‘It Was A Really Great Party And This Is The Hangover’
href=”http://www.fresnobee.com/local/story/12564707p-13275303c.html” mce_href=”http://www.fresnobee.com/local/story/12564707p-13275303c.html”>Fresno Bee. “Hundreds more homeowners in the central San Joaquin Valley are in danger of losing their homes to foreclosure this year because their houses are not gaining value fast enough, a real estate tracking company says. ‘There has been a dramatic increase,’ said Bill Pfeif, a real estate agent in Fresno whom lenders use to sell distressed properties.”"He said rising interest rates combined with an abundance of homes for sale, liberal lending policies and stagnant prices have created a ‘perfect storm’ for foreclosures. ‘The table was absolutely set,’ he said. ‘There is absolutely no way it couldn’t have happened.’”
“The situation is more dire in other parts of California, where home prices are higher and where values have tumbled. In Placer and Sacramento counties, where median-home prices in June fell 6.2% and 1.3%, respectively, from last year, the number of default notices more than doubled. The number also doubled in Riverside County and nearly doubled in San Diego County.”
“‘It was a really great party, and this is the hangover,’ Pfeif said.”
The Gilroy Dispatch. “Developer Gary Walton said he thinks the time will come when so many fees are tacked on that even fewer Californians will be able to buy a pricey sun-drenched home. ‘You know, I don’t think I have to worry about it because pretty soon nobody will be able to afford to buy a house (in California),’ he said.”
“Walton explained that the continuing escalation of housing prices on homes that are already costly, will drive young people out of the state. ‘They really need to consider what Californians are making,’ he said noting that California has one of the lowest home ownership rates in the country. ‘There’s a limit, I think, to what people are willing to pay to live in California.’”
Thanks to the readers who sent in these links. The San Francisco Business Journal:
‘ The pace of home building in California was also a hot topic of discussion. Hans Lapping, an attorney with in Walnut Creek, said he was routinely getting five or six calls a week to discuss raw land deals in California as recently as two months ago.’
‘They’ve stopped buying land,’ he said. Now these home builders are boosting incentives and cutting prices to sell the homes they’ve built.’
Psycology not interest rates were responsible for the housing bubble.
Greenspan dropped rates to historic lows, Brush got on the stump and promoted the ownership society, then it was of to the races, as the sheep were sucessfully headed up the hill to the cliff on the other side. The realtors builders and mortgage brokers then played it for all they could. And they’ll continue to try at ring out every last bit they can.
No amount of excess money or loose lending standards, could have gotten people to pay ever increasing prices for houses if they hadn’t been convinced that there would be a never ending supply of greater fools. It was a change in psycology, promoted by the goverment and made feasible by the Fed.
Like any pyramid scheme, it reaches a critical mass when it starts to collapse on it’s own. The interest rate increases may have helped nudge the psycology a bit, but the mania was already reaching it’s natural climax.
Blameing interest rates is just rhetoric by those who want to keep it going as long as possible until there’s not a single sucker left.
Fear is just starting to replace greed. Sellers fear not getting out before prices fall even more and buyers fear buying while prices fall.
Now we’re left with millions of people strapped to mountains of debt, desperate for the greater fools to return. The question is “Will the fools fall for it again, when the scheme is promoted again”.
JMO
Yes, but several years of falling interest rates were what kicked the appreciation escalator into gear. Somebody (calculated risk? Piggington?) had a graph that showed that inflation adjusted payments on a median cost home were FLAT through 2003. This was represented several years of double digit appreciation. THIS is what shifted the psychology of buyers into beleiving that this sort of appreciation is normal, expected and reasonable. Of course after rates bottomed out the only way that such appreciation could be continued was through toxic loans. Several years of extraordinaryily low defaults were a result of double digit appreciation, and that is what encouraged banks to MAKE and buyers to buy bonds based upon such toxic loans. ALL of this comes down to short-term thinking about long-term investments.
“Hundreds more homeowners in the central San Joaquin Valley are in danger of losing their homes to foreclosure this year because their houses are not gaining value fast enough.”
THAT is the problem with this whole thing. Many of these borrowers NEED to pull the cash out to pay their mortgage payments!!!!
The problem is not the slowing appreciation, it is that these people couldn’t afford these homes in the first place!
Look for a new post in the next day or so…it is almost done.
Thanks!
