February 19, 2006

What’s Happening In Your Housing Bubble?

Post your housing market observations here! Some readers sent in this on Las Vegas. “A decline in new home orders by some of the nation’s large builders reflects a softening in the housing market that is being felt in Las Vegas, a local housing research expert said.”

“‘It’s softer than it was, the way it should be,’ said Dennis Smith, president of Home Builders Research, ‘because we all knew it was going to slow down sooner or later. We got away from talking about cycles and started talking about bubbles. The cycle is on the downward slope of the peak.”

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Comment by Ben Jones
2006-02-18 11:50:11

All over northern Arizona, everyone is noticing the plentiful ‘for sale’ signs. It has been so warm the spring effect has already started.

Comment by arizonadude
2006-02-18 13:17:25

How much snow have you had up there this year? Seems like the fire season is going to be bad this year.

Comment by Ben Jones
2006-02-18 13:20:57

It snowed once for about two minutes. We’ve had a quarter inch of rain since October. Flagstaff couoldn’t open the snowbowl. Very dry.

Comment by pt_barnum_bank
2006-02-18 11:57:31

In my area, northern Illinois, my county reports home sales and assessments on line. This freedom of information is very handy. I watch home in my area. If they sit for a few months, I check the sales price with their current asking price.

Used to say about stocks. The bid and the “wish”. There is one $450k home for sale that is now listed $20k *under* assessed value and still has not moved. Lots of loser “flippers” trying to sell the home they bought 6 months ago for $100 over their purchase price. The homes just sit there. Fun to drive by at night and see them empty except a few token pieces of furniture to make them seem not desperate.

I sent an email to the realtor of the home priced $100k over the 6 months ago purchase price asking her how they justified the huge price increase. I asked retorically if they somehow added $100k of upgrades. . Suffice it to say I have not gotten a reply. I will probably send her another one in a week to rub it in a little more.

Not only have interest rates caught up with these idiot flippers, but the assessed value has pushed the already high 2.2% property tax much higher. Add in heating costs and now a 10% increase in electricity cost and you can see reality setting in. You need to make significant coin to purchase a $500k home in this area (due to heating and prop tax). Better off with a $700k home in Cali as payments would be similar.

Comment by S - crow
2006-02-18 11:59:44

Seattle doesn’t have a housing bubble.

Lawrence Yun, Senior economist with National Association of Realtors says that the Seattle area may experience a 30-40% rise in median prices over the next two years. This is reported via the Seattle Times today.


Comment by death_spiral
2006-02-18 12:42:03

not if that volcano blows up!

Comment by Catherine
2006-02-18 13:07:38

I WISH TO HELL these economists and spokespeople for the NAR would add the disclaimer (which is their mission statement):

“The core purpose of the NATIONAL ASSOCIATION OF REALTORS® is to help its members become more profitable and successful.”

to media reports…the representatives of the NAR are NOT unbiased and measured observers of housing econonics! They DO NOT have any inclination to enlighten or educate the general public beyond their stated purpose of furthering the profiteering of their dues paying members!
They are foxes in the henhouse!

Comment by Kay
2006-02-19 08:23:06

With all due respect Catherine, as a realtor and a person who has grown up in the business, the broad generalizations you are making about NAR are totally incorrect. You might suggest our code of etchics to begin with. Any successful realtor knows the #1 rule in realestate sales is the consumer is ALWAYS the first consideration and person to protect. Let’s not assume people are so stupid they can be so easily controlled. Consumers have much more moxie today than ever, which is wonderful. The Realtor who wishes to be successful always keeps this in mind. Nobody preaches this like NAR and the comments you made are just too far off the mark to NOT comment. Sorry, but this is the voice of an experienced NAR member. Thank you and get your facts straight please. No other sales body is governed as we are, nor do they have the code of ethics we must follow to be members. After 40 years is realestate, I know.

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Comment by Privatebanker
2006-02-19 09:38:27


You may be correct in your point of individual realtors being ethical and sound. However to Catherine’s point, there is no other organization that I can think of that makes biased opinions on the “market” without providing any disclosures as to any conflicts of interest, etc. The NAR is a very biased organization, rightfully so on their own part. Many people are looking at real estate as an investment these days and with all traditional investments come disclosures which include any conflicts of interest recommended by the facilitating firm. As for “Realtors”, I’ve come across some smart people but as a whole, there are a lot of realors out there that are stating facts that are completely naive and they clearly show that they have no general understanding of economic cycles as they pertain to the financial markets and asset prices. They’re usually great sales people but not economic analysts.

Comment by OutofSanDiego
2006-02-20 06:55:57

Boy were you polite but eloquent in your reply. These days most Realtors(TM) are idiot salesman that will do anything immoral, but usually short of actually illegal, to get the sale. I’ll agree that there are some professionals that were in the business before the bubble and still will be afterwards, but that doesn’t account for the other 75% of them. They are not investment advisors, just transaction assistants, and should not give ANY comments or advice on appreciation or investment potential of a property. If they are allowed to do that, then they need to be properly regulated and held accountable. There is going to be hell to pay when this is all said and done. I believe NOTHING put out by the NAR. Consumers are not “Smarter” now. During the bubble-mania realtors were pushing buyers into sales with out home inspections and regardless of appraisal type deals. Ecomonics and investment advice are best developed by think tanks and scholars, not salesmen.

Comment by rms
2006-02-18 14:05:58

I doubt that home prices will rise without a ready supply of no-doc interest-only money, but Microsoft recently announced huge expansion plans for their Redmond campus, so maybe a soft landing might happen in the Seattle area. You better have a college degree!

Comment by DeepInTheHeartOf
2006-02-18 22:48:03

That huge expansion will mostly be “line” workers, jobs in the $50k to $100k range. Microsoft stopped minting new millionaires about 10 years ago. Except at the GM/PUM/VP levels, which account for a very small percentage of people, nobody is going to “get rich” on Microsoft stock (as I sadly know) which has lost 1/3rd its value since 2001.

Anyway, most of those line workers will see _very_ little in the way of raises or stock awards (MS did away with options a few years ago), due to it’s compensation policies.

Anyway, to summarize: Microsoft will not be exhaling a cloud of newly wealthy people upon the local real estate market. A number of people who are making ok to good money (depending on your definition, yes), but almost none of those people will be buying homes close to work (the area is already priced out from old money).

Comment by Kim
2006-02-19 08:03:12

Microsoft isn’t the biggest employer in the Seattle area, Boeing is, and there are also a lot of companies in the area that are Boeing “support” companies that provide parts and services to Boeing, so there are a lot of non Boeing jobs that would be immediately lost if Boeing left the area. Microsoft expansion will not make any difference to the housing prices in the greater Seattle area.

Comment by B. Kaster
2006-02-19 09:01:06

Seattle most definitely has a housing bubble. And it will pop. However, I believe Seattle will lag the CA/AZ/FL pops by 1 to 2 years because Microsoft, Boeing, and Amazon are still hiring. That being said there are more for sale signs and “new price” signs. Too early to tell if it is the normal winter slowdown or the start of the big “pppffffttttt”.

Comment by Nicholas Weaver
2006-02-18 12:04:37

Across the street from my apartment complex, in the “nice” part of Richmond, CA, a complex of about ~130 townhouses is going up. This is by the far more reputable builder in the area (Signature Properties), and there is a 1 year no-flipping clause.

But its on a brownfield site (forunatly you can’t have a garden because of no-yard, otherwise you would get Leaded Begonias). It’s about 3 feet above sea level (better hope Republicans are right about Global Warming). And its on bay fill (the California equivelent of building at -15 feet in New Orleans). Items which don’t factor in as a renter but do factor in as purchaser (and why even if prices were reasonable, I wouldn’t buy into that development).

This was the big opening, as they were trying to sell off the initial release of 7 uncompleted units (the demo units going up next to the nicely disguised double-wide sales-office, and are the ONLY units currently under construction). Only 6 units were taken. They had about 15 couples showing up, based on the number of cars in the parking lot.

Actually, a pretty good showing all things considered.

The prices ARE overpriced: the cheapest is $500k, which puts rent-equivelent-cost (interest, property tax, hoa, insurance - tax savings, given 10% down, 6.2% 30 year fixed 1st, 9%, 30 year fixed 2nd) is $2200/month. And really, under conventional measures, you “only” need a $130k/year household income to buy. The most expensive is $620k (so $160k/year household income).

Given rent is probably about $1800 for an equivelent to the cheapest unit, price would only have to drop 20% to be in line with expectation, which is far less inflated than the (soon to be) condos where I’m living.

So my initial impressions from talking with people. Those who showed up still believe the hype. Yet not so many did show up, really (given I would hope that the big opening would be, well, bigger). But the builder obviously does not believe the hype anymore.

Rather than having to do a fire sale later on (the Centex style), this builder is already dropping prices to be more in line with expectation. These are the best view-lots in the complex, and they are probably $100k cheaper than they would have asked for 6 months ago.

The ones this will hurt are others in the area.

Why spend $500k on a 2 bedroom, 900 square foot condo in a building built in 1980s (what they want for mine once they convert it), or $650k on a 3 bedroom, 1300 sqare foot, 1984 building (an MLS listing from the next complex over), when you can get a brand new 1300 square foot townhouse across the way for $400k, and a 2000 sqare foot townhouse for $620k?

