take a bath in real estate . Your a kind man clouseau ,but sometimes nothing can save people from costly mistakes .
Yes, we may have but we’re not stupid to buy a 450K house on a 35K salary.
He deserves to have his ass nailed to the wall, and he will. (Nothing we can say or do can influence that either way.)
The fact that he’s your “friend” colors your thinking but we can’t seem to generate an emotional response to that.
“The fact that he’s your “friend” colors your thinking but we can’t seem to generate an emotional response to that. ”
Exactly. Which was the point of my original statement. The emotional ramifications will be terrible IMO for all but the most coldhearted when the fallout begins.
Like a smoker who gets lung cancer. Is it their fault. Yep. Does that make it a happy occasion when they get cancer? No. do they DESERVE to die? I don’t necessarily think so. Should they die? Yeah I guess.
same with my friend.
clouseau
Well, if that’s the extent of your statement, it is trivially true.
I don’t wish misery upon my fellow humans, but we didn’t ask them to sign on the dotted line, did we?
Many lives are on the cusp of being irretrievably ruined. Hopefully, some will learn from their foolishness. Many will not.
Life will go on…
“June home sales were 2,947, down 33% from June 2005.”
Funny — two days back I posted a Realtor (TM) sales blurb from the SD Union Tribune where he boasted about 5000 smart San Diegans who are buying a home each month. It looks like he was about 2053 high on his monthly sales estimate, and that despite the fact that we are at the peak of the sales season.
Well naturally he rounded it to the nearest 5000….
I saw that blurp in the real estate section, “What do these buyers know that others don’t?” or something like that. I think he got that question reversed about 180 deg.
Wait, we got it all wrong, prices are actually rising:
http://realtytimes.com/rtmcrcond/California~San_Diego~marvincollier
What a genius!
It looks like 20 months of inventory for San Diego by August 2006.
Trend is 24000 inventory with maybe 1200 sales according to B.Casagrand
“The inventory on July 1 stood at 22,049, up from 20,635 a month earlier. For the past few months we have been adding inventory at a rate of about 1,500 homes per month.”
“The first 9 days of July(2006) have 303 homes sold for ………..“Last July’s 933 (first 9 days)sales represented 25% of the month’s sales, if that were to hold this year, well suffice it to say that would be a disaster.”
Getting pretty close to 24000/1200….20 months inventory… ouch! That is after the supposedly hottest months of the RE market year. Not looking too good going forward. By the way Union Tribune is still reporting that it takes 66 days to sell a house in San Diego. Guess they forgot to average in the expirations,cancellations,withdrawn listings and house that just flat out never sell. Watch the Union Trib print that there are just 5 months of inventory next week.