The ‘Price Of Admission’ To Californias’ Housing Bubble
Some housing bubble reports from California. “The housing market slump in California slogged onward during June with sales falling by their biggest annual margin in nine months and the median price hitting a record $575,800, a trade group said Tuesday. It’s also the first time that sales fell under 500,000 for two consecutive months since 2001, the association said.”
“‘I don’t think there is anybody who is forecasting a significant decrease in prices. But I think that over the course of five or six months or for a year we’ll be seeing very moderate price increases or maybe even stationary,’ analyst Nimi Nattagh said.”
The Sacramento Bee. “Amid a confluence of economic factors, homes on lots smaller than 4,000 square feet have become, along with condominiums, a new standard in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties.”
“About 40 percent of new-home sales this year in the six-county region involve houses on lots smaller than 4,000 square feet, according to the a research firm. Five years ago in El Dorado, Placer, Sacramento and Yolo counties it was a mere 1.5 percent.”
“Fast-growing Natomas, north of downtown Sacramento, especially has become rife with large homes packed onto less than a 10th of an acre. Increasingly, such smaller-lot homes have become the price of admission for first-time homebuyers in the capital region.”
“‘As funny as it sounds, you can get a 3,000-square-foot home on a 4,000-square-foot lot,’ says Barry Grant, territory president of KB Homes.”
“‘It’s all about what you can afford,’ said Wil Mar, a first-time homebuyer who has only a ’strip of dirt’ behind his new home in Natomas’ Hamptons subdivision. Mar says he’s happy to be a homeowner in Sacramento. But he sometimes longs for the bigger home lots he says are selling in New Mexico. ‘Here,’ Mar said, ‘everybody is being crushed into little tiny spaces.’”
The Daily Breeze. “The statewide housing slowdown appeared evident in some South Bay cities such as Torrance, which saw 1.2 percent appreciation in June; Redondo Beach, 2.7 percent; and Gardena, 5.4 percent. Manhattan Beach saw the median price slip 0.3 percent in June.”
“John McHugh, (broker) in Hermosa Beach with his wife, Janet, said home sellers must avoid pricing a home too high. ‘We’ve found that if you price a property, you have to price it correctly or else it’ll sit on the market for a long time,’ he said.”
“Added his wife: ‘Everybody has been spoiled with an overactive market. Now that it’s a more normal market, some people are taken aback.’”
And from PBS San Diego. “Developers are enlisting sign spinners to jump start a sluggish condo market and entice potential buyers. Builders say it works, but some cities say the animated signs point to nothing but trouble.”
“Chris Christensen, President of CondoConversions.com: ‘It creates a sense of excitement for people to know that hey, there’s something going on just around the corner, just down the street. So the sign spinners are crucial to bring traffic into the individual project.”
“The City of El Cajon disagrees. James Griffin: ‘The use of a sign spinner isn’t going to stop somebody driving down the street to suddenly pull over and say ‘I’m going to buy a condo.’ You’re fixing your prices at the wrong level, maybe that’s why they’re not selling. I mean, putting 100 spinners in front of your project isn’t going to sell any condos if the price is still too high.’”
“I mean, putting 100 spinners in front of your project isn’t going to sell any condos if the price is still too high.’”
Aaahhh. Fresh air.
was just at the wall street journal blog and it seems our favorite vegas gal is selling her home to wait out the bubble in belize sipping pina coladas then she will buy after the bubble deflates.
No kidding? I thought she had all these rentals to tend to. Is she claiming to have sold them all or what? What about the sudden turn-around in 2007, when all these buyers are going to beat her door down to buy overpriced LV houses.
Too funny!
I suspect quite a few more people will be anxious to get out of the country as this unfolds.
i see that fema removed the certification that the levee’s around Natomas would survive a 100 year flood.when they fail Natomas will be 13 feet under water.
Yes. Flood insurance will be mandatory soon AND homeowners will be required to pay close to $30K each, spread over 25 years in the form of an assesmentt to upgrade the levees in Natomas.
Funny how the Sacto Bee isn’t reporting this. Ya think it has anything to do with RE ad dollars?
“required to pay close to $30K each”
That is part of the Price of Admission
a similar discussion is going on in my country, Netherlands.
in my area, all new developments are up to a few meters below sea level (we are about 10 km from the ocean). With the recent increase in rainfall and flood levels due to climate change, authorities can no longer guarantee that the buyers of those homes will keep their feet dry all year (at least, if they really live in the property …). It’s simply too expensive or technically impossible to keep pumping the water out in these areas.
Someone is going to pay dearly for these problems and in Europe that someone will most likely be the taxpayer …
“‘I don’t think there is anybody who is forecasting a significant decrease in prices. But I think that over the course of five or six months or for a year we’ll be seeing very moderate price increases or maybe even stationary,’ analyst Nimi Nattagh said.”
Will somebody please get this man/woman a date, it’s obvious he/she doesn’t get out much.
What about all the people at the housing bubble blogs. This guy is clueless.
David
By “anybody” he means real estate “professionals”.
Then he/she would be wrong again (what the hell is a Nimi anyway) Plenty of “pros” calling for declines these days.
significant declines? I haven’t seen one.
Comments from an analyst tightly tied to the mortgage industry can’t be considered unbiased, and therefore lack any credibility. Six months to a year from now the MSM won’t be talking to any of these industry analysts - they will be too busy covering the reality of a RE market with prices declining by double-digit percentages YOY.
Saw an article today on CBS Marketwatch, ‘buyers able to refi as interest rates still affordable’. If market tanks, ten year bond will decrease. Still inverted though. What happens when buyer can’t qualify, has no equity, has no cash to pay for refi, appraisal doesn’t make it? Oh, of course, Fed and Bernanke will create a ‘NEW’ loan at FNME to bail F’d borrowers out that solves the problema.
we are already seeing this in sonoma county,starting in may ‘06
you’ve seen something Fannie Mae’s using in Sonoma County to bail out upside-down FBs unable to refi? Please tell me more.
Yes, details please.
in the Netherlands they simply keep increasing the subsidies (e.g. 50.000 euro ’starter subsidies’ for starters with no money, or free government-provided mortgage insurance) to keep home prices rising even though prices have been extremely unaffordable for years. Simply increase the subsidy (or tax advantage) every year and the market remains magically healthy. I’m sure Ben B can think of something similar for the US.