Comment by txchick57
2006-02-18 12:10:37

Have they done any remediation? UFB. I have a friend, an environmental attorney, who works on brownfields matters.

Comment by Nicholas Weaver
2006-02-18 12:33:21

They have, but only on the surface.

Since people can’t plant gardens, who KNOWS what crap is 10+ feet down in the soil (its the old Kaiser shipyard location).

Frankly, the brownfield part wouldn’t bother me (it does’nt bother me as a renter), its the bay fill and 3′ above sea level that would bother me as an owner: IMO, in a major earthquake, every building in this area will be red-tagged.

Comment by stanleyjohnson
2006-02-18 12:18:56

check out Sunday’s LA Times. Article about Mile High capital accepting deposits from mainly Californian’s last year for “get rich from real estate pitches.”
Article goes to say all that money they collected is gone. Investors also know as morons who mortgaged their homes are SOL!

Comment by stanleyjohnson
2006-02-18 12:25:48

if you go to http://www.milehighcapital.com site has been removed.
their address was at
9780 Mt. Pyramid Court Ste 270
Englewood, Colorado 80112

Someone should have been suspicious mailing their deposit checks to an address at a “pyramid” (scheme)

Comment by stanleyjohnson
2006-02-18 12:39:12

check this out from last year. These people were duped by mile high capital. their money is gone.

Mile High Capital Group, a Denver firm, has been making repeated forays to
California to sell duplexes it plans to build in Colorado, Florida and North
Carolina. Presentations in San Francisco in January and Los Angeles in
February drew about 400 people each, some simply curious, others brandishing

On the stage, the Mile High speakers sell the idea of real estate. “I’m
telling you, from the bottom of my heart, you gotta do this,” Chief
Executive Rick Dryer exhorted the crowd at the San Francisco convention

The firm’s sales pitch is that it has done extensive research to determine
which communities will be experiencing substantial growth, which will lead
to a brisk demand for rental housing.

One of Mile High’s developments is in Fort Lupton, north of Denver. “Few
areas in the U.S. afford you to go skiing one day and golfing the next,” a
company brochure explains with enthusiastic if idiosyncratic English.

At the side of the room, representatives of the mortgage brokers Investment
Property Funding offered counsel. In the rear, Mile High representatives
unfurled scale drawings of their new neighborhoods. People could mark off
the duplex they wanted, provided they were willing to immediately fork over
5% of the price, which was usually $330,000. They won’t see the finished
product for as long as two years - an eternity for investors.

There are other hurdles. One potential investor asked why the Florida
duplexes, located northwest of Orlando, were described as bringing the
owners less than $30 a month after mortgage payments and other expenses -
hardly worth bothering about.

“If you buy in Florida,” said sales director Andrew Eikenberg, “you’re
really betting on appreciation.”

That investor walked away, convinced the bet was unwise.

Those who bought had more faith: that their project will be finished, that
the communities in which they’re located will become vibrant, that tenants
will be plentiful and eager to pay enough rent to allow investors to recoup
their costs.

And if any of these things don’t come true? The contract states quite
clearly: The buyer assumes all risk, and the 5% down payment is not

“Maybe I’m naïve,” said Massoud Balbas, a Laguna Niguel computer consultant
who attended the L.A. presentation, “but I thought [the speakers] were

Balbas bought a lot of tech stocks in the late ’90s, an experience that left
him unhappy. “I had no idea what I was doing. I put everything in one
basket. Real estate is different. People are always going to need homes.”

His own home has ascended in value from $400,000 to $1 million. That makes
the Colorado duplex he agreed to buy from Mile High look inexpensive.
Balbas, 60, has never been to Colorado and said he had no plans to go
anytime soon.


Comment by Sunsetbeachguy
2006-02-18 12:58:11


Comment by athena
2006-02-18 12:26:17

in Sonoma? There are 174 condo + single family homes listed on GMAC MLS, though I have received 35 emails in the past three days of new listings that are not yet posted. There are more than 200 listings if the search is run show all…

According to ZipRealty.com and their nifty “search properties by newly reduced price option” there are 45 houses with new price reductions. Some are as great as $100k reductions, yet other sellers with their houses on the market 60+ days have made more than one reduction totally only $10k. Let me take a stab at the Sonoma stage… I would say Stage One… DENIAL!

69% of Sonoma property just last year alone was purchased with those nifty, exotic I/O loans, and when one needs to have an income in the $150k range just to QUALIFY for a house they can afford, being the median house price is above $600k how much longer can this bubble stay in the air?

further, sonoma statistics are showing that there is 3 x the inventory listed for sale, and with the rise in median costs, sales have plummeted more than 50% and the time on the market has doubled…

only 7% of Sonoma residents can afford to buy a home…That is the lowest affordability in any County in California… and the average income of the Sonoma resident is around $46k a year…oh no, what do do, what to do? Dude? Where’s my bubble?

Comment by Kaleidoscope Eyes
2006-02-18 12:37:28

Housing in many parts of CA has always been expensive. However, when only 7% of the locals can afford an average-priced home, you know you have a bubble on your hands. How much large-scale Aspenization can go on before we run out of: 1) people with inheritances, equity from previous homes, access to Bank of Mom and Dad, etc. or 2) people willing and/or able to gamble on exotic mortgages?

Outside a few resort areas those kind of prices can’t hold in the long run.

Oh, and I’m soooooo glad to be a renter about now…heh heh heh.

Comment by athena
2006-02-18 12:46:59

The thing is in Sonoma so many bought thinking it was a sure thing and they could flip it to those who feared being priced out of the market.

Property values were still fairly reasonable as early as 2000 and 2001 but the telecom tech boom of companies moving out of silicon valley because it was too hard to recruit people changed the landscape. They began moving in and bringing a workforce with them that wanted a better quality of life. Not to mention if they moved them there, the liklihood of them giving it all up and moving back to SillyValley was pretty low… um.. as long as the jobs held out. It was a retention tactic and a pretty good one.

That being said, at that time- the late 90’s and early 2000’s there was still significant price disparity between Sonoma County and the greater Bay Area and Silly Valley. I actually was interviewing a Director for one of the tech companies and he asked me seriously (in 1999) if I had any insight into some property he could buy. Because he sold his SF house for $750k but he couldn’t find anything expensive enough in Sonoma County to roll the money back into.

He was not alone… more and more workers moved North from SF and Silly Valley homes and found themselves in the same boat.

A Flipping Revolution was born, and these sorts of folks bought multiple houses. The property values climbed. The media smelled a story, the teeming masses caught on and the race was on.

Those relocating from higher property value areas were still in control though, because while there were a handful of companies offering Silicon Valley Salaries the rest of the jobs in Sonoma County were still for service workers, blue collars, and of course the burgeoning real estate and construction industry that was the benefactor of the speculators.

Sonoma Valley itself is quaint and small and was vulnerable to the uniqueness sell… the limited availability of property- and they began consumming large quantities of the supply and demand Kool-Aid.

For a while there, there actually were people who followed the newbies and speculators into the market and benefitted from a couple year’s worth of equity in houses they bought late 90’s and 2000 and 2001… those people wanted to be the next investors and some traded up, and some bought ahem… “investment properties”

Then in the last two years you can see the trend of those who WANTED to at least FEEL wealthy and get into the market. They saw the easy killings so many others appeared to be making and they set out to bag their own exotic, erotic loan and sell their very souls to the lenders.

In the last year alone- the properties sold were 69% I/O ARM loans… that should tell any intelligent person right there, that the last round of buyers were not wealthy people with money burning a hole in their pocket just waiting to get into the market.

They were chumps who had no money but were banking on the entitlement that real estate only goes up, and all they had to do was sign on the dotted line, and voila they too would own their very own houseATM.

Comment by bottomfisherman
2006-02-18 13:56:17

… and they are your new “bag holders” class. ;-)

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Comment by Out at the peak
2006-02-20 14:36:57

So I’m part of this “telecom valley.” A lot of shuffle happened as I was laid off three times between 2000 and 2004, but still was part of telecom each time because that is the technology core here (Alcatel, Cisco, Tellabs/AFC, etc). When I jumped on a precon in 2000, affordability was kind of reasonable. When I saw that senior engineers couldn’t buy houses anymore, I knew something was wrong. Lay offs were still occuring from Mahi, Tellabs/AFC acquistion, and Aglient/HP (my neighbor was laid off just two weeks ago), and it was clear that prices could not be supported on an upward trend forever.

I know super rich people who don’t have to worry about money again, but they already have their dream houses.

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Comment by death_spiral
2006-02-18 12:52:02

Blasphemy!!! there is no bubble!!

Comment by DCBubbleHead
2006-02-18 12:28:24

this morning i spotted a $100,000 off ad on craigslist under “reduced” listings. It was $100,000 off a condo that sold for $359,000 last weekend. I inquired with the realtor who posted the ad and he said that the developer was unloading the condos in lots of 20 and said there would be another “wave” of them from the same developer last weekend. Sounds to me like a lawsuit waiting to happen.

I’ve been monitoring real estate listings on craigslist and it seems like the houses bought by flippers are popping up for sale everywhere. I saw one group of listings and it was 7 houses on the same street. There are also tons of renovated houses for sale in the NW quadrant of DC on the edge of NW. There was listing on 610 Columbia Road, NW that read as follows:

Back on the market. Contract fell through. New roof-only 5 months old, shows well, wood flooring under carpet. Basement could be
converted back to a rental. As-is, seller will make no repairs. Has
great potential. Location-location-walking distance to columbia heights metro station. May need possible rent back.