SoCalMtgGuy
http://www.housingbubblecasualty.com
What’s almost done? The post or the bubble?
the post.
the bubble is just beginning.
SoCalMtgGuy
The post is UP!!
SoCalMtgGuy
http://www.housingbubblecasualty.com
Zillow..garbage in, garbage out..
I think, except in areas with tract homes or in large condo complexes, that it is impossible to really estimate a home’s value. There are far too many factors that can impact a home’s price. It is very, very subjective and don’t think without actually viewing a property, that a price can be arrived at. It’s not like pricing cars or other things that are virtually identical. Even the square footage calcs that I have looked at are way off. Too many variables such as lot size/shape/location, finish work, quality of materials, etc. One of the biggest problems is arriving at the true square footage of the living area. I’m sure that I’m not the only one that has every walked into a house and thought, “2800 sq ft?”..sure, maybe counting the deck, attic, basement, gargage, etc.
I remember seeing one listed at around 3,000 sq ft with a 40×24 foundation. There was an article about this not too long ago in the local paper, where the same house had been listed with three different brokers and each listing had a different sq footage. Even better, 3000 sq ft homes with bedrooms that are 8×10, living room 12×12, you get the point…
My favorite is the 5 bedroom/3 bath homes that are 1800 sw ft…
Anyway, I wouldn’t put much stock in Zillow.
The measurement of a home’s are can be tricky. Our neighbors have a home that is listed as 3,600 sq. ft in County records. The Architect thay hired to do renovation says it’s more like 4,200 square feet.
ANSI created a standard (Z765-1996) for figuring square footage. These are standards for measuring and reporting square footage in single-family residences. It’s about time that a standard be followed.
it’ll never happen…
it should, but won’t..
Agreed.
I can’t wait until Zillow starts to reflect price drops. I am tracking several communities in the East Bay (Lafayette, Walnut Creek, etc), and they all so consistent upward price revisions. I listed my house in October, 2005 for $799k, and it sold for $822. I don’t even want to say what Zillow now gives as its Zestimate….
1) Zillow is a lagging indicator. It uses comp up to 90 days old (and occasionally 120 days old if required to get to 5).
2) You can already see the drops in most areas!
3) If there are no sales, there will be no zillow update.
So those commenting that a few “low ball” sales will rock the zillow numbers are right on the money.
Neil
Zillow is the RE agents golden calculator!!!! It has no minus keys and only positive numbers work.
I don’t think it’s in Zillow’s interest to favor only one group, like Realtors.
From what I have gathered they are mostly a technology company. When prices start to fall, I’ll be surprised if the drop is not reflected in the ‘Zestimate’.
Zillow has been reflecting price declines in areas of LA. All it takes is a couple of lower comps.
Isn’t the Zillow source county records? Most counties are notoriously slow to update - could be 6 months after recording. It may be a a long time before Zillow shows declines.
This anti-Zillow sentiment doesn’t make sense. Zillow appears to be doing typical value computations based on comperables. In many extreme bubble areas the numbers are already headed down fast.
In some areas of Mountain View, for example, the Zestimate graphs already have an angry looking downward bend with extreme slope. The median pricing data will also start to look really bad for a long time during the downturn just like it appeared good for a long time going in.
The 85020 zip code (Phoenix) on zillow is showing a price drop. About a month ago prices were sometimes 30K higher than they were today. The price retreat is starting to show up, just a little late in my book.
Zillow is joke. It has one purpose, and that is to get shady brokers off my back who are begging for a “comp check”, which “real” appraisers know are a violation of the Uniform Standards of Professional Appraisers Practice (USPAP). Problem is, not that many real appraisers practicing in Southern California anymore. Its become a free-for-all. Get your appraisers license as fast as possible, so you can help your broker buddies close deals and make some money for yourself. The game is rigged folks. Everybody loses.
Well, everybody who doesnt get paid a commission of a flat fee to commit fraud on an appraisal report.
OC Appraiser:
No need to worry about Zillow, shady brokers or shady appraisers. Field reviews are being conducted on appraisals left, right and center. Appraised values are getting cut by the lenders…. sometimes too aggressively in some cases.
Soon the incentive to push value will disappear once the broker knows it will not pass the review. There will be more incentive to use honest appraisers such as yourself and the shady appraisers will either have to clean up their act or get out of the business.
The place I rent was valued by zillow in January at $400K, today it says $277K. I think that’s reasonably accurate.