I am getting really tired of lazy reporters who merely parrot anything an “analyst” or “expert” says, without challenging it or presenting any other points of view. I just sent the author an email, telling him how wrong he is.
So is it the lack of buyers, the skyrocketing inventory, or the historically low affordability rates that makes him so confident that prices won’t go down?
Geez, Ben: It must be getting tough to keep up with all of the mainstream media articles, finally acknowledging what we’ve all known for a while.
You perform an excellent service, and those of us who read this blog are grateful.
Just don’t hurt yourself mousing from one “housing crash” story to another….
Ben can sue David Liareah for causing his carpal tunnel when this is all finished.
I saw a thread yesterday with over 250 posts. Has this blog gone that high before. The support here is getting creepy.
Agree. There is also little posting by Bulls - hopefully we have not scared them off. I wonder if any are lurking??
Ben - Can you post any details on who is visiting? NAR, NAHB, CAR, Countrywide, etc.. I would love to know who visits.
I miss some of the bulls, like RE King and wthell. Those clowns were funny.
and LV Landlord and beaconst.
Yeah, where is beaconst? And wthell? I miss those guys, too. wthell sometimes didn’t have much of a sense of humor - probably less so now!
Don’t forget “celebfan1000″ and “HomeownerMA” - or were they one and the same? I cannot recall…
“Added his wife: ‘Everybody has been spoiled with an overactive market. Now that it’s a more normal market, some people are taken aback.’”
Taken aback… Giving one a feeling similar to walking to the edge of a cliff, and looking down into the abyss…..
BTW, this “primal fear” is the factor that will cause the rush for teh exits.
That fear will be accentuated by the fact that this is all that people have in their minds in the way of savings. Back in the crash of the 90’s I remember a lot of people could walk from their losses because they had other investments/savings to fall back on. Most today have placed all their trust in their home-equity-nest-egg. They’ve been planning on it funding everything from retirement, college tuition, daughters weddings, and so on. The confidence they’ve put in this so called “nest egg” is astonishing. Imagine what will happen when the very thing they’ve placed all their hopes and dreams on shows signs of vanishing. Could the effect be any less dramatic than the run on trhe banking system of the late 20’s? Yeah, we’ve only seen the beginning.
Exactly. Especially when people realize that by law, the bank only has to hold approximately 10% or YOUR money in the bank at any one time (fractional reserve lending at it’s best…come on, where did people think this money is coming from). Hmmm. I wonder where that other 90% went? Could it have gone to all these folks that we wonder how the hell a waiter can afford a half million dollar house?
You’re darn skippy it did. That, along with our pension funds/mutual funds that folks have no idea are wrapped around the MBSs.
When folks figure it out, just like looking for a seat in the housing bubble, you won’t want to be looking for a seat then either. FDIC? As foreigners holding trillions figure it out, it’ll be making your insurance check in US dollars even more worthless.
Careful what you wish for, you just might get it.
This bad senerio, will this make money worth more or less? Money goes away because the value of so many homes goes down, this should make what is left worth more? this is deflation assuming you can withdraw from the bank, etc. These days mant transactions are cashless though, so you don’t need real cash in hand as long as the bank you have your deposit at doesn’t fail. Also these days so many people have Money market mutual funds prehaps treasury funds. You can write checks on these accounts. So what am I missing? Besides the government fails and we all live in a Road warrior movie.
A house’s value can be measured in different ways. We generally refer to it in regards to dollars. It went up because we’ve had massive monetary expansion by the FED which gets multiplied even more by lending institutions. A lot of this money was pouring into housing. It was almost like it was a sure thing that prices would always go up, and go up a lot. Actually, depending on how many dollars are created, there really isn’t a limit as to how high they could go in dollar terms. That assumes, in a global marketplace in which we are a debtor and the owner of the reserve currency, that foreigners would never notice how their holdings are being devalued by us creating them on a whim. Obviously a big gamble.
Because of our situation, most (even Greenspan) realize that is unsustainable. That would be hyperinflation which history shows doesn’t have a happy ending. So now they are saying they will raise rates to curb inflation. How is that going to cause a contraction of the money supply? It doesn’t. It may slow the rate of monetary expansion, but by itself, it doesn’t. By raising rates slowly, they are hoping they can find the exact place where just the right amount of folks default on their loans to effectively destroy enough money without causing cascading defaults. That would be a meltdown.
Because it has gotten so far out of hand, your money will go farther for some things and not so far for others. Because the situation in housing resulted in people buying them to just hold and sell later, we’ll certainly have a large supply. I’m fairly confident your dollar will go farther to buy a home in the future (as witnessing now). Getting a loan to buy a home in the future might be a different story. As for your dollar buying commodities (where people are putting actual money to preserve it vice taking on loans to buy it), I am guessing it won’t go as far.
It is part of the cycle of history. When money is flowing from everywhere, it seems like it can go on forever. Why not spend it on nice to have things. As things get riskier (chances of default rising), the money made off those loans during the apparent good times will be flowing to hard assets to preserve the wealth. This is the fine line the FED is walking. How to instill enough confidence to keep that money from flowing into hard assets that will certainly show in CPI numbers, yet not crushing the folks who are in debt from taking those loans.
If they can’t get the magic interest rate just high enough, hard asset prices will skyrocket as faith erodes quickly. If they go to far, then they have a massive meltdown from cascading defaults. I suppose that where you put your savings depends on how much faith you have in this small group of folks attempting to steer our world. Trying to live your life constantly having to worry about what a small group of people are going to do is not much fun.
I like your answer. I think you are right _deflation in some things and inflation in others. However Its hard for me to see how bad this housing bubble bursting will get. I think the possiblities of a melt down just from the housing bubble are small… but coupled with another unforseen thing it could get bad.
Its werid but the bond market is telling me that inflation is not expected. inverted yield curves as I remember often result in recessions. But Gold has gone up in price in dollars at least. How do I figure this one as gold up often is an inflationary sign. The only thing my small brain can come up with is a dollar devaluation AND a recession.
“dollar devaluation AND a recession.”
Isn’t that our good old friend “stagflation”?
http://en.wikipedia.org/wiki/Stagflation
Or the bond market is in a bubble as well. Lots of foreign CB’s stuffing dollars into bonds. Might be artificially keeping the yields low. Just a thought.