This listing looks like someone bought for a flip and ran out of money. I’ve spot checked a few of the more desperate sounding listings and the owners are losing money after netting out the realtor fees (with no consideration for what they spent on granite countertops).

I think we’re to the point where the flippers are running for the exits. I think the new starts number is a direct result of warm weather enabling builders to slap up new houses before buyers that put deposits down have a chance to change their minds. I think the initial decline will be sharp and sudden. I think the broad economy will feel the impact once folks that maxed out their HELOCs have to sell–that will take some time.

Comment by NOVA fence sitter
2006-02-18 14:51:09

I noticed on townhouse going in Arlington VA listed for $410K and the add said the investor had been renting out for $1450…why would they point out the fact its cheaper to rent than to buy. Boggles my mind.

Comment by MjrMjr
2006-02-18 15:43:59

$410k for an Arlington TH may be a reasonable price in this market, depending on the specifics of the property. Exactly how that $1450/mo rent factors as a selling point, though…? I’m also scratching my head.

I’ve seen quite a few ads on craigslist that are geared towards “investors” that talk about “instant equity” and/or state the monthly rental income of the property. In every instance where I’ve done some back of the envelope math(30yr with 10% or less down) the rental income doesn’t cover the mortgage payment. In these cases and the example that you cite, it’s implicit that the would be buyer is betting on big appreciation. Or do most people not think this sort of thing through?

Comment by NOVA fence sitter
2006-02-18 16:19:06

The problem with Arlington property is that although its close in alot of the property’s are very old (ie circa 1940). I can’t imagine how a property that only rents for $1450 is worth $410K…unless like you said they are counting on appreciation. The upkeep on older property seems to be an expense that no one considers. I will bet that all the factors that would drive appreciation are already priced in at this point.

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Comment by DC Bubble Seeker
2006-02-19 14:04:34

Speaking of condo flippers, there was a posting 2 weeks ago on craigslist asking $497K for unit 634, a 1-bedroom in Clarendon 1021. It appeared again last week at $470K, a reduction of $30K in a week. . In the ad, the guy tries to play it up like it’s a great deal. And yet, he wants out. Makes me happy to see that flippers are getting screwed.
I have a graduate degree and 7 years of work experience and I feel priced out of the market, in part because of damn flippers.

Comment by athena
2006-02-18 12:31:12

“Sonoma County and the Bay Area are near the top of the PMI risk index for home price declines over the next two years. ”

The latest PMI index projects a 45 percent chance for a price decline in Sonoma County over the next two years. The Bay Area has a nearly 48 percent chance for a price decline.

Year-end sales reports cap a year that saw rising mortgage rates and sinking affordability trigger a slowdown that had been predicted for two years.

For 2005, Sonoma County home sales fell short of the 6,000 mark for the first time since 2001.

The time it takes from when a home is listed to when it is put under contract has risen rapidly in the past four months and is now at 90, the highest level since February 2002.

four months in a row home sales have been off by double-digits from the year before. Not only that, the 268 homes sold were the lowest single monthly total since January 1998!

Affordability sunk to record lows as prices rose to new heights. While the percentage of households that could afford to buy a home had been declining, it dropped significantly over the past year.

Only 7 percent of households could afford a median-priced home in Sonoma County at year’s end compared with 12 percent a year ago.

A Sonoma County household needed a minimum income of $152,595 to buy the typical home, based on prevailing interest rates for a 30-year mortgage. A year ago, the minimum income needed was $124,650.

Buyers had to increasingly stretch financially to purchase homes. A majority turned to interest-only and other adjustable-rate loans, often making little or no down payment when purchasing homes.

Adjustable-rate mortgages accounted for 69 percent of loans to buy Sonoma County homes last year and only 31 percent were 30-year, fixed-interest loans - a reversal from just two years earlier.

Comment by John in VA
2006-02-18 12:45:35

The cycle is on the downward slope of the peak.

Someone should tell the good folks of Pahrump, NV that a shack on a 3 acre parcel of useless dirt isn’t worth a million bucks anymore.

Comment by lmg
2006-02-18 14:18:49

This definitely looks like a candidate for the “Hall of Fame” of the great 2000-2006 ‘bubble.

I kind of like the ~2 bedroom South-Central LA dream home that was featured recently in the LA Times, the one offered for $500,000 with bars on the windows (aka, passive-security devices).

Comment by rms
2006-02-18 14:23:32

Greenspan Mortgage Co. — :)

Comment by Rainman18
2006-02-19 11:39:42

I agree, this POS may be a finalist for the Bubble Awards. Nothing like 110 degree weather and vinyl floors.

Comment by Manhattan Beach Trojan
2006-02-18 12:49:07

I have been reading this blog for 8 months now and I fully believe the RE bubble will burst to the tune of 35% to 50% in the most heavily affected bubble areas. What I find amazing is in some of the areas that have seen 5% to 10% declines, the realtors are already quick to call it a buyers market as to imply that we have already seen the worst of it. Who are they trying to fool? It is still very much a sellers market nationwide and only until prices fall to 25% to 30% will the shift become more to a buyers market.

Comment by Observer
2006-02-18 16:53:19

I agree wholeheartedly!!!

Comment by Tom
2006-02-18 12:55:25

I just saw balloons, sign wavers and the whole enchilata for KB Homes here in Tampa. They are really trying to move some unfinished condos. The parking lot was DEAD! And 6 mos ago it would have been packed with speculators hoping to cash in on the housing boom. Looks like the party is over and it’s all downhill from here.

Comment by Dreaming 07
2006-02-18 12:56:00

Yesterday, I was in Wilmington DE visiting my inlaws. I have never seen for sale signs in their neighborhood (as small desireable enclave of Victorian twins right in the city) as the few homes for sale in the past years have been purchased almost immediately. Yesterday there were three ‘for sale’ signs that I could see just looking out their living room window and one was having an open house. My father-in-law said that an unusual amount of people were selling and wondered why. I just said, “housing bubble, cashing out.”

I submitted a job application for a position in Diamond Bar, CA so I have been looking at lot at the area east of LA where the LA, Riverside, SB, OC county lines meet. There are several decent working class neighborhoods out there with very overpriced homes, but A LOT of increased inventory and some small price cuts recently. Inventory has increased almost 100% in some of those areas since the beginning of the year and price cuts are getting more common. I did notice inventory go down in several cities in that area last week for the first time since I started tracking, so I’m sure some families who have been waiting for a better deal jumped in.

Comment by Pismobear
2006-02-18 13:04:20

Who cares if only 7% of the people living in Sonoma Co. can ‘afford’ the median priced house? We are ALL using stated income and I/O and neg Arms. aren’t we? Huh? Huh? hehehehehehe Pick up the pieces in ‘08?

Comment by athena
2006-02-18 13:17:09

my point exactly LOL… I love those conversations with the bubbleheads in my town bragging about how much they can qualify for with nothing down… and they encourage each other to go go go, and buy buy buy, real estate only goes up…

I always ask the same questions- just who is going to buy your chit box for more than what YOU are paying for it when even YOU can’t afford it and have to go with a stated income I/O and you are banking on flipping it?

They look at me like I just sprouted 3 heads. I guess they figure if they can get a mortgage for a house they can’t afford, then so can anyone… right… and that HAS been the case which is how we got HERE…

I then say- “look, there were once standards and income qualifications for mortgages because well, because they are there to keep the risky people who bite off more than they can chew from being given more money than they can manage so the banks don’t end up with high default liabilities. Now that we in the place we call HOME KNOW that nobody can afford the home prices… how much longer until the exotic erotic financing dries up… and THEN who is going to buy your chitbox? How close are you to the end times when you have documented proof that the last two years growth was due to the exotic financing given to the people who can’t afford the homes in the first place? You are already scraping the bottom of the barrell? Where do you think more money is going to come from?”

three heads… clearly I have three heads.

Comment by bottomfisherman
2006-02-18 14:03:32

The Greater Fool Theory at work. The one left holding the bag is the Greatest Fool of all.

Comment by Robert Campbell
2006-02-18 15:47:42

You are really a good writer, and I’m sure people tell you that.

You’re a pleasure to read.

Comment by athena
2006-02-18 21:52:16

Well who doesn’t like to hear that? (thank you) LOL… I only wish I were writing fiction. Unfortunately, these stories are true, and yet oh so surreal.

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Comment by ajh
2006-02-18 16:54:28

Not only do you have 3 heads, you’re speaking martian :D.

Comment by MC_White
2006-02-19 05:57:10

This headline from the Martian Chronicles Real Estate Section for Feb 18th (by the Earth calendar):

“Rcke Meebzorb, mrbzeek shrozfrp greezork urke zoorognak”

My martian is a little rusty, but I this this says “They aren’t making any more land on Mars.”

Better buy property near Olympus Mons before it’s out of reach forever!

(Comments wont nest below this level)
Comment by chiphxla
2006-02-18 13:10:50

Just came back from my saturday jog; spotted 3 ‘for sale’ signs right next to each other in front of a townhouse/condo building in WLA; I jog here every week and they weren’t there last weekend. There’s another townhouse that’s been for sale since around Thanksgiving one block away.