In southern CT, the zillow zestimates peaked in winter 06, and have come down as much as 20% from the peak by summer 06. Zillow can indicate declines as well as increases.
A woman I work with was scoffing at zillow today saying it’s “totally inaccurate!” She said her home is zillowed between $275,000 and “low $300s” but that a home identical to hers (she’s in a 55+ townhouse community) just a few doors down recently sold for $375,000. My reply? “Well then the fool who bought for $375 overpaid!” She told me I was wrong.
Then she goes on and on about the “$40,000 of upgrades” she put into her home which zillow doesn’t account for. I told her that $40,000 of upgrades doesn’t = $40,000 of value on the home. She flat out told me I’m wrong and that I know nothing. Of course at this point I’m just plain irritated with her so I drop it.
“$40,000 of upgrades”
We all know $6000 Viking ranges or Sub-Zero fridges are as good as cash–and depreciation-free.
And the additional 34K spent on what the rest of us would call routine maintainance to bring the dump up to livable standards.
AMEN!
Are you kidding? A Sub-Zero fridge is a big repair bill just waiting to happen. Viking ranges too.
But it does relate to one way that Zillow can never be accurate–it calculates from comps and the data it has, but Zillow knows little about the actual house or its condition.
What difference is there between homeseekers.com and realtor.com? My next-door flipper paid $139 for an extremely professional video tour which was posted immediately on realtor.com, but has yet to show on homeseekers. He said. Since he is now going through a realtor after unsuccessfully trying FSBO,
it depends on the relationship and $ between the realtor and the MLS/websites.
Feedback, please?
Robin,
I don’t have much experience with homeseekers, but have used Realtor.com for quites some time. Realtor is quite good - apparently have different levels of listings, some with enhanced mult-photo tours and 360 tours. Its easy to filter by housing type, zip code, and square footage. My only issues are twofold:
1. No addresses are provided. So, if you see a house you like, you’re going to have to employ another service and lookup the MLS# to see what neighborhood it’s located in.
2. The sort function is VERY limited. Basically, it sorts by price. I’d like to see sorts on square footage, size of lot, etc.
Hope this helps!
They call it a depreciating asset for a reason. Anybody who has owned a home for any length of time should know this. I have put over $40k into my home over the last 10 years just to keep it up to date. Gas heater, replacing doors, new Kitchen appliances, replace roof, refinish hardwoods, landscaping, etc…
I have no idea where this lady is coming from, but these are things you do just to maintain a home.
sorry for the double post, but the first one was located incorrectly..
Zillow..garbage in, garbage out..
I think, except in areas with tract homes or in large condo complexes, that it is impossible to really estimate a home’s value. There are far too many factors that can impact a home’s price. It is very, very subjective and don’t think without actually viewing a property, that a price can be arrived at. It’s not like pricing cars or other things that are virtually identical. Even the square footage calcs that I have looked at are way off. Too many variables such as lot size/shape/location, finish work, quality of materials, etc. One of the biggest problems is arriving at the true square footage of the living area. I’m sure that I’m not the only one that has every walked into a house and thought, “2800 sq ft?”..sure, maybe counting the deck, attic, basement, gargage, etc.
I remember seeing one listed at around 3,000 sq ft with a 40×24 foundation. There was an article about this not too long ago in the local paper, where the same house had been listed with three different brokers and each listing had a different sq footage. Even better, 3000 sq ft homes with bedrooms that are 8×10, living room 12×12, you get the point…
My favorite is the 5 bedroom/3 bath homes that are 1800 sw ft…
Anyway, I wouldn’t put much stock in Zillow.
Zillow values my propery at over $1M, with 6 bedrooms and 3 baths. I actually have a 3 BR/1 BA front house of a huge 963 sq. ft., and a granny unit of 1 bedroom, one bath with about 400 sq. ft. Offer me $900,000 based on Zillow, and I will gladly accept.
House at the end of my street just sold for 740K -still zillowed at $895K today. They had some mold problem , but only a 5 year old house , so don’t know how bad it could have been .
Gary Walton sounds like an idiot. When young people can’t afford to enter ANY housing market, prices adjust…DOWNWARD!
Lets watch Massachuttes as it has had a net outflow of people the past three years. Young people cannot afford to live in the state. A real brain drain!!!
oddly enough I had friends who left the bay area several years ago to go to Mass. because they couldn’t afford to buy a house here, and thought it would be better there.