The bonds are saying that the FED will do what Greenspan did. Crisis=cut rates and bond prices go up. Bonds are certainly forecasting a recession, I’m just not sure they’ve got the outcome correct. Oh I’m sure that the rates will be cut. They’re just not factoring in the trillions of dollars from overseas being returned to the US. Maybe they won’t, like they haven’t for 30 years. If not, we’ll be able to tax the rest of the world for our consumption (via inflation) for who knows how much longer. If not, well, then we’re up the creek.
As for gold, it has gone up in many currencies besides just the dollar. Not sure there is a currency that it hasn’t.
“Exactly. Especially when people realize that by law, the bank only has to hold approximately 10% or YOUR money in the bank at any one time (fractional reserve lending at it’s best…”
Don’t believe the 10% example from your economics class. Last I saw reserves were not even 1% of outstanding loans.
Cash will be the king. Cash is that most of people do no have. More recent homeowners will have negative equity. Lots of people who used the house ATM will have negative equity. Whatever incomes we make will not keep up with increase in energy costs, taxes, insurance and all that stuff that goes up every year.
People who have cash by any means, some selling at the top of the market (even if you manage to sell today, you are still close to the top), or frugal renters that saved a lot will enjoy unparalleled benefits in the coming housing market, meaning top class housinng in prime location going for a song because you have cash.
They’ve been planning on it funding everything from retirement, college tuition, daughters weddings, and so on.
Yep, all of the above. They think the world is going to pay them $100k a year just by virture of living in their own house.
I mentioned to a co-worker that prices would go down, thinking it wouldn’t bother her as she bought a decade ago. She looked shocked and tried to argue that prices couldn’t go down much…it was only later I realized why she cared: she and her early-retired hubby are banking on their house to appreciate 20% forever. No one saves anymore…a lot of people are going to be screwed come retirement…
No joke. In addition to regular expenses, you need to save another 200-300k to pay for your HEALTHCARE expenses. I wonder just how much equity she thought she had - and just where would she live once she cashed out? Your co-worker is a pathetic fool - feel sorry for her.
I am tired of this equity rich argument. If you own only one house, it means nothing. Yes, you can re-finance it but still you have to pay it back. If you have few properties, sure, if you are smart and time it right by “buying low and selling high” you can generate income. But if you only one house, there is nothing you can do as you will need a place to live anyway. The price escalation can actually affect you negatively with increased taxes and insurance. Too many “savy” investors out there with nothing to show but a home title deed and a huge mortgage balance. Live within your means and if you want to live better, get an education / qualification / better job / marry rich but do not answer the stupid calls from mortgage re-finance people.
You have to have money to make a run on the system
Very good point. If nothing is in the bank, pretty tough to make a run on it. I had an epiphany the other day. The standard guy was standing on the corner asking for change. I thought to myself, “You know, when you look at a person’s balance sheet with assets compared to debt, this guy is probably just a hair above zero. There are probably a fair amount of people who give him money whose balance sheet is negative”. What a strange country.
Kerk: yes, but they have access to credit and he doesn’t. Of course when this whole thing unwinds there will be VASTLY LESS CREDIT. No more housing ATM, lower credit card limits, and actual downpayments required for buying a house. They will effectivly be much poorer even if their net ballance sheet doesn’t change.
I think the difference now is that many homeowners have NOTHING invested in their homes, so they really don’t have much to loose and will NOT rush to the exits, many will probably stay the course and wait for the next FED reflation cycle.
I agree that savers should start to hurry to the exists as soon as the ball starts rolling, for they have a real risk of loosing what they have (in case of a run on the banks because all the funny money is disappearing into thin air).
The ‘clever’ homeowners of today can only get back to where they were a few years ago in the worst case (and if there are enough of them, even that won’t happen as the banks/lenders will probably allow them to stay in their homes on maybe slightly less favourable conditions).
That quote from the Daily Breeze about Manhattan Beach is a bit misleading: “Manhattan Beach saw the median price slip 0.3 percent in June.”
The reason the price didn’t drop a larger chunk was due to a rash of new listings at $3M plus, including one place on The Strand at $9M. The “real” price drop percentage, of places that are still on the market, is roughly 5 or 6 percent, with some places dropping in the teens.
Take for example today’s listing of 1205 Bayview, which was originally listed on 5/3 for $2,449,000 and is now priced out at $2,250,000, a reduction of about 8%.
By just eyeballing my personal spreadsheet, about 45% of the places on the market have reduced their price. The smallest reduction is 2% (50k off a $2.7M house) and the largest is 31% ($450k off a $1.4M house).
I would agree with you MB Renter. I live in Hermosa and have watch the market now for 2 yrs. The denial level here in the SB is frickin’ ridiculous. And if you want to see an area heavily dependent on the RE bubble (LOs, brokers, RE agents, builders, subs, etc.), look no further than the South Bay. Yeah, we got pummled during the 90s due to Aerospace cut backs but the engineers were much more conservative and no where near as dependent on the RE bubble as the folks listed above.
I lived here in 1992-1997 and during those days you could have almost any property you wanted at 25-50% of prices today - even on the strand. I’m not sure it will go back to 1995 prices but 1999 prices are very realistic.
The other thing interesting about 1992-1997 was how flat the RE prices were. We saw a large decline from 1989-1992 and then it was pretty flat til’ 1997. I’m not sure why. Maybe because no one was buying and therefore no one could sell (those who were not under water).
Inventory increasing at a brisk pace every month and all the mom and pop builders continue to tear down and build houses, townhomes, condos. It’s the beginning of the end here…and it’s not going to be pretty.
I agree, it won’t be pretty and many SB residents are in for a rude awakening. I’m the next beach down in Redondo.
Let me join the chorus. Have you noticed how many *empty* homes are for sale in the area? Whom is living in the south bay now?
Judicious1, when I first read your post I thought it was
“and many SB restaurants are in for a rude awakening” and then I realized, that’s going to be very true. Cheesecake factory is seeing a drop in sales YOY for same store sales (stock: CAKE).
I expect denial to last through July. August to get people worried and maybe start the panic… Get out of the way in September. By then any seller will realize the market is limp.
Now homes will still sell… its just only going to be the homes priced best. Right now the best 25% of homes can sell (in terms of value). What happens when only the best 10% of values can sell? You guessed it kiddies… a price drop!
Neil
Where is PV Tom?