Comment by Portland Mainer
2006-02-18 13:28:31

Here is a history of single family homes in the Portland, ME area since last summer, taken from Realtor.com. This tracking is for 3 zips in Portland (04101, 04102 & 04103) as well as neighboring Falmouth, Cumberland and North Yarmouth.

9/6/05 352
9/19/05 394
9/29/05 400
11/3/05 425
12/5/05 406
1/3/06 407
2/2/06 395
2/11/06 352
2/18/06 348

As can be seen, there’s no inventory pileup yet. I believe it’s a littl;e too early to infer anything from this tracking with respect to what 2006 will be like. Spring comes a little later at this latitude. Also, another reader has pointed out in the past that Spring may bring a game of chicken between buyer and seller. I agree with that - I think it will take many sellers getting shut out for them to realize the very peak prices of yore are not going to happen again anytime soon.

I also believe that many smart Massachussetts folk who are able are running to the exits to cash out before sales in the Bay State really tank. Just a few like that fleeing to a relatively small market like Portland could artificially keep Portland prices up.

I’m watching the ski areas in Maine and NH keenly as I think theseare in for a crash. Second homes will be sold off before primary residences. Also, much of the buying is driven by investment — it’s simply a lot cheaper to rent those few weekends than buy. If the asset appreciates, it’s a different story. But once depreciation starts, it’ll be reversion to renting. Plus many will likely cut back on vaction spending as the wealth effect from housing becomes a phantom. Once this happens, this should then flush out the enormous amount of “hidden inventory” at the resorts that is owned by builders. The real estate agents tell you a new subdivision at a ski area is 75% sold out and you’d better hurry. What they are not telling you is most of the sales went to builders. See how they run!

Comment by Backstage
2006-02-18 21:23:48

Realtor.com is not unbiased, and not particularly accurate. Y-O-Y numbers might give you a trend, but not accurate numbers.

Comment by Portland Mainer
2006-02-19 12:42:21

How so?

Comment by Brandon
2006-02-18 13:47:58

The Boise area is still stuck in bubble land as RE agents tout growth and claims of future appreciation for investors. Many people I know are still in the mindset that they need to buy now (using IO loans) before they are priced out of the market. Prices are staying high as inventory increases. Their are some well worn townhouses near me that are on the market for $130-140k. I think the sellers are high because you could rent the same thing for $650 month.

A few weeks ago, the Idaho Statesman noted that 30,000 homes are in the pipeline for the valley- thats incredible for this area. lists all of the planned subdivisions.

What is interesting in Boise is the rental market. Investor rentals are flooding the market and rents are dropping. The newspaper today (online) has 948 rental listings. Most new homes bought by investors are renting for less than $1000 a month. My finace manages a 120 unit apartment complex and they just dropped their rents.

Doesn’t rising home prices and dropping rents spell bubble?

Comment by Brandon
2006-02-18 13:49:07

Here is the link on the subdivisions:

Comment by Suspicious 2
2006-02-18 13:52:23

Rocklin, CA. 95765.
I sold my house almost two years ago and rented three doors down. My real estate agent lives on the same street. I just talked to her yesterday. Although, prices went up almost 25% SINCE TWO YEARS AGO! However, houses are now sitting on the market for 4 months. I sold mine in three weeks, at that time, for a trend setting price.
One more interesting bit of info. Her husband sells wholesale lumber for a living. Over the last two years, businees was so good, he only concentrated on one or two major home builders. Now he said the lumber whole sale market has really changed. His major customers have stopped buying and he has got to put in major hours to make sales. It’s starting to et tough out there!

Comment by bottomfisherman
2006-02-18 14:06:40

Maybe he can export that lumber to China to build houses for all the new factory workers there. Jobs- courtesy of the USA.

Comment by Stephanie
2006-02-19 06:42:47

Just don’t send the lumber to Shangai in China, where the real estate market has come to a standstill, with many people going bankrupt, losing their properties, and watching the values drop a long ways!


Comment by flat
2006-02-18 13:56:42

Dc central soviet where no one ever gets laid off-
house up the homes are languishing while Wash Post avoids the subject

Comment by Brandon
2006-02-18 13:58:46

New update- As I finished my post on the Boise area, I received a call from a realtor at a subdivision we had looked. They are offering $5,000 gift cards for a furniture store if you buy in the next few weeks.

The once hot market must be cooling (in RE agent speak) if they are offering gift cards for new homes in Boise!

Comment by George Campbell
2006-02-19 06:34:17

What a deal - a $5000 gift card to entice you to buy a $450,000 property that will be worth $390,000 in only 18 short months! You will pay $60,000 to get $5000 worth of furniture!

Comment by spacepest
2006-02-18 14:00:29

Comment by John in VA
2006-02-18 12:45:35
The cycle is on the downward slope of the peak.

Someone should tell the good folks of Pahrump, NV that a shack on a 3 acre parcel of useless dirt isn’t worth a million bucks anymore.

A shack on 3 acres in Pahrump was never worth a million dollars; in fact, I doubt all the land in the entire town of Pahrump is worth a million dollars.

Pahrump is such a sh1thole. Its like living in a Third World country or an Indian reservation in the middle of the desert (and I can live on an Indian reservation for free). There are no jobs out there and barely any services…you’d better think about twice in living in a place where the best paying job for a local is legalized prostitution.

Comment by Lou Minatti
2006-02-18 16:24:47

Pahrump is such a sh1thole.

Hey now, Pahrump’s most famous resident is Art Bell. Art has the nicest house in town, consisting of two large trailers welded together and featuring a nice gravel landscape.

Comment by bottomfeeder1
2006-02-18 19:27:18

prostitution is a service.however the homes their are worth 150k tops.since the advent of viagra for retiring boomers does add a premium plus you can gamble your ssi checks so i guess its not all that bad.

Comment by flat
2006-02-18 14:03:42

Dc sorry , house up the street , a rare 5 bedroom w no bids at a price from 6 months ago
2006 will = 2004 and 2007 will = 2003
and then ?

Comment by athena
2006-02-18 14:26:04

Gonna go out and get a paper- I bet the real estate section will be a bit on the thick side.

Comment by achtungpv
2006-02-18 14:53:03

Lennar in Austin is offering 50% off all upgrades with no cap.

Comment by Melody
2006-02-18 15:01:10

I hope your birthday isn’t today… this is your horoscope!!

HAPPY BIRTHDAY for Saturday, Feb. 18, 2006:

You want to focus on the quality of your personal life. A real estate investment could make a big difference in your life choices. You could be surprised at the security that property can bring. Some of you might be spending a lot more on your homes than you’d anticipated. If you are single, you might be more closed off and withdrawn this year than you realize. Be careful not to tumble into a relationship where the other party is emotionally unavailable. If you are attached, your relationship will benefit from more downtime. TAURUS is a homebody.

Comment by Anton
2006-02-18 15:19:43

Taurus doesn’t start till April 21.

Comment by Melody
2006-02-18 15:24:02

That is too funny. Must have been written by a realtor.

Comment by Melody
2006-02-18 15:12:13

Read about Northern Arizona market remains strong!.

“2006 should continue to be a good year for investors in Northern Arizona. There are several new high density subdivisions scheduled for Flagstaff in the next 2 years. One of those, Villagio Montano, is a 3,900-home subdivision with a mix of single-family homes and condos on 1,000 acres in west Flagstaff, with a new interchange on Interstate 17. Developers are currently working with the city planning and zoning to move forward with this project.”

Comment by jeffolie
2006-02-18 15:38:04

Area home sales at 5-yr. low
By Don Jergler, Staff writer

LONG BEACH — The number of home sales in Southern California in January fell to the lowest level in five years, a real estate information service reported Wednesday.
Many buyers were scared off by higher mortgage rates, and some just chose to sit out the market’s slow season, experts said.

A total of 20,085 homes were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month, down 30.6 percent from December, according to DataQuick Information System. January’s sales were down 7.4 percent from the same time last year.

A decline from December to January is normal for the season, which is traditionally a slow time for home sales and when homes tend to sell for less, said DataQuick’s John Karevoll.

The median price paid for a home in Southern California was $469,000 in January, down 2.1 percent from December’s record high of $479,000, according to DataQuick.

Karevoll views the drops in sales and price appreciation as a return to a more manageable market.

“The market is just easing back in incremental bits toward normalcy,” he said. “The market is kind of rebalancing itself.”

Last month’s sales count was the lowest for any January since 2001, when 18,010 homes were sold, according to DataQuick.

Comment by Surffroggy
2006-02-19 01:29:10

“The market is just easing back in incremental bits toward normalcy,” he said. “The market is kind of rebalancing itself.”
…Yeah, and things will not be completely normail until prices crash back down to 2001 levels. Keep crashing to normal baby!

Comment by invest3
2006-02-20 06:22:43

Tech stocks “normalized” as well when the NASDAQ dropped from just over 5,100 to it’s bottom of 1,200 in 2002.

Comment by Melody
2006-02-18 15:42:09

Read about Interesting OC Chart.

Comment by Nick
2006-02-18 16:06:19

In Glendale, CA (suburb of LA):

Inventory is definitely up at least 15-20%, home prices do not seem to have moved in the last 2-3 months, and usually sell for under asking. If you price your house $30-40K below Nov/Dec comp, then you will sell it in a few days. Definitely not normal compared to other years.

Comment by adaylate
2006-02-18 16:36:26

I would agree with Portland Mainer that inventory has not spiked dramatically in Portland, Maine. However, I found 50 properties under $200,000.00 currently for sale in Portland & South Portland, where there were times when there were none last spring. Also, homes are not moving, but I’ve seen several owners in my neighborhood take their houses off of the market this winter. So spring should be interesting.