They are headed to Florida …. I just read it somwhere.
That’s too bad. They should put a fence around that state to keep the liberal pinkos from infesting other states. They can keep their little self-righteous attitudes in Boston where they belong.
RIP Lingus.
Good thing we don’t have any of that in New York City.
“They should put a fence around that state to keep the liberal pinkos from infesting other states”
That’s what most upstaters say about NYC! (sigh) Where have all the moderates gone?
‘You know, I don’t think I have to worry about it because pretty soon nobody will be able to afford to buy a house (in California),’ he said.”
Yes, California will be empty. There will be millions of empty homes, all listed on the MLS, for $5 billion each, since real estate only goes up. Genius!
“The median price on single-family detached homes in closed sales dropped to $805,000 in July, $15,000 off June’s $819,950 median.”
Is it still possible to get home-equity cashout financing when home prices are dropping at a 20% annual rate? BTW, a 20% drop from $820K would amount to a reverse wealth effect of a $160,000 drop in household net worth. Imagine your median SD household, with $65,000 or so annual income, dealing with a $160,000 loss in home equity. And that is for those who only own one house…
Seeing price cuts in San Ramon, Fremont, and other parts of the SF Bay Area to get the house to sell. Most of those without price cuts are just sitting. I think SF is still strong, anyone in SF please comment. Still seems to be buyers out there as there are still a good number of high paying jobs here.
Here is an article from our local shill Realtor.
http://www.sunsetbeacon.com/archives/richmondreview/2006editions/Jan06/LeeCol.html
I personally haven’t seen prices fall (yet). But I have noticed alot of for sale signs popping up. I thought everyone wanted to live here.
Here is an article from our local shill Realtor.
http://www.sunsetbeacon.com/archives/richmondreview/2006editions/Jan06/LeeCol.html
I personally haven’t seen prices fall (yet). But I have noticed alot of for sale signs popping up. I thought everyone wanted to live here.
Numbers in the city of San Francisco are hard to interpret - very skewed. Local realtors keep a tight lid on #s and manipulate them to their advantage (i.e. get a low ball offer a seller accepts, so they take the house down and re-list it for the offer to make it look like it sold for the price asked, etc.). But given the amount of empty open houses every weekend, and all of the new condos coming online in the next 2 years, I’d wager prices will definitely fall if they haven’t started to already.
(i.e. get a low ball offer a seller accepts, so they take the house down and re-list it for the offer to make it look like it sold for the price asked, etc.)
Maybe I’m dense but what could a Realtor possibly accomplish by wasting time with this scenario.
Could this just be you making it up as you go along and just pulling it out yer aSS.
I mean really come on in a city as big as San Francisco a group of Realtors are going to play out the above scenario so they skew the market so you can’t figure out whats going on. Wow I am truly amazed.
I bet there’s a really big ugly green monster that sleeps under your bed at night too.
Geez give me a break.
Everything is wierd about San Francisco, but I’m confident it will eventually catch up to reality. Housing prices at least will. Tech jobs are leaving and the population is shrinking. Overall, energy and optimism here seems fairly low, moreso than usual, especially with people looking for work. Native San Franciscans are some of the biggest morons by the way so it will take awhile to exhaust the greater fools here. Also, people in San Francisco don’t tend to work–in my neighborhood there are a lot of people from China and Russia who have been here for generations and STILL don’t speak English–so I betcha there are a lot of HELOCs that will be coming due. Street advertisements are commonly in Russian here, and I hear it spoken regularly on the streets. Indeed, part of the charm, but still kind of unusual.
That said, there currently are NOT many for sale signs around–I’ve seen more before. There are some, but it’s not a flood. One thing I have noticed is that signs tend to be from firms that I have NEVER heard of.
One other thing, I have a friend who has parents living in Marin County who want to sell their house and move to another state. Sounds familiar I know. But their Realtor told them to wait a few months. That sounded odd. I wonder if they are trying to keep inventory low?
Overall, energy and optimism here seems fairly low, moreso than usual, especially with people looking for work.
First signs that the recession is comming ???
Let me guess, you live in the Avenues, around the 20s?
Newsweek interview with Ben Jones:
What was the “aha” moment that convinced you that the housing market was out of whack?