He was absolutely adamant that coastal So Cal is protected due to very moneyed interests jumping in at 10-15% off.
I don’t think so. A national bubble will hit the coasts just as hard.
There may be marginally more competition for decent to nice absolute coastal properties (1/2 mi or less to beach) but it didn’t help during the last downturn and it won’t help in the next.
See Cagan’s fire burn PDF on First American’s website.
LostAngels, I think RE was so flat during the 90’s because of the reason you mentioned plus the job market still sucked (until the late 90’s), interest rates were higher (than now), and maybe market psychology (falling knives syndrome). Also, it’s interesting how a few Strand properties can skew the numbers…
Neil, back on that other thread from yesterday I was indeed talking about the Daily Breeze article from June. Maybe I misread it. I thought it was the first YOY price decline in the SB…guess it was month over month…the damn Daily Breeze doesn’t have it on it’s website anymore…anyway, you are correct about the pricing points. My wife and I have been looking in the SB the past year (90505/90277) and have seen many reductions over the past few months. We’ve seen several in zip 90505 that have dropped by 100k (900k to 800k). We looked at one on Susana a few months back that was originally listed at 899k (3/2 1200 sq. ft.) then eventually lowered to 819k (not sure if it sold). One is now on the market at 5619 Riviera Way that was originally listed at 900k now it’s at 839k and still sitting. I think maybe why the prices haven’t gone down further is because I’ve noticed an increase in newly-renovated properties coming on the market. Many of these look brand-new (as new as a 1950’s cottage can be) with all the bells and whistles so I’m guessing sellers think they can charge more. But, many have to be priced at least 10% below what they are asking for them to move, especially with a 30 yr fixed now at 7%. My observations.
ockurt
You’re right in that many newly renovated are hitting the market. Plus all of those new townhomes; most of them are in the 1.05 to 1.4 Mil range. Absolutely rediculous! If any of those 1.0M+ are selling, that will shoot the price up.
I’m not thinking a 10% price reduction is enough to move homes… But its a nice start!
But who is making the 300k+/yr to pay for these homes?!?
Neil
Yeah, I can’t figure it out either. I think most of the people buying now in those areas are trade-up buyers with substantial equity and decent incomes…but I know what you mean…most households don’t come close to 300k/yr and even with 200k down it’s still a big monthly nut. I just don’t know how people are doing it, especially if they want to raise a family. Prices have reached a point where affordability is at all-time lows and the interest rates on adjustables are nearly as much as a 30 yr fixed.
Great to hear from all the South Bay bloggers, didn’t know there was so many… Sunset, I’m still hanging waiting on that big drop. Heard an interesting story from the wife of my buddy the other day saying basically that she was “amazed at all the people who didn’t realize that only the first million in interest is tax deductable.”
And this was causing a major crimp in their planning. Planning? What planning? Anyone that truly can afford the FU houses around the South Bay doesn’t carry that kind of mortgage. This is getting interesting!
This is my favorite new daily listing in Redondo….
http://matrix.gsbrmls.net/Matrix/Public/DisplayAutoEmail.aspx?ID=6138680-15545199-37
“MUST SEE. Next Door Neighbor at 1544 Steinhart with Same Floorplan CLOSED IN MAY-06 For *$875,000. THIS HOME IS PRICED TO SELL FAST!”
LOL…After listing it for 17 days at $869K, they hack a whopping 2% off of the list price. They are basically TELLING the would-be moronic buyers that the market is dropping and they expect to sell it at that price??
“‘As funny as it sounds, you can get a 3,000-square-foot home on a 4,000-square-foot lot,’ says Barry Grant, territory president of KB Homes.”
“‘It’s all about what you can afford,’ said Wil Mar, a first-time homebuyer who has only a ’strip of dirt’ behind his new home in Natomas’ Hamptons subdivision. Mar says he’s happy to be a homeowner in Sacramento.
That Sac Bee article was very interesting. And the comments from readers (many of them from Sacramento) were enlightening. Rightfully so, the Sacramentans hate this new house-on-a-postage stamp-sized-lot trend. The guy in the article is bursting with pride , however, because he is now a homeowner, but when his 4 kids get old enough to need room to stretch out, where is it? There is no back yard, really….just a dog run sized area. And one person commented (not sure if he is in the same area) that his house is so close to his neighbors that he can watch them take a shower from his bedroom window, and can probably hear everything else that comes from that bathroom, too. (pardon my crudeness)
Uh, hello! So if your neighbors are that close and you have no back yard, what IS the difference between that and a condo or a townhouse of similar sq ft’age?
(FYI: For new readers who can’t don’t want to register at Sac Bee to read the article, just go to http://www.bugmenot.com, paste the url for the article in the field in the middle of the page where it says http://www.example.com, click Get Logins, and then choose one of the logins on the next page.)
BayQT~
It has been like that for some time in So Cal. I remember over 20 years ago, when I was a teen, goofing off on construction sites. One in particular where I was running and jumping from roof top to roof top, one house after another, until I ran out of houses. Nope, I wasn’t any Carl Lewis either.
Great visual!
We have those “large houses on tiny lots” on Desert Foothills road in Ahwatukee. While driving past them, my sister’s boyfriend says one neighbor can be using his bathroom, reach out his window, and take toilet paper from his other neighbor.
Wow, that’s funny and scary. I expect to see that in SoCal but not Sacramento. Jesus.
‘So if your neighbors are that close and you have no back yard, what IS the difference between that and a condo or a townhouse of similar sq ft’age?’
there isn’t. that is why i am astounded that ppl want to buy those at such high prices. yes - the noise. yes the lack of privacy - and yes i think the fire hazard is almost just as great. one burns down, can domino.
who can say why some ppl are so stupid - i do not have that answer
Welcome to city dwelling!
> i think the fire hazard is almost just as great. one burns down, can domino.
European and other cities addressed the problem centuries ago: A firewall between two adjacent houses is mandatory.
the difference is that you get to pay more to heat or cool the house, since you’re not sharing walls with neighbors
It’s not like this is new. San Francisco has had closely packed houses for over a century. (I think the building codes there require a minimum of six inches between houses.) Compared to the “jewel by the bay”, Sacramento’s lots must seem spacious
The difference about high-density living in San Francisco is that you’re living in San Francisco. To be living like sardines in Sacramento is a lower ring in hell.