Luckily, the Massachusetts market is very slow, and it is that market that drives the Southern Maine market… Without money from Mass & NY, wages here could never have caused the recent runup…

Comment by sf jack
2006-02-18 18:00:01

In my San Francisco neighborhood last week I noticed three new “For Sale” signs on just one side of the street. Albeit a little slower here in the City proper than other places (I expect), people are definitely moving toward the exits.

Condo construction in the East Bay appears to continue apace, while accompanying some of the usual harbingers of change: I don’t see nearly as many “buyers” looking at them as in the recent past and in some of the newer complexes, “For Rent” signs have begun to appear in the windows.

And last week I noticed the drive time ads for mortgage lenders are still ridiculous - and possibly getting worse.

Comment by kaneui
2006-02-18 18:25:01

Although Hawai’i’s deflating bubble is generally lagging the pace on the mainland, it’s already underway:

Maui homes selling slower

By Andrew Gomes
Honolulu Advertiser
February 18, 2006

Maui’s housing market mellowed a bit last month with relatively stable prices and another significant drop in the number of single-family home sales.

Condo sales — boosted by vacation investments — remained strong.

Some real-estate professionals say the slowing pace of single-family home sales is a healthy cooling for a market that has consistently led the state in median prices.

Maui, however, still remains a pretty pricey place to buy a home. January’s median price was $698,750, meaning half sold for more than that and half for less.

The median was up 10.5 percent from $632,500 in January 2005, representing the smallest percentage-point increase in 11 months. Last month’s price also was down from $722,500 in December, but was still the fifth-highest median on record.

The record came in May when median prices peaked at $780,000.

“I wouldn’t say it’s a buyers’ market, but it’s definitely evening out,” said Keone Ball, president of the Realtors Association of Maui, which compiled the sales data. “To see the median price come down a little bit is not bad, in my book.”

Ball, broker in charge at Carol Ball & Associates, said rising inventory has created more competition between sellers, who in the effort to attract buyers are less likely to list their properties for above-market prices.

“Two months ago, people could put their properties on (the market) and go for it,” he said. “That was realistic. Now, instead of having three or five properties (to compete with), they have 10 or 15.”

Despite higher inventory, there were fewer purchases of single-family homes — 76 last month, down 22 percent from 98 a year earlier. It was the lowest number of transactions for January since 2002 when there were 63 sales. The drop last month was the fourth consecutive monthly decline compared with the same month a year before.

For condos, there were 117 sales, up 18 percent from 99 a year earlier but still lower than sales in January 2003 and 2004.

The median condo price was $440,000. That was up just $10,000 from a year earlier and up from $400,000 in December. The median condo price for all of last year was $390,000.

Maui’s median prices are often pushed to lofty levels by property sold at some of the state’s toniest resorts. For instance, there were three single-family homes sold in the Wailea-Makena area last month. One sold for more than $9.2 million, and one sold for less.

The bulk of single-family homes were sold in Central Maui, where the median price was $610,000, or $5,000 less than single-family homes sold on O’ahu in January.

The largest number of condos was sold in Kihei. The median price for condos in Kihei was $420,000. That compared to O’ahu’s condo median of $295,000.

Comment by ProudRenter
2006-02-18 20:09:07

On Sonoma County bubble - last four homebuyers I have met in Sonoma County:

1. Gardener
2. Gardener
3. Maid
4. Pool cleaner

The pool cleaner now believes he is a real estate “investor” having just completed the purchase of a second home in Sonoma County.

The maid purchased with no money down and a cash kickback from the seller to cover closing costs.

One gardener used a “liar’s loan” to qualify with a salary at least 2x reality.

The other gardener looked at everything (upgrades, etc.) in terms of monthly payments, as in “I told them to go ahead and add it, it’s only X dollars a month more.”

Wow - I guess this must be the “smart money” moving into Sonoma real estate.

Comment by athena
2006-02-18 21:58:17

Well come one come all… the Motley Fools have arrived.

Good grief….the fall is upon us. Bring it on is all I have to say. Who was it that said this is kind of like reading obituaries for people who haven’t died yet? What an apt description.

Comment by dennis
2006-02-18 20:15:15

Out and about in Irvine,Ca. today on a cold day no less and saw many for sale signs for a Saturday on a major holiday week end. A little above normal on the FSBO.

Comment by kosiuko
2006-02-19 06:07:07

Hi Dennis, best place to check FSBO in Irvine? thanks!

Comment by amoney
2006-02-18 20:33:40

Inventory is starting to climb hard again in San Diego:
January 4th - 15852
January 27th - 17304
February 18th - 18275

That smell! That gasoline smell! It smells like . . .
burning flipper.

Comment by GetStucco
2006-02-18 22:51:01

Where do you get those numbers? Greater SD inventory on ziprealty shows 16,947 tonight, poised to go over 17K tomorrow. But I suspect this understates the actual figure, due to FSBOs which are not on there.

Comment by enron_by_the_sea
2006-02-19 14:06:42

Fellows, no matter whose numbers you look at at, it is a record for San diego! This week the inventory rose above the level it reached last year before the winter drop. The spring “sell-a-thon” has not arrived yet

Comment by amoney
2006-02-19 17:42:40

I get them from helpusell.com/caminoreal. They dont put their
customers properties into the MLS at first. I also refer to Noah
Gamer’s site at http://www.sandiegorealestatecentral.com/ which
listed 18731 yesterday (and more today). Some sites have only
single family, etc. and I want them all - homes, condos, land, you
name it because these brain dead flippers bought everything they
could get their hands on and they’re heading for the door at the
same time.

Comment by seattle price drop
2006-02-18 21:10:10

re Lawrence Yun and Seattle:

Lawrence Yun is a real nutcase. Have you seen his 5 min. Comcast commercials touting how Seattle RE is on a constant upward spiral and has “a lot of catching up to do” to reach the price levels of CA?!! Like we all want THAT to happen!!
He is also the same person who waxed poetic about the Seattle economy in a long article for the NAR.
I believe it was later that week that another article came out showing that there were only 2 counties in the US where wages actually FELL in ‘05. One was in Georgia and the other was King County, WA., home of Seattle.
This guy just never gives up. Amazing that he’s still saying this stuff in February ‘06.

Comment by mtnrunner2
2006-02-18 22:51:11

Is Austin really the next hot place to buy RE?

My hairdresser wants to buy investment property there. He says his brother just left his $55K job in SD for a $75K job in Austin, that in general salaries are same or better than in SD, you can get a 2300 sq ft house for around $220K, movie stars are moving there, he can easily charge $75 - $100 for a haircut, and the only disadvantage is a few big bugs which you avoid by having a screened porch. He says they’re keeping out investors by granting deeds to the buildings but not the land, so he’s getting around it by buying parcels. He has a real estate license and used to do mortgages, so he is well versed in all aspects of RE. Is he on to something, or a flipper late to the party?

Comment by txchick57
2006-02-19 05:36:38

No, it’s a place where money goes to die. See the post upthread about a homebuilder cutting prices there already. Then look at Craigslist. That would scare anyone away.

Comment by Stephanie
2006-02-19 07:41:31

Is Austin really the next hot place to buy RE?

No, you’re too late, from someone who lived there for 10 years and saw the hill country immediately due west of Austin nuked by RE developers. The prices have been ridiculous from the early 90’s. The hillsides started getting ruined out there, especially around Loop 360, Mopac, 2222, 2244, 620, Hwy 71. I think the process started in the late 80’s-early 90’s. I was starting to see substantial development out there around ‘95. From that time on, dense RE development was moving at a few miles per year westward toward places, like Lakeway, The Hills, Spicewood, Volente, Lago Vista, etc. Traffic was starting to get crowded and taking longer to get to work.

The other reason Austin’s not really a good RE investment area is because the economy there is not diversified enough. First you had the oil bust cut Austin down a few notches. Austin slowly built it way back up through the 90’s, and then it got cut back down badly in the tech bust at the turn of the century. I could tell in this last one because traffic, even during the school year, was less than before, because I could get from one end of town to the other in less time. And for the first time in years, rent actually dropped down substantially and transitioned from a landlord’s market to a tenant’s market. You could get incentives like one or two months’ rent free, cable and Internet access free in several cases, etc.

Now, I don’t know what is the main driver for Austin’s economy these days, since even the tech industry isn’t anywhere near what it was in ‘99. How do I know? Being in the computer industry, I knew several people who wrote technical manuals, did system administration, programming, even mainframe maintenance in very rare cases, and they were left without jobs, or at best, doing pest control, working in retail (one person (name withheld) was even doing mantles for chimneys in the new houses being built), office work for $8-12 an hour, you name it. Foreclosures had gone up drastically, especially to the north in Williamson county and surrounding counties.

I have worked for my company in 3 different cities through the years, Austin being one and now Houston. I find that Houston has a more diversified economy because it has a shipping channel, refineries, and other things, and it’s a lot bigger. In Austin, I would notice our hours would be cut back a lot in the off-season, and then increase a lot during the busy times. Not being used to Houston’s 24-7-365 economy, I had expected my hours to be cut back this and last month. Business hardly dropped a beat, though it was a bit slower than the holidays. The weekends continue to be busy, with people gearing up for Filmont, backcountry trips, even going to work in Western Siberia, Mexico, Norway, you name it. I had not experienced this in Austin or Dallas, even during the heady days of the 90’s.