Specifically what I very first noticed was in the fall of 2004, California house prices had had a little dip but then they took off again and were doing 22-25 percent year-over-year price increase-[and] they were already high to begin with. It was primarily those California numbers that caught my attention. Also, when I was combing for data one of the things I came up with was a huge increase in sub-prime lending. The more I got into it the more I found out [lenders] were doing anything and everything just to keep the game going.
Awesome Ben! Finally the MSM is talking to other sources than the NRA and so-called “economists.”
“…Buyers are coming in $5,000 and $10,000 under asking and asking for work to be done.” Ooh, such savvy buyers, $5-10K less than nearly a million dollar asking price. I call BS on this shill. He’s trying to work what few buyers exist into thinking you should only come in w/ offers $5-10K less than asking. Buyers ought to be coming in $400-600K less than what these ass-wipes are asking, and then ignore the fools when they counter with something almost as ridiculous as the original asking price.
Bwwwhhhhhaaaahhhhaaaa. I like that strategy.
I saw that comment too, and it raised my eyebrows. What a liar. What a miragee! What a maroon!
“If you say the same lie long enough, it becomes the truth.”
- O.J. Simpson
I think this Time Magazine cover marks the top at June 13, 2005.
http://en.wikipedia.org/wiki/Image:Time_Magazine_June_13_2005_Cover.jpg
And the time to buy will be when Time Magazine has a cover saying that home values only go down.
-
“The Death of Real Estate” - June 13, 2008
http://bigpicture.typepad.com/comments/images/7265064_e30fd4083b_m_1.jpg
They should update that cover image to show the weight of the house crushing down on the owner’s chest…
“Hundreds more homeowners in the central San Joaquin Valley are in danger of losing their homes to foreclosure this year because their houses are not gaining value fast enough”
Uh, no. These people are in danger of losing their homes because they made a stupid decision to buy. Not having a house appreciate fast enough does not result in foreclosure; foreclosure results when a bunch of FB’s insist they must have a big house, big ass truck that will never leave the pavement, the RV, the pool, and vacations. There should be no sympathy either for the flippers/speculators or the cash-strapped buyers who insisted on being “better” than everyone else and stretched to buy a bunch of useless things.
BTW, I think the Federal Reserve is already showing sympathy for these people. Given a choice between defending home prices and defending the dollar, Helicopter Ben has chosen the former. But, it will be to no avail. Just look at Toll’s report today.
Long live Helicopter Ben! HORAAAAYYYYYY!!!!
No kidding. Since when did your ability to service your (hopefully amortizing) mortgage suddenly DEPEND on PERPETUAL 20%/yr. APPRECIATION? Un-fucking-believable. Even if no other evidence existed to show that the entire housing market is one giant Ponzi scheme, this quote by itself would be proof enough.
I’ve mentioned before that the San Joaquin Valley is a crap hole, but I’m not suprised at the turn of events around Fresno, Visalia, etc. A lot people around their have Bay Area/ So Cal envy and I bet they were anxious to play the bubble game and gain a lot of cash via appreciation, flipping, and HELOC just like their friends and family in LA and the Bay Area.
Like most bubble areas, people got caught up in the hype, greed, and overall mania. The people who took a moment and realized that the appreciation values were insane and stayed out of the market will be ok. Those who did not complete their due dilligence or ignored the obvious are going to hurt.
Truth be known, the bubble in the San Joaquin was primarily driven by Bay Area/So Cal flippers buying up valley housing. As for envy, you can’t live here or you would realize that those that do have little interest in either place. As for the San Joaquin being a shit hole - a rather broad brush. Big place, lots of variation.
Strange post. Let’s see - Bay Area/So Cal flippers started the mess here; valley residents generally couldn’t care less about BA/So Cal; crap hole? A little broad - the place is far too big and way too diverse.
Well- if I had to classify the place as a whole- it’s a crap whole: really bad smog, high crime, traffic, a lot of social problems, etc.
You are correct to say that people from So Cal and the Bay Area started the bubble, but I know of quite a few locals around Fresno (my family included) who jumped in on the game by flipping homes, living high off of HELOC loans, etc. When speaking of envy, I was speaking to the material gains/ lifestyles of those living in SoCal and the bay area due to the housing bubble- SUVs, boats, plasma TVs, luxury vacations, etc.
I lived in the valley for 21 years and 90% of my family lives in the area. My thoughts may not apply to everyone, but they are not entirely off base.