Lots of news this week. The tide is turning real fast. I think when two things happen the Tsunami will begin - (1) YOY declines in CA and AZ/FL. and (2) 10,000 $hit canned at Countrywide. These two events should happen in the next 60 days, imo, and they will occur as the Fall Selling (or non-selling) season begins.
dude, my coworker’s chick works at Countrywide in Rosemead. She told him they are cutting back on office supplies and only cheap coffee now! lol.
That is the universal sign that layoffs are right around the corner.
Cheap coffee? Those bastards! (One must have standards.)
Neil
Operation is dead right. I’ve been through the whole layoff / company declares bankruptcy. Everything is fine one month, then the coffee machine is removed, office supplies stop getting ordered, you are asked to reuse old binders etc, if you ask its because “someone was stealing the ______” thats why we stopped supplying it. Then a month goes by, some thing breaks like the copy machine, instead of shelling out to have a repairman fix it, you’re told use the one upstairs etc, another month goes by, you notice more dust accumulating on things and the bathroom isn’t as fresh, the cleaning crew has been removed from nightly duty to weekly. If they make it another month, things start to disappear, tuition reimbursement is reduced or canceled altogether, your HMO may be changed to a cheaper provider (about 1 step above medicare), then the next month comes, you notice everyone has a chip on their shoulder because management is working them to death and not hiring replacements for attrition, here is where the fun begins… you come in only to find out layoffs and whole divisions are let go or thinned out, if you survive the first round it only gets worse.
…bottom line, it ALWAYS starts with the coffee, keep that in mind.
My “favorite” experience from my own layoff situation involved the company’s plastic plants, which unbeknownst to me were leased. One day a man wheeled a cart into my office, loaded my fake ficus onto it, and chugged out. Shortly thereafter the food in the cafeteria went to hell–the hamburgers were composed of the previous day’s meatloaf, etc. Two months later I was gone.
LOL, Snake, they took back your plastic plants and it took you TWO WHOLE MONTHS to GTF out?!
they do this so they can say that they did everything they could before they had to cut ppl
Next is the famous coffee is for closers line.
Ahhh….The old Countrywide sweatshop in Rosemead. there have been rumors going on for two years plus that they were going to close that place down.
I hear a lot from former co-workers that many employees have been offered gigs at their 2/3 year old facility in Arizona (Flagstaff methinks).
Plenty of rentals to choose from in Flgstaff I guess.
to date, this is the best date ever for those who have been preaching the housing bubble gospel. the amount of bad news today is crazy.
I agree. Housing bubble reports from all the biggies–D.C., Boston, NY, Chicago. It’s almost like they planned it.
Yah, it’s quite a coincidence how all those “local markets” tanked at the same time…
I didn’t have that word tanked; but I had paused, plateaued, breather,interval, lull, break, gap suspension, recess, lapse, slide, slip, decline, revert,deteriorate,dumped, moderate, tempered, and any other word or words to describe the price reductions.
Defecated its trowsers?
LOL,
…, held, hesitated, hicupped, hovered, …
Yes, anything but tanked!
“‘It’s a great trend. We love to see that,’ said Tim Frank, a senior policy adviser to the Sierra Club, which advocates less growth onto open space and farms. Frank hailed the capital-area trend as a return to the smaller lots that were commonplace in the United States before World War II.”
Yeah, back to the Depression. Translation: “You proles have been using up too much space, and now you’ll just have to cut back in order to satisfy the Sierra Club agenda. After all, we know what’s good for you, and you’ll take what you get and thank us for it.”
I just don’t have any adjectives strong enough to characterize this dreck properly.
Where’s Robert Cote, I bet he has a post at his blog?
Choices in the housing marketplace rationally priced without any subsidy for one lifestyle or another is an American ideal. Someday we should try it.
You win that bet.
http://exurbannation.blogspot.com/2006/04/smuggie-oxnard-again-sigh.html
Um, back at you. The USGS has good evidence that buildable space was quickly occupied between 1960 and 1990. Most of the areas that remain are nowhere near existing cities and/or geographically challenged to the point of not being safe even with major reengineering. Even some of the existing areas are in dire need of geoengineering for safety. The available space got used up and we are having a hard time adapting to primarily dense infill development. That people might be willing to pay a half million dollars for six feet of space between them and the next unit is a hint that some small changes might go along way. Personally, as a capitalist I think your position is a huge cop out and a major denial of opportunity.
A couple of comments:
Large areas of built-out space would have to be cleared if we used the USGS safety criteria. For example, Oxnard, Ventura, and much of Camarillo would be subject to liquefaction in the right earthquake. Most of Malibu is geologically unstable. San Francisco and Marin sit astride the mother of all faults. Yet people will pay big bucks to live in those places.
Why should we restrict housing to areas near existing cities? Even if we do, for example, the decomissioned base above San Diego would take a lot of houses. But there’s plenty of space left in California: Trinity County, for example, is mostly empty, has lots of land, and most of the logs are already cleared. Yes, Trinity County is near an extince volcano, but so is Tahoe, and for that matter all of Montana, Utah, and Eastern Washington State.
As a capitalist, I would have no problem selling dense infill lots to a willing buyer. I just would never choose to buy one myself, and I would argue that the only reason they are selling is the fact that that’s all that’s getting built. The reason for this is the artificial scarcity of land created by mega-NIMBYs such as the Sierra Club, that claim all undeveloped land as their personal back yard.
This is so contrary to my dozen plus years of collected evidence that I don’t even know how to respond. The USGS does noting in the way of ranking buildable land. Most of the recent (40 years) development patterns have bewen urban adjacent. No place in the US has ever come even remotely close to running out of land. Everyplace in the US is at or exceeds any previous geotechnical building safety standard. Your entire premise is bankrupt.
Thanks Robert, now I can keep my reply short & sweet.
My suggestion to mole man: Broaden the scope of your knowledge, and be sure to get out more. Then, return & contribute to this blog.
No place in the US has ever come even remotely close to running out of land.
And although it is often doubted on this blog, the same goes for the Netherlands which is one of the most densily populated countries. We hear these same arguments over and over from RE bulls, but in reality only 11% of the Netherlands is built area - and calculations show that if that is increased to 12.5% there will be plenty of space for the next century or so (especially now that the population is starting to shrink).