The other thing is very unfavorable demographic changes in Austin during the 90’s and on. When I first got to Austin, it was a really nice, progressive, cool town to be in. I had met a wider range of people in the first few months than I had in 8 years in Dallas-Fort Worth alone! Not long after that, it started changing with people with lots of money coming in and gentrifying a lot of areas. Their social demeanor is snooty, snobbish, rude, and they don’t give you the time of the day. I’m reminded of that whenever I travel up to Austin to see friends. The ones who are friendly, humble, have manners, are most likely the ones who are the original Austin residents raised there or from California. They are there, but you have to find them.

My suggestion is save your money and rent, as you can get great rental deals (I think this is still the case, but I moved to Houston in mid-2004). Also, find out what your field of work is like in Austin. What you save, put it in physical gold and silver and keep about a month or two’s worth of cash at home (not in the bank). The stock market is in the topping stages before it goes bearish, never mind the Dow Jones Industrial Average getting inflated from irrational exuberance and the inflated dollar.

Good luck!

Comment by OutofSanDiego
2006-02-20 07:11:33

Movie stars are moving there??? I love Texas, but give me a break. Are you referring to Sandra Bullock or a couple others who may be Texas natives returning home and building their dream house? By the way, Sandra Bullock is involved in a lawsuit with her home because of shitty construction (yep, even in the million dollar range). If you are wealthy and not from Texas there is no way you would want to move there. The weather is just SOOO much better in Southern California and remeber you said Movie Star, so don’t start about the affordability issue factors (a big deal to me, but not for a “Movie Star”). I would never speculate in Texas…look at the inventory levels of all the big builders. There are LOTS of houses and still LOTS of land. Plus, since there is no state income tax, the property tax is really high (3.5% in many incorporated areas) which makes the numbers tough to work out if you think you are going to rent out your speculative real estate.

Comment by desidude
2006-02-18 23:01:07

In newbury park, in my condo development(where I rent) there are 4 condos on sale this weekend.

one was on sale last week for 499
This week two at 490
one at 484.5

Al very similar 3BR/2B 1300 SQFt in a nice nighbour hood
I rent a similar but 4BR/2BA for 1850. My landlord buoght it for 466

Comment by rent2home
2006-02-18 23:46:52

Hi, desidude,

Would u mind telling the condo name or street.
I live around. I saw one crappy townhome on corner oh hilcrest and rancho conejo. Was almost like a condo, a small dark patio. The whole thing looked worn out (description claimed many as new!), was asking around $585K. Not more than 300k to compare with your rental.

- Thank you

Comment by lunarpark
2006-02-18 23:52:46

Comment by NOVA fence sitter
2006-02-19 07:42:08

I just saw a really abnoxious realestate add on Zip realty:

Welcome to fairfax county. Houses here go up in value about $2000-5000 a month. House is in turnkey condition and will make any buyer happy. Call for warranty, closing help,and buyer's agent bonus at 3014403311.

Give me a break.

Comment by Sammy Schadenfruede
2006-02-19 08:08:25

First my cat disappeared. Then something started raiding my garbage cans. At first I thought it was a racoon or fox. Then I set a snare and caught me a hungry, cash-strapped realtor. (She promptly offered to sell me a new house with “no money down” and $25K worth of upgrades.)

Comment by GetStucco
2006-02-19 12:33:11

At least it wasn’t a cougar (although I guess the difference is slight).

Comment by Sammy Schadenfruede
2006-02-19 08:19:34

One of Mile High’s developments is in Fort Lupton, north of Denver. “Few areas in the U.S. afford you to go skiing one day and golfing the next,” a company brochure explains with enthusiastic if idiosyncratic English.

LOL. The “Mile High” club used to mean you got screwed in an airliner toilet at altitude. Looks like this outfit brings the experience down to the good old terra firma. Slightly less enjoyable I suspect, especially as the Denver real estate market is in full-fledged bubble-implosion mode as Spring approaches.

Comment by sm_landlord
2006-02-19 11:34:18

closed tag

Comment by SeattleMoose
2006-02-19 09:40:46

From what I can tell here in the “Emerald City”, Seattle properties are overvalued anywhere from 20 to 40 percent. The “high end” areas (Kirkland, Bellevue, and upscale Seattle areas will be in the 30 to 40 percent range. The areas like Burien, Bothel, Des Moinse, Renton, and Federal Way will probably be in in the 20 to 30 percent drop range.

I base this on using the 10 year sale history info on Zillow.com and assuming a 5% increase in price since 1997. Rough, but probably in the ballpark. Then I go to a property and look at my 10 year predicted price vs the current asking price.

The exotic loans are what has driven the “froth” in the market. A Kirkland mortgage lender told me that over 50% of the loans she had processed in the last couple of years were “exotic loans” (no interest, ARM, etc.)

Sadly there are going to be a lot of people upside down. They believed the hype and bit. The deflation of the bubble will occur in three phases.

Phase one will be a game of “chicken” between buyers and sellers. This will last from 6 months to one year.

Phase two will be the flippers and “jittery homeowners” dumping and running to cut their losses. This will occur during and after Phase one.

Phase three will be the most painful. The real homeowners who got caught in the bubble (bought after 2002) will end up with increasing payments and decreasing values. They will hang on until they are foreclosed or try to declare bankruptcy.

Don’t think the timing of bankruptcy laws being changed a couple months ago was coincidence. The big boys have seen this coming for quite a while.

What has happened in America is criminal. People who were not smart enough to protect themselves used to be protected by lending laws which allowed a person to only buy a home about 2.5 x their gross yearly salary. Remember, how hard it was to get a loan 20 years ago? Remember “ratios”? Apparently now anybody can incur massive debt for no upfront cost to themselves. “Step right up, step right up”….

I estimate most of the price corrections will occur within 3 to 4 years for Seattle. Sooner for CA/AZ/FL. After that I see real estate flat or even gradually decreasing for a long time.

I wonder what the next big bubble will be?…..follow the sharks.

Comment by pchander100
2006-02-19 10:49:30

In my home town Fresno, CA - also known as armpit of California - air is leaking out fast in the housing market. In the local paper, open-house pages are filled with the cancelled orders of new homes. Builders are ready to throw-in extras and reduce price to lure buyers. Price reduced signs in the ads have made the come back after years of absence. Full page color advertisement for new homes fills the newspaper pages. In the hey days, hardly any builder bothered to advertise.

Local real estate agencies are posting the photos of hundreds of their agents in their ad. I wonder why…! There are more agents than the number of homes selling. Inventory is piling up. Weekly home sales have come down to 90 units from 200 per week during the frenzy.

Comment by sm_landlord
2006-02-19 10:58:22

Brief tour this morning:

Santa Monica 90402: Not a lot of For Sale signs out, pretty much the usual sprinkling. I still see what must be the last few WWII vintage bungalows being scraped for McMansionization. A few larger homes being upgraded on the outside, and what looks like some inside remodeling in progress. What *is* new today is a house with a For Rent sign out in front - you almost never see that in 90402.

Santa Monica 90403: Lots of condos for sale, as usual. The same ones seem to be sitting week after week, and new ones seem to be cropping up. I’m seeing a few condos for rent. There are a few new conversions of apartments coming on the market as condos. The vacancy rate for apartments seems to be rising, and apartments are taking longer to rent while asking prices are rising.

I am not bothering to visit open houses in either zip code, since I don’t see any evidence of falling prices yet. But I expect to see condo prices start falling soon, as the supply appears to be growing quickly.
As for houses in 90402, I don’t see any sales since last fall, and the few available comps from last summer sold for between $800 and $1300 per square foot.

In summary, it looks like we have a freeze: prices firm, nothing moving, supply growing.

Comment by cereal
2006-02-19 12:46:00

it’s terrible what has happened to the architecture in 90402. those were some of the nicest 20’s 30’s and 40’s built houses in the world. paul zahler came along in the 80’s and put up probably 50 mcmansions where nice old houses used to stand. he went belly up in the crash. i have seen that people are more reluctant to tear down the bungalows nowadays. they fetch top dollar

Comment by sm_landlord
2006-02-19 13:47:15

The bungalows do fetch top dollar, but they still get torn down.

Many of the really nice old houses (the bigger ones) are still there, because they have enough square footage to be usable. For example, the Georgina St properties, the higher numbered streets up toward the contry club, and some of the area west of 4th St.

The smaller bungalows, while they usually had adequate yards, were typically 900-1200 sq ft - not big enough for someone to pay even middle six figures for under any circumstances except as a scraper.

The McMansions that replaced the smaller bungalows are not that bad architecturally, in fact, some would be very cool… if only they were sitting on about 4X as much property, so they weren’t butted right up against the one next door.

Comment by txchick57
2006-02-19 18:33:42

There are some seriously cool modern houses though in 90402, the Predock one for example with the pivoting front wall. Awesome place.