I hear ya Brandon, but am afraid I have to side with turnoutthelights on this one. I lived in Selma 18 years and would never live in the valley again, but I can’t call the whole place a craphole. Of course, that doesn’t stop me from staring in awe at the ridiculous house prices every time we drive down to Fresno from Oakhurst. Not a craphole, but certainly not worth half a million per house either.
Yeah, I’m not buying it either.
Of all my friends in the Bay Area, and all my friends of friends, extending my social network as far out as it will go, both work and personal, and I do know quite a few people here- I know not a single one who is a flipper, and only one who owns more than the house he lives in– and that it just a cabin and an adjacent rental property.
The only friend of a friend that I know who is getting his ass kicked by a failed flip is an ex-Enron employee in Houston.
> Given a choice between defending home prices and defending the dollar, Helicopter Ben has chosen the former.
I disagree. Yields of long-term treasuries justified the decision of the FED: the market sees the dollar as having long-term value. Why should the FED invert the yield-curve even more to accelerate a recession?
“Hundreds more homeowners in the central San Joaquin Valley are in danger of losing their homes to foreclosure this year because their houses are not gaining value fast enough”
Funny, I’ve never been un danger of losing my homes to foreclosure even when prices fell. **Slaps Head**, Oh yeah, thats right…..I always put +20% down and did conventional 30 year fixed. Never mind…..
Ben - make sure there is a glossary in your book. Make sure Robert gets a chapter - and Txchick as well!
My “chapter” won’t be printable. Hangover? I know hangovers. I went to an expensive east coast college. I played rugby. My roomates were frat boys and sons of South American generals. My worst hangover ever involved in an amazing amount tequila, wodka with a w, copious beer and yes, live goldfish saturated in the aforementioned tequila. What we have now is NOT a hangover. This is that tipsy/tipping point where you decide whether to pull back from the abyss and take your medicine or carpe diem and hope for good medical insurance.
I’ll have to agree. What we’re in right now is what I used to refer to as “amateur hour”. The real bender is just around the corner. Yeah, I know hangovers…..although I used to try to limit their effects with vodka straight-up in the morning, and then on through the rest of my day, over and over and over again. For this reason, come the 13th of this month, I’ll be sober 6 years.
Congrats nnBrk;…
“It was a really great party, and this is the hangover”… No, hopefully this is the part where you wake up with a headache and you’re still a little drunk… the real hangover kicks in a few hours later and lasts the whole weekend!
After a wild party, you wake up naked (lost your shirt and pants) with a hangover and who knows what happened the night before. I think that was a girl.
“I think that was a girl.” Ever hear of coyote ugly. Lots of people going to have to chew there arm off to get out of this mess.
This hangover is going to drag on for a while.
Lots of FB’s are going to have their Coyote in a leg trap moments.
It is cruel to do that to Coyotes, but if we collectively can do that to Coyotes an FB deserves no better.
“I think that was a girl.”
Nope, according to the message left on your answer machine, apparently you sodomized the neighbors dog. Now that’s a hangover!
You owe me a keyboard, dammit!
Grumble wine all over the grumble keys grumble grumble.
We’re at the stage where you just wake up, your head is pounding, you’re not quite sure what’s happening. In about a minute or so, you’ll realize you have a stomach, and it ain’t feeling too good. At that point, you have about 30 seconds to get yourself to a toilet, because everything you ate and drank for the last 5 days is on the way.
It’s starting, but the realization of what’s to come has not yet set in.
The worst part of a hangover for me is not necessarily the discomfort of the hangover, but the fact that it lasts ALL DAY. We’ll see whether this little real estate bump is something that can be fixed with a breakfast burrito and a cup of coffee or something more substantial.
The reality of the hangover occurs when you are handcuffed in the back seat of a sherrifs patrol car, on Pacific Coast Hwy, muttering “My Life is F*ucked”. and it makes the evening news
Hey Mel, you left out the screaming of racial slurs
-
“I own Malibu!!!!!!!!!!!!”
which is a big difference from “I own a Malibu”
Or, “I own in Malibu”. As in “I’m a contributing part of the community.”
As soon as I read the original post, I figured I’d embellish on the hangover analogy since I have a great deal of experience here…but you bunch of damn drunken bloggers beat me to it…almost verbatim
Now if we’re really into the analogy, I would wonder:
Is the hangover going to last longer than the party?
If so, we’ve got another 4 years of hell before “detox” is complete. ;p
The following is from “Housing market hitting a rough patch”
http://tinyurl.com/por3e
Sales of new homes and existing homes have been falling. And although the median prices are still increasing, the gains have been the smallest in years.