In Ventura they have the SOAR law that prevents building on AG land without a vote. The cities will approve projects that infill with Townhomes and housing above retail in strip malls. In Moorpark last I was there a large North Park development was voted down. This will keep exsiting housing scarce and expensive there. Ranch style homes with property- example by the Regan Libary -are what?
1 million and up? Doesn’t matter what the USGS says about land if you can’t build on it.
Robert, I know you were busy addressing the main argument, but forgot to get at the secondary one.
“That people might be willing to pay a half million dollars for six feet of space between them and the next unit is a hint that some small changes might go along way.”
If people cannot afford to pay $500k for 6 feet of space, it won’t sell. Salaries and incomes are not keeping up with the price of housing, regardless of how dense population is getting.
Even granting your premise (with which I disagree), the changes you discuss are structural and long term. The bubble is ephemeral and short term, and is based on short term economics put in place to try to fix immediate economic problems.
http://money.cnn.com/2006/07/25/real_estate/housing_market_values/index.htm?cnn=yes
Just a taste of the article:
“By Winzer’s figuring, Santa Barbara is the most overpriced housing market in the nation (see table below). The median home there costs $567,300, 80 percent more than it should.”
Empty bean counting exercise. I’ll trade any three median houses for any two median houses in Santa Barbara any day of the week. That’s what they call “fair.” The market says 1 SB house is worth 3 Mephis houses for a 2:1 difference of “opinion.” Difference is I can take my difference of opinion to the bank. This sounds like an oportunity for a famous bet.
interesting, here is some numbers to get a long-term ratio.
#2 Historical Census of Housing Tables
Home Values
Intresting info. I would like to see it updated with todays #’s.
I know in CA it would be much more staggering….It said the median in CA in 2000 was 211,500, now its over 500k.
Santa Barbara ia very nice, these nice areas won’t fall as much as one would think based on price. They are expensive for a reason. I expect the newer inland commuter areas to do worse.
Last time I checked Beverly Hills is very nice, but that fact didn’t seem to spare it from being slaughtered in the 90s.
Ok lets no go overboard, Memphis vs Santa Barbara, have you ever been to SB? If there was any place in the world I would want to live it would be SB. There still are some places where price does not matter and SB is one. I would say it would take 10 really exceptional Memphis homes to equal a very nice SB home.
Puhleeze people, a waning tide sinks all boats.
For reference see Christopher Cagan’s analysis of the early 1990’s bust.
It is called Fire Burn at First American Title.
Exactly. An the market and I agree with you. For the record I don’t live in neighboring Santa Barbara because I coose not to. I could have settled there as easily as were I am now. My brother in law lives in the swankiest part, a place called Montecito on the beach. That’s “on the beach” not “near the beach,” not “beach adjacent,” not “beach accessible.” For readers old enough, when Clinton was elected Nov 1988 he went to the west coast. He stayed in the house next door. The Secret Service, with permission, used their beach path for security/safety reasons. My niece played with Chelsea.
Yeah, it is gonna get whacked. It’ll fall hundreds of thousands. BFD, it’ll still be wicked expensive and for good reason.
Desmo has it right. Anyone who wouldn’t want to live in S.B. is making a trade off in their head.
“For readers old enough, when Clinton was elected Nov 1988 he went to the west coast…”
Sorry to be picky but you need to get your facts straight before telling tall tales…
I don’t remeber Santa Barbara going down much in 1990’s ? Thousand oaks and surrounding areas down like a bomb 30% plus.
Anyway TO has Amgen as a major employer now so if you’re waiting for that area to crash like it did in the 1990’s don’t hold your breath.
I hope it does though, I’ll move to Dois Ventos, nice mountains and ocean breezes.
Well we will see, I moved to Phoenix, now talk about a place that has all the signs of a crash, houses for sale all over the place. So I rent and wait. good to hear about the old Town though, I lived in Moorpark for 20+ years. before there were Grocery stores there.
Join me, wont you, on a stroll down memory lane all the way back to 2002. Ahh, the low prices, the bidding wars, the belief that housing prices would climb forever. We were so young and full dreams…
Low interest rates and stock market wariness mean homes are snapped up as soon as they’re listed. But that’s not scaring off those willing to pay more than the asking price.
http://tinyurl.com/p6zv5
DIANE WEDNER, LA Times Staff Writer
April 21, 2002
When Debora Brown-Parker put her three-bedroom Long Beach home on the market recently, she expected it to sell fairly quickly. The tidy, 1,200-square-foot house was perfect for a first-time buyer, her agent told her, and because it was fairly priced in a tight market, it was bound to attract interest.
What she didn’t expect was a request to see the house 20 minutes after it was listed. The eager buyer showed up that evening with her family and made an offer almost immediately. Six competing offers quickly followed, overwhelming the first-time seller, who hadn’t counted on such a flurry of activity.
“I had no idea the market was this crazy,” said Brown-Parker, a 44-year-old flight attendant, who asked her agent to take the house off the market until she could decide which offer, if any, to accept. “We were offered $4,000 over our asking price, but we just couldn’t handle all that bidding.”
Real estate experts say the frenzy closely resembles the market of the late 1990s and 2000, when demand for a limited inventory fueled bidding wars and home prices soared.
Agents from Ventura to Riverside report that homes in all price ranges are being snatched up nearly as soon as they’re listed. The perceived threat of rising interest rates and a trend toward acquiring solid assets, rather than depending on the stock market, has buyers turning to the real estate market, a traditionally conservative investment.
“It’s hot, hot, hot!” said Barbara Shoag, an agent at Re/Max College Park Realty in Long Beach. “Low interest rates have been very appealing to first-timers, especially, but also to every other buyer out there.”
Brown-Parker and her husband, Erwin Parker, are trying to sell not one but two homes. They are in escrow on the sale of a Rancho Cucamonga home, which Parker bought before the couple married 10 years ago. It sold in six weeks, after attracting three offers.
Brown-Parker, who ended up declining the earlier offers, said they now will re-list the Long Beach home for $10,000 more than the original $180,000 asking price. And they probably will get it.
“I think this strong market has surprised everyone,” said Shirley Tenger, an agent at Prudential California Realty in Glendale. “Anyone who was thinking about buying has been buying, even as prices continue to go up.”
In Los Angeles County, the median price of existing homes surged 15.1% to $259,000 in March, up from $225,000 a year ago, according to figures supplied by DataQuick Information Systems of La Jolla. In Orange County, the median price rose 11.6% to $357,000.