(Comments wont nest below this level)
Comment by sfbayqt
2006-02-19 11:13:08

I’ve been watching a house in the Dublin Hills of Dublin, CA (near the San Ramon border). It went on the market just before Thanksgiving, 2005 for $895,950 (4bd/3ba, 2700 sf, 19 years old). Mind you, according to Ditech.com, this house was sold (or refinanced) in 1993 to the tune of $322,500). Early this month the price was reduced (drum roll….) to $887,000. A 1% reduction in price! 1%!!!! Now if that isn’t very indicative of a seller who is insisting on getting what they think their house is “worth”, I don’t know what is. It could be that their agent told them that it would move faster if it were priced right, but they did not want to budge from their asking price because that is what the house is “worth” and that’s what they want. My feeling is if they keep that mindset it will still be on the market come November 2006.


Comment by sfbayqt
2006-02-19 11:14:46


I didn’t add any italics tags although my post shows italicized. :-(


Comment by Tyler Durden
2006-02-19 11:53:49

Someone didn’t close their italics tags in one of the previous posts.

Comment by sfbayqt
2006-02-19 13:18:21

Ok, thanks. The snowball effect….

Comment by Mike_in_Fl
2006-02-19 12:11:43

Insane … insane amount of open houses and for sale signs around town here today (Jupiter, FL). I am talking about several intersections in a large master-planned community called Abacoa having 3 or 4 signs each. My inventory for sale tracking on Realtor.com is really going ballistic too. We’re up to almost 450 homes that meet my search criteria, vs. 150 last June. Or in other words, inventory has almost tripled in less than a year.

Comment by Derek H
2006-02-19 12:24:58

I have a good friend who’s a realtor here in FL (who doesn’t), and one of his properties is a perfect anecdote of flipping greed. The out-of-state owner bought the house sight unseen in a nice part of Miami for about 700K about a year ago. Problem is the place is a crapbox built in the 1920’s that needs to be totally gutted and remodeled (at least another 250K) to make it habitable. Out-of-state guy payed some crook 150K to “improve” the place which amounted to him getting about 2K worth of paint and carpet, and the place is still a craphole in need of 250K worth of work. And out-of-state guy, figuring he’s at least 850K into it, is asking nearly a mil. Good luck.

Goes to show the blind greed of this market.

Comment by GetStucco
2006-02-19 12:28:45

ziprealty.com shows 113 Greater SD homes with a listing date of 2/18/06 and 0 with a listing of 2/19/06 (today), and over 200 homes are shows as “new listings” (2/17-2/18).

Guess #1: They could have listed 2/19/06 new listings, but are withholding them in order to avoid spooking prospective buyers.

Guess #2: The new listings for today will push the number of listings over 17K for the first time since ??? (it never was this high for the last couple of years, at least!).

Comment by cereal
2006-02-19 14:58:13

stucco, i noticed the same thing on my humbolt county tracker. they never have skipped a day and suddenly no new listings for 2/18 & 19. they are running 5 - 10 new listings a day. on a side note, the humbolt pending to active ratio is about 1:25.

Comment by Gary Anderson
2006-02-19 12:47:25

Reno housing bubble as follows for January 06: Active listings surged to 5183 in a city of 450,000. New listings in January alone were 1825. And only 520 homes were sold in January. This bubble is one of epic proportions.

Comment by Johnny Fever
2006-02-19 12:55:18

The apt turned ‘condos’ in MDR(delreyterrace.com) are now afficially being flipped…
Realtor signs out front now…
ha ha

Comment by Johnny Fever
2006-02-19 12:55:51

oops ‘officially’.

Comment by To BA Or Not To BA
2006-02-19 14:29:50

In the heart of Silly-con Valley, Cupertino, there is a 2 bedroom condo - oooopps - LUXURY condo - on Stevens Creek and De Anza. It has been on the market definitely since before thnaksgiving. On Zip Reality check out MSL 602343. It was relisted again this year. The asking price was a mere 869K. It has been now reduced to a bargain price of 825K. Yes. No typo there. This is for a 2 BD condo ! This particular listing is my bubble meter for now.

Comment by Curtis G
2006-02-19 17:44:56

Wife and I took the in-laws to breakfast this morning in downtown Huntington Beach. Saw more open house and for sale signs than I’ve seen in recent memory (signs of the times?). I grabbed a flyer from a house for sale and it had no price listed. I said, “That’s so they won’t have to mark the price down on all the flyers when they don’t get their asking price.”

We stopped by a TINY little open house a few blocks from the beach just to check the price; there were no flyers in the box out front (listing here.), but the house next door, slightly larger, had a for sale sign and flyers: 1br/1ba with a separate studio, 650 SF, asking $949,000 (the 4 was penned-in over a previous number). The kicker was the subhead on the flyer: “Live the Surf City Lifestyle - build or rent ($2,500)”

I did some very quick math and said, “So where does the rest of the mortgage payment come from?” (Here’s the listing.)

Comment by 42
2006-02-19 19:43:39

I drove home tonight down River Rd through Edgewater and Weehawken (NJ) and it looks like builders are in a huge rush to finish slapping together what looked like dozens of huge condo buildings going up in former ‘brownfield’ (toxic old industrial sites) areas along the Hudson. prices are still insane. of the ones that were finished, there was about one unit lit up for every 8-10 dark ones. there must be a few thousand condos either just finished or almost ready and I bet those dark windows are gonna stay that way for a long time. on the plus side, maybe that means I can rent one of these “luxury” boxes and get the hell out of Bayonne.

Comment by Betamax
2006-02-19 23:34:53

While walking my dog this morning in Vancouver, I met a very bright, articulate, elderly lady who just sold her house in Silicon Valley. I congratulated her on selling at the peak, and she agreed and said that’s why she sold, and she said now she was going to rent for a while.

It was refreshing to meet someone so astute. Made my day.

Comment by athena
2006-02-20 23:11:54

Sonoma’s State of the Bubble

For Sale Listings: 176 (www.ziprealty.com)

# of Listings w/reduced prices: 52

% of Listings with price reductions: 30%

1. 792 AUSTIN AVE, Sonoma, CA 95476
Price Reduced: 02/14/06 — $910,000 to $889,000
Days on Market: 27
Total Reduction: 21k round about 2.3%

(wow, this guy is really pricing to sell. Hurry, Hurry, come one come all… this one is priced to move quickly, come and get your 2.3% price reduction)

2. 18423 RIVERSIDE DR, Sonoma, CA 95476
Price Reduced: 02/18/06 — $650,000 to $575,000
Days on Market: 31
Total Reduction: 75k round about 11.5%

3. 222 & 226 W SPAIN ST, Sonoma, CA 95476
Price Reduced: 02/10/06 — $2,275,000 to $1,975,000
Days on Market: 31
Total Reduction: 300k round about 13%

4. 193 GUADALUPE DR, Sonoma, CA 95476**
Price Reduced: 02/07/06 — $629,000 to $619,000
Days on Market: 43
Total Reduction: 10k round about… don’t make me laugh

5. 435 JACEY ST, Sonoma, CA 95476**
Price Reduced: 01/26/06 — $599,950 to $589,950
Price Reduced: 02/16/06 — $589,950 to $559,950
Days on Market: 45
Total Reduction: 40k round about not even 10%

6. 111 W MACARTHUR ST, Sonoma, CA 95476**
Price Reduced: 01/18/06 — $450,000 to $430,000
Price Reduced: 02/13/06 — $430,000 to $410,000
Days on Market: 47
Total Reduction: 40k round about still less than 10%

7. 18817 RAILROAD AVE, Sonoma, CA 95476**
Price Reduced: 01/19/06 — $649,000 to $644,500
Price Reduced: 02/01/06 — $644,500 to $639,500
Days on Market: 48
Total Reduction: 9,500k round about… couldn’t even spring for the full 10k reduction huh?

8. 731 5TH ST E, Sonoma, CA 95476**
Price Reduced: 01/03/06 — $875,000 to $849,950
Price Reduced: 01/09/06 — $849,950 to $849,444
Price Reduced: 02/01/06 — $849,444 to $799,444
Days on Market: 56
Total Reduction: 75,556k still less than 10%

9. 609 ROSS CT, Sonoma, CA 95476**
Price Reduced: 01/06/06 — $849,950 to $829,950
Price Reduced: 01/17/06 — $829,950 to $799,950
Days on Market: 69
Total Reduction: 50k round about 6%

10. 17660 17662 MIDDLEFIELD RD, Sonoma, CA 95476**
Price Reduced: 02/02/06 — $1,140,000 to $1,095,000
Days on Market: 69
Total Reduction: 45k round about… why bother?

11. 304 DECHENE AVE, Sonoma, CA 95476**
Price Reduced: 01/26/06 — $659,000 to $639,000
Days on Market: 76
Total Reduction: 20k round about… so not impressive

12. 18585 MANZANITA RD, Sonoma, CA 95476**
Price Reduced: 12/20/05 — $740,000 to $729,000
Price Reduced: 02/07/06 — $729,000 to $699,000
Days on Market 79
Total Reduction: 41k round about …. pppfffftttt

13. ? 18677 MELODY LN, Sonoma, CA 95476**
Price Reduced: 02/06/06 — $649,000 to $629,000
Days on Market: 75
Total Reduction: 20k wooohooo… can I get a “Hell Ya!!” for round about 3% ?

14. 1385 BAINBRIDGE LN, Sonoma, CA 95476**
Price Reduced: 12/13/05 — $710,000 to $675,000
Price Reduced: 01/03/06 — $675,000 to $670,000
Price Reduced: 02/09/06 — $670,000 to $669,000
Days on Market: 91
Total Reduction: 41k around 5.8%. ..was this the guy’s interest rate before his ARM adjusted?