A record level of unsold homes is expected to exert even greater pressure on prices in coming months.
The concern is that the already sizable inventory glut could worsen as millions of Americans with adjustable rate mortgages, taken out when interest rates were at four-decade lows, suddenly find they can’t meet new higher monthly payments.
“So far, the correction in housing has been orderly, but there is a significant risk that this orderly correction could become more chaotic,” said Mark Zandi, chief economist at Moody’s Economy.com.
“The housing market has been driven by euphoric optimism about future house price growth. That could quickly change to dark pessimism and we could see sales and prices fall much more than expected,” Zandi said.
David Lereah, chief economist for the National Association of Realtors, predicts that the sales slowdown is about to bottom-out. He said stubborn home owners are starting to realize they will need to lower their asking prices to attract buyers.
“We are going from a seller’s market to a buyer’s market,” he said. “It looks like the worst is behind us and sales are starting to level off.”
But that process will leave housing sales well below the boom levels of the last few years. Sellers will have to say goodbye to double-digit price gains and some formerly red-hot areas may have to cope with outright price declines.
That could leave sellers and their real estate agents longing for the old days.
“I have seen a number of housing cycles but nothing to compare with the past five years. That was the most robust real estate market that I have experienced, without question,” said Miami real estate agent Maurice Veissi, who has been selling homes for 35 years.
Many economists are stopping short of predicting a wholesale bust in the housing market.
“There is no evidence that prices are going to collapse,” former Fed Chairman Alan Greenspan said earlier this year.
—————————————
There will be a bust, and it will be bigger than anything we’ve seen before, just as the rise was bigger than anything we’ve seen before.
“We are going from a seller’s market to a buyer’s market,” [Lereah] said. “It looks like the worst is behind us and sales are starting to level off.”
Good lord. Is this man completely incapable of telling the truth? The worst is behind us? Level off? I am completely flabbergasted by this constant “black is white” nonsense, and yet it keeps on coming.
“We have always been at war with Oceania.”
CME housing Aug, 06- May, 07 futures have weakened further since July 28:
http://www.cme.com/trading/dta/del/product_list.html?ProductType=hng
July 28 and Aug. 9: expected price decline through May, 07:
Composite: -4.1% -5.2%
Boston: -4.7 -6.3
Chicago: -3.9 -3.6
Denver: -4.1 -2.9
Las Vegas: -3.6 -4.7
Los Angeles: -5.1 -5.7
Miami: -4.6 -5.6
New York: -4.2 -4.9
San Diego: -4.4 -6.2
San Francisco: -6.6 -6.8
Wash DC: -4.4 -4.8
A question and a comment:
Are these numbers the expected YoY of the median price from May06 to May07, or is it from Jul06 to May07 and from Aug06 to May07, resp.?
The numbers look both small and homogeneous to me, I would have expected negative double digits for Miami and Boston and only around -1 for SF and NYC.
Regards,
Peter
This is the difference between the Aug, 06 and May, 07 futures.
Tattoo on your Forehead:
http://www.xanga.com/home.aspx?user=russwinter&nextdate=8%2f9%2f2006+23%3a59%3a59.999
Off topic, but I have a theory that all of this easy / subprime financing is causing bubbles beyond real estate. I know an illegal alien, makes about 100 per day, who just bought a brand new Yukon for 31,000. How? Financing at 7 percent. I asked him if he had any idea how much he’d end up paying for the thing. He answered coolly “45 thousand”. Sheesh. We make many times the money he makes, and almost never buy new cars.
This is the same guy who told me yesterday that there are six houses on his street in south central LA for sale because the owners bought with no money down, and now their monthly payments shot up. List prices are still above 450K, no bargains yet.
How can an illegal alien get a car? Wouldn’t they be afraid he’d just drive it down to Mexico and sell it? They’d never catch him.
Sure thay would find him in Mexico…. look for the guy named Juan Gomez.
South Central LA? for $450k? Doesn’t this area include all the dogsh*t around USC as well?
Yup, but ya gotta remember the upgrades! Bulletproof glass, Subzero for the extra pints of blood, Granite gun racks, stainless steel ammo boxes. Them babies add up.
There are very well off people who would kill to own that dogsh*t. I have a malibu client who will buy nothing not in that area. I know a few people like that.
Brave souls.