Longtime renters Christi and Tim O’Leary of Pomona consider themselves lucky after bidding on a three-bedroom, two-bathroom home with a pool in Pomona, for which they paid $231,100–$4,000 more than the list price.
The 1,700-square-foot fixer was perfect for the couple and their three children, Christi O’Leary said, but seemed a near-impossible dream when they made their offer.
“We really wanted that house, so we bid higher, just assuming someone else would outbid us,” she said.
“The market time out here is normally about 15 days for properties under $400,000,” said Barbara McClelland, the O’Learys’ Century 21 Citrus Valley Realty agent. “But I just sold three properties in less than four days at or above the list price.”
Real estate experts say that the threat of climbing interest rates has only pushed reluctant home buyers into the market, however, not discouraged them.
“People who have been sitting on the fence are now jumping in,” said Scott Reed, an agent at Strada Properties in Newport Beach. “And they should. Product that was $450,000 two years ago is now in the high $600,000s. The demand is just too great.”
“In Los Angeles County, the median price of existing homes surged 15.1% to $259,000 in March, up from $225,000 a year ago…”
———————
Let’s dwell on these prices for awhile. And this was after a few years’ worth of price increases already. I distinctly remember prices taking off in 1998. Some friends and I were laughing at the new “flippers” (didn’t know the term then) who were buying, fixing and flipping houses for obscene price increases in only a matter of months. We were all amazed at how stupid the buyers must have been. After all, the house was $100K cheaper just months prior.
We have a long, long way to go.
Thanks, Rainman!
I distinctly remember prices taking off in my country in the early nineties; that was after a 10-year slump so nobody thought it would last long. But prices kept increasing at double-digit rates for nearly 10 years. I remember that many people (including me) laughed about all those who started to flip severly-overpriced homes around 2000. Well, despite the huge prior runups many of those homes increased another 200, 300% in the next years and some of those flippers who started with zero money are RE millionaires now.
Even now that the Dutch bubble is nearly 15 years old you can still see people fixing&flipping homes for a cool 100% profit within a few months (especially with the more expensive homes). The flippers were greatly rewarded for their stupidity in this con-game from the central banks. Never underestate the supply of stupid buyers (of course, we did it before with the tulip mania in 1635 - at least then there was no government bailout so one could have hoped people learned something …).
That’s one aspect of the bubble that scares me, this bubble is all over the place: Netherlands, Australia, NZ, China, UK, etc.
Other than Japan, it seems like most developed countries have been in a crazy real estate run up lately. Even Lebanon was until recently booming..sorry to say.
Anyone read “Empire of Debt: The Rise of an Epic Financial Crisis”, I haven’t yet, but it’s depressing to read about the possiblities:
The Blog | Lew Rockwell: Empire of Debt
What if the U.S. economy goes down big time, well China, India and Europe, etc. be able to pick up the slack? It sounds like they have just as much of a bubble as we do.
Will the U.S have to do like the Italians and just drop a 0 or 2 off our currency, so $100 is now $10. That would show their hand so I doubt that will happen.
I think it’s clear that inflation is one reason for the housing bubble though, the Fed is constantly screwing with the dollar, so who knows what it is really worth, other than a lot less than it was 5, 10 and 15 years ago.
1 million by T day 11/23/06
mid may was 799,000
6/10/06 was 836,471
6/14/06 was 840,935
6/17/06 was 846,120
6/20/06 was 850,317
6/22/06 was 855,892
6/24/06 was 860,647
6/29/06 was 866,037
7/01/06 was 858,675
7/09/06 was 870,854
7/11/06 was 882,239
7/13/06 was 886,055
7/14/06 was 890,896
7/18/06 was 895,022
7/21/06 was 900,000
7/25/06 today 905,170
http://www.ziprealty.com/maps/index.jsp?usage=search&cKey=74rbwvlk
Thanksgiving TURKEYS!
here are my quick calcuations based on the link.
california/TN housing ratio.
high=3.34 in 1990
low=1.79 in 1950.
it was under 2 in 1970, 1960, 1950 and 1940.
in 2000 it was 2.27
If only Bakersfield and Fresno and Victorville and Palmcaster weren’t part of California you’d have a useful measure. Santa Barbara is as far from Sacramento as Gettysburg is from Concord & Lexington.
There will always be a premium to live in SB. There was that same premium 10 years ago as there is today. SB is as if not more overvalued than the rest of CA.
I will point out a fatal flaw of Santa Barbara in respect to Sacramento. Sacramento has water. Perhaps even too much water, given the reliance on levees. Santa Barbara’s water situation is somewhat precarious. The founding fathers did not have the foresight of the L.A. and S.F. promoters.
Santa Barbara could probably use a new nuclear plant to power a desalination plant. If they pull that off, then I think Santa Barbara is, as my boy from Lennox Financial says, “the biggest no-brainer in the history of mankind.” Until then, I consider it like an island is for a country to possess. Beautiful, but utterly reliant on tourism, since it is too expensive to maintain under its own resources.
S.B. has a desalination plant in mothballs. Ready to provide something like 80% of all imported water. Doesn’t matter. Water is a settled issue in California. Doesn’t seem like that to outsiders but trust me. Nobody goes without.
S.B. is not tourist. That is icing on a cake. Tourism causes high housing prices? Not.
If there were a planetwide emergency, S.B. would be one of the places to be. Heck, my being 50 miles downcoast I could make do with my land in such circumstance although I need to plant a lime tree for gin&tonics.
SB is nice but can residents really afford it? I went to college there and I can’t think of any big businesses there except the colleges. There are wineries up north, a casino, then the rest of the place is retail, harbor jobs, restarants, a tiny airport, and other blue collar work.
If someone can name one large company located there, or even an industry not mentioned above I will stand corrected. (Selling homes to each other does not count!)
PS - I just did a google search for “Santa barbara companies” and guess what came up? Mortgage company, moving company, and concrete company, LOL, nah, SB isn’t going to deflate, everyone wants to live there!
Raytheon, Delco, General Research?
Goleta, just west of SB, has real business. Tech, retail, banks, etc. Most young workers are priced out though, so from what I’ve seen the workers are either young rich kids (typically lazy) or old codgers that have lived there for a long long time. The local police department is having staffing problems right now because the cops can’t afford the area.