15. 1343 E NAPA ST, Sonoma, CA 95476**
Price Reduced: 01/17/06 — $1,368,000 to $1,295,000
Price Reduced: 02/13/06 — $1,295,000 to $1,268,000
Days on Market: 94
Total Reduction: 100k That’s nuthin’ I bet Bill Gates has this between his couch cushions

16. 18015 HARVARD CT, Sonoma, CA 95476**
Price Reduced: 02/04/06 — $775,000 to $750,000
Days on Market: 95
Total Reduction: 25k priced to sell, I tell you. Better hurry up or be priced out forever.

17. ? 970 GLENWOOD DR, Sonoma, CA 95476**
Price Reduced: 01/10/06 — $679,000 to $665,000
Days on Market: 89
Total Reduction: a great big fat 14k

18. 535 MITCHELL WAY, Sonoma, CA 95476**
Price Reduced: 01/16/06 — $799,000 to $775,000
Price Reduced: 01/26/06 — $775,000 to $750,000
Days on Market: 96
Total Reduction: 49k come on… would the full 50k kill you?

19. 919 1ST ST W, Sonoma, CA 95476**
Price Reduced: 02/01/06 — $415,000 to $405,000
Days on Market: 100
Total Reduction: 10k Oh Puuhhleeaassee!

20. 910 ARGUELLO CT, Sonoma, CA 95476**
Price Reduced: 01/06/06 — $649,500 to $629,500
Days on Market: 103
Total Reduction: 20k This 3% thing is popular…

21. 920 5TH ST #M, Sonoma, CA 95476**
Price Reduced: 11/16/05 — $425,000 to $389,000
Price Reduced: 01/16/06 — $389,000 to $373,000
Days on Market: 111
Total Reduction: 52k round about 12%

22. 1365 DAWN HILL RD, Glen Ellen, CA
Price Reduced: 12/11/05 — $1,400,000 to $1,198,000
Days on Market: 104
Total Reduction: 202k round about 14.5%

23. 215 DEPOT RD, Sonoma, CA 95476**
Price Reduced: 01/10/06 — $565,000 to $525,000
Days on Market: 112
Total Reduction: 40k right around 7%

24. 16880 ESTRELLA DR, Sonoma, CA 95476**
Price Reduced: 02/02/06 — $997,000 to $950,000
Days on Market: 117
Total Reduction: 47k round about 4.7%…really is the 5% too much to give back?

25. 17930 SPRING ST, Sonoma, CA 95476**
Price Reduced: 12/08/05 — $499,000 to $484,000
Days on Market: 124
Total Reduction: 15k that was hardly worth the time it took to re-enter it in MLS

26. 16737 SONOMA, Sonoma, CA 95476**
Price Reduced: 11/29/05 — $635,000 to $599,000
Days on Market: 124
Total Reduction: 36k somewhere near that 5.8% again

27. 832 2ND ST W, Sonoma, CA 95476**
Price Reduced: 11/15/05 — $545,000 to $525,000
Price Reduced: 01/13/06 — $525,000 to $510,000
Days on Market: 124
Total Reduction: 35k in the ballpark of 6.5%

28. 600 OMAN SPRINGS CIR, Sonoma, CA 95476**
Price Reduced: 11/08/05 — $669,000 to $654,000
Price Reduced: 11/16/05 — $654,000 to $639,000
Price Reduced: 01/09/06 — $639,000 to $619,000
Days on Market: 126
Total Reduction: 50k in the neighborhood of 7.5%

29. 846 848 3RD ST, Sonoma, CA 95476**
Price Reduced: 11/18/05 — $897,000 to $875,000
Price Reduced: 01/17/06 — $875,000 to $850,000
Days on Market: 126
Total Reduction: 47k round about: 5.3%

30. 19177 ARNOLD DR, Sonoma, CA 95476**
Price Reduced: 12/05/05 — $625,000 to $599,999
Days on Market: 128
Total Reduction: 26k round about: who gives a rat’s ass?

31. 17313 PARK AVE, Sonoma, CA 95476**
Price Reduced: 01/31/06 — $599,999 to $589,999
Days on Market: 131
Total Reduction: 10k round about: give you 3 guesses why this baby ain’t movin’!

32. 162 W AGUA CALIENTE RD, Sonoma, CA 95476**
Price Reduced: 01/09/06 — $368,000 to $364,900
Days on Market: 136
Total Reduction: round about 3k… baahahahahahahaha!

33. 842 W 2ND ST, Sonoma, CA 95476**
Price Reduced: 12/06/05 — $549,000 to $539,000
Days on Market: 139
Total Reduction: 10k let me get my bullhorn… “Dear Seller, 2% isn’t very compelling!”

34. 49 S TEMELEC CIR, Sonoma, CA 95476**
Price Reduced: 01/19/06 — $589,000 to $569,000
Price Reduced: 02/08/06 — $569,000 to $549,000
Days on Market: 145
Total Reduction: 40k round about: not much

35. 399 DAHLIA DR, Sonoma, CA 95476**
Price Reduced: 01/31/06 — $545,000 to $539,000
Days on Market: 146
Total Reduction: 6k round about: YAWN

36. 17178 SONOMA HWY, Sonoma, CA 95476**
Price Reduced: 12/02/05 — $385,000 to $375,000
Price Reduced: 01/06/06 — $375,000 to $329,000
Days on Market: 154
Total Reduction: 56k round about: 14.5%

37. 4611 WARM SPRINGS RD, Glen Ellen, CA
Price Reduced: 01/04/06 — $699,000 to $629,000
Days on Market: 151
Total Reduction: 70k round about 10%

38. 980 RACHAEL RD, Sonoma, CA 95476**
Price Reduced: 11/22/05 — $2,495,000 to $2,375,000
Price Reduced: 01/16/06 — $2,375,000 to $2,345,000
Days on Market: 159
Total Reduction: 150k round about- almost 1k per day since its been listed

39. 140 ENCINAS LN, Sonoma, CA 95476**
Price Reduced: 11/30/05 — $510,000 to $500,000
Price Reduced: 01/30/06 — $500,000 to $495,000
Days on Market: 160
Total Reduction: 15k round about: squat

40. 511 BAINES AVE, Sonoma, CA 95476**
Price Reduced: 11/11/05 — $535,000 to $510,000
Price Reduced: 11/30/05 — $510,000 to $495,000
Price Reduced: 01/12/06 — $495,000 to $479,500
Days on Market: 163
Total Reduction: 55.5k round about 10.4%

41. 17023 SUMMER MEADOW LN, Sonoma, CA 95476**
Price Reduced: 11/14/05 — $1,249,000 to $1,149,000
Days on Market: 165
Total Reduction: 100k right close to 8%

42. 12 WOODWORTH LN, Sonoma, CA 95476**
Price Reduced: 02/10/06 — $399,000 to $379,000
Days on Market: 166
Total Reduction: 20k round about: 5%

43. 17333 MALEK LN, Sonoma, CA 95476
Price Reduced: 02/20/06 — $549,000 to $544,000
Days on Market: 173
Total Reduction: 5k round about: You have GOT to be kidding me! LOL

44. 107 PINE AVE, Sonoma, CA 95476**
Price Reduced: 02/06/06 — $479,000 to $469,000
Days on Market: 188
Total Reduction: 10k round about: who cares?

45. ? 715 BOYES BLVD, Sonoma, CA 95476**
Price Reduced: 11/14/05 — $879,000 to $849,000
Price Reduced: 02/08/06 — $849,000 to $799,000
Days on Market: 181
Total Reduction: 80k round about 9.1%

46. ? 18395 BARRETT AVE, Sonoma, CA 95476**
Price Reduced: 01/30/06 — $579,000 to $569,900
Days on Market: 190
Total Reduction: 10k round about 1.74% (who came up with that lame number?)

47. 13400 SADDLE RD, Glen Ellen, CA
Price Reduced: 12/19/05 — $1,149,000 to $1,049,000
Days on Market: 208
Total Reduction: 100k seems to be the magic number on million plus property

48. 17135 SONOMA HWY, Sonoma, CA 95476**
Price Reduced: 01/05/06 — $629,000 to $600,000
Days on Market: 208
Total Reduction: 29k round about: negligible

49. 13432 ARNOLD DR, Glen Ellen, CA
Price Reduced: 01/13/06 — $849,000 to $799,000
Days on Market: 209
Total Reduction: 50k round about 5.9%

50. 290 SERRES DR, Sonoma, CA 95476**
Price Reduced: 01/03/06 — $1,650,000 to $1,595,000
Days on Market: 264
Total Reduction: 55k round about a blip

51. 1901 FREMONT DR, Sonoma, CA 95476**
Price Reduced: 02/02/06 — $2,950,000 to $2,650,000
Days on Market: 271
Total Reduction: 300k close to 10.1%

52. 16743 SONOMA HWY, Sonoma, CA 95476**
Price Reduced: 11/29/05 — $635,000 to $599,000
Days on Market 489
Total Reduction: 36k round about barely noticed

Comment by athena
2006-02-20 23:17:06

More Sonoma State of the Bubble

2005 Total Units Sold 1/01-2/20: 78

2006 Total Units Sold 1/01-2/20: 64

2006 Unit volume: Down about 19%


2005 Total Sales 1/01-2/20: $50,961,973

2006 Total Sales 1/01-2/20: $53,231,980

2006 Total Sales Volume: up 0.4%

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