To rent a 3 bd/3bth house right now would be about $2500-$3000 per month. Buying that same house would run 1 -1.5 million, so somewhere in the neighborhood of 450 X rent. I’ve been tracking inventory here, and it has gone up 10.36% in the last 50 days, on track to double in 16 months. At the pace of sales, this inventory should have a 7.4 month turnover (and rising fast as sales slow and inventory rockets).
Anyone check out the Daily Breeze article above?
“”We still are expecting a soft landing. This is part of a soft landing,” said Conway, who works at the university’s Luck Center for Real Estate. “Naturally, you are going to go down from double-digit appreciation to single digits.”"
That’s directly from the article. Luck center for RE. I think it’s supposed to be Lusk. The name in the article is far more appropriate. Russian Roulette wheel of RE according to the chumps at the Luck center.
LMAO.
sfbayqt - mentioned the Sacramento area ….. about 100 years ago.
Why IMHO this region dies hard in the very near future is; It was never desirable ….. ever. Amazing because it is the big “Capitol” city (admittedly no guarantee of desirable area to live) but in the last 20 years there has be a pretty remarkable transformation of the downtown area. However, there is not much to Sac than the fab-40’s and maybe midtown. The rest is Los Banos (sorry LosBanos, just an example, love ya). Nothing left to support this region but minimum wagers and bay area commuters ….. until gas goes to $5-gal.
My wife has a friend who’s a realtor in Loudoun County and she bumped into her husband at the store last weekend. She asked him if his wife was out working open houses and he laughed. “No, she’s not working. Nobody in her office is working this weekend. She’s at the mall!”
Aug 06 Investment Outlook from PIMCO’s Bill Gross.
http://www.pimco.com/LeftNav/Late+Breaking+Commentary/IO/2006/IO+August+2006.htm
Hi. I lurk here some, this is my first post.
I’m in my low-20s and have been out of college 2 years. After deciding on renting a duplex recently instead of buying a house in a small city where housing prices don’t go up, but don’t go down either historically, I’ve been looking at housing, which brought this blog to my attention.
Some of the talk here really scares me. My lack of experience in this area means I can’t distinguish between “you can’t go out to eat as much” talk and “Germany post World War I, hyperinflation, country in disrepair, racist elected leader” talk. My generation has never had to deal with a recession or even seen one since we were kids, we have no idea what it is like or what to expect.
So assume that housing goes down, the Fed gets it wrong on how to respond with interest rates, easy credit disappears, real estate plummets and there are still no buyers, and this thing called stagflation occurs. What happens? Am I, with my only debt being a car payment that I am paying off as quick as I can, in a lot of trouble? Should I expect to not buy a house for 10 or so years?
Quite a teetering slope if people here are unfortunately correct…
There always have been and always will be crisis of one sort or another in life. In my childhood there was the cuban missile crises and polio, during the teens we had recession and you could only buy gas on tues and thurs if your license ended in an odd number. But life goes on. Read and learn but do not worry. Every generation runs in cycles, usually these cycles are between 10 and 20 years of either a financial/political upswing or downswing. On this site we focus on a lot of what if/ worst case scenarios. But even during the depression (before we had safety valves built into the US financial system - not everyone starved. Most people got by and came out of it wiser. I don’t think you will see anything like a depression in your lifetime. There have been several recessions and booms in my life and honestly they did not effect me all that much.
If you want to read a book that will give you a good overview of where you stand generationally and what you may expect, try “The Fourth Turning” by Strauss and Howe.
Use time to your advantage, have patience and be thoughtful and eventually you will get an opportunity to do or have whatever you want in life.
Sheeple still buying here in Tucson AZ but i’m happily renting, hope the rent doesn’t go up too much or I wont be so happy. (Could have bought where i rent, a 1234sf 2bd/2br townhome, no garage, in Oct’04 for $150k but declined because I had just gotten laid off from Gateway in April’04)
Zillow shows value up to $200k+ but everytime it rains the roof leaks (built in ‘99 for $90K) even though the landlord ‘fixed’ it twice. Still halfway kicking myself for not buying but it would been one of those 5 year ARM deals and I didnt feel right knowing i was about to be unemployed. Anybody have any thoughts on this?
The market here just keeps going up and now we are #7 on Forbes list of most unafforable places to live but #102 out of 112 for lowest wages. I feel like i missed out on a LOT of appreciation. Should i be kicking myself?
No need to kick yourself. You can’t live life looking in the rearview mirror about what might have been. We are all in the same boat, even those that had a home and sold with big gains. I remember all the 190K houses in my old neighborhood in 2000 that shot up to 500K by 2004 and have always thought how awesome it would have been to buy a few rentals back then. However, even at 190K back then, the numbers did not add up and it would have been a neg cash flow. That’s why you analyize risk. Take a risk and you may experience big gains, OR big losses. I’m sure there a lot of current flippers/speculators who will be looking at their decisions in the rear view mirror and regretting the decisions they made in the last 15 months. Opposite the feelings of those that lucked out with their timing and were in and out early.
Zillow is probably wrong. Or even if it is not wrong in terms of what it is worth based on the comps, the information may already be stale. I have noticed many condos for sale on Ziprealty, with a much higher “zestimate” than asking price. Yet, it sits, with price reductions. So then, what is it really worth?
It is estimated that if all the world used oil like Americans, we would run bone dry in 15 years. There is often a smugness in our attitudes in developed countries about how much more we can build, but you miss the reality of how much people in developed countries are programmed to consume.
I hear there’s cheap housing in Darfur, Bangladesh and Malawi, any takers?
Take heart and live where most energy comes from nuclear power. then buy one of these: http://www.teslamotors.com/index.php?js_enabled=1
The best geological evidence points to a major earthquake hitting Southern California every 150 years. The last big one was the Fort Tejon quake of 1857. Add to that the alluvial floodplains that make up a good percentage of building area in Los Angeles, and you’ve got liquefaction soup in many areas ala Bay Area freeway collapse in 1989. However, it was poor construction too. I told my wife on several occasions on my way to visit dad in Mill Valley that that freeway was going to collapse. It shook so much with the trucks above that it was disquieting.
“miss some of the bulls, like RE King and wthell. Those clowns were funny. LV Landlord and beaconst.”
They’re allexperiencing the same nightmare, where they’re all standing in the Las vegas desert in 120 degree heat, taking turns shoving hot pebbles up each other’s butts.
Doc