Do the Crips run a property management company?
What if they have to collect rents on a Bloods ‘hood?
Or does one have to contract with both companies
I still love the fact that folks paid (and continue to pay) half a million dollars to live in the barrio, w/ bars on the windows and the threat of death looming over you head day in and day out. The tough part to reconcile is that such complete idiots have access to that much money. What a great country this had turned out to be.
“List prices are still above 450K, no bargains yet.”
Probably not sales yet, either.
Not true, buddy of mine just closed one for 475k a week ago. The hispanic market is still chugging along like there is no tommorrow in South Central.
I beleive that, I also beleive they will cut and run in the biggest numbers if things go badly.
I hope this is not too far offtopic, but I am hoping I can get some feedback as I really respect the opinions of posters here. I plan to rent for the next few years while I save up a down and wait for the madness to end, but what happens in a situation like this:
I saw a place on CL north of Reno today that is what I am looking for
http://reno.craigslist.org/rfs/192178079.html
I called and asked the lady if she would lease, no she said, she got divorced and must sell…I asked how long its been for sale, and she said they had a realtor but he didnt bring them anybody so they are trying to sell it on thier own now!
This is what Zillow says:
http://www.zillow.com/HomeDetails.htm?city=RENO+&o=North&state=NV&zprop=7309673
I can see that they bought last year near the bubble peak, previous sale was in 98 for $125k!! I think the place is worth 200k -225 tops…
If they cant sell what do they do if they must sell??? How long will it take before sellers will give in…I would love to lowball, but I dont think its gonna work yet….
Any thoughts on this? Also, I am kinda one of those people that would benefit from the looser lending standards but am somewhat nervous about getting a loan in a few years…why? I can not verify my income (eBay) but I have excellent credit with a FICO well over 720 (last I checked) and borrowed quite a bit and never so much as had a late payment on anything. Any advice for someone in my situation? I actually need to move soon, would like to buy, but refuse to take on a toxic loan for a bubblious house, but would also like to get a loan before things change…please don’t flame me, I am really looking for constructive criticism…
I would seriously recommend not buying in the Reno area right now. I grew up there, and a greater bubble would be hard to find anywhere. Reno has low wages, which don’t even begin to support the prices. I read an article from a guy who estimated that over 60% of the homes for sale in the area right now are investor owned which, if true, is a particularly ominous sign for the future. I really see homes which sold for $375k late last year and early this year dropping below $200k when this plays out. Unless you want to live in that home 15 years plus and the payment is great for you, I would stand back and watch the carnage from the sidelines.
No flaming here, I’m in the same position. I’d rather slit my eyes with razorblades than get an ARM, or 0% down, or an I/O….
Probably best to ask yourself how much you can afford to buy, before you do anything else. Once you’ve crunched the numbers, you’ll have a better idea of how much you have to play with.
If you’re going for a traditional FR 15/30 year, then have enough for a 20% downpayment, closing costs and have 3-6 months ’salary’ (OK, hard to know being an eBay seller, but average out a years worth of income and put half of that away in a high-interest account with no withdrawal penalties) put aside for moving, decorating and emergencies.
Once you’ve done that, then calculate about 3.5 times income for the WHOLE loan payment: interest, principal, insurance, taxes (PITI).
If you rent, then you could also use 100 - 150 times monthly rental as a ballpark figure for the loan.
There’s loads of info out there on getting a sensible, affordable loan.Weirdly enough, one of the better books for explaining this is “Housebuying for Dummies”! It also gives good advice on not getting in over your head, and a breakdown of costs for different types of loan. I kid you not. I bought it and it’s been a great help.
As for the lady…? Well, Zillow says she bought it for $350 last year. But…its not worth that to you, either, and its unlikely she’ll get that price at the moment
I’m going to suggest what I intend to do when the the time comes to buy:
In 1998 it sold for 125K?
Offer her that price, plus 5% appreciation per year. Using my handy compound interest calculator I make that $184,682.
Round it up to 200K to look like a good guy, and explain how you got the figure.
If she’s made ‘improvements’ then discuss the amount of depreciation per year and add it to the price. Unless she went crazy and added $200K’s worth of granite countertops, the price should still be under 250K.
She’ll probably curse you for a vulture, and it is a loss for her. However, if you like the place, give her your contact details and ask her to get in touch if she can’t find a buyer in a few months. Chances are she still won’t have sold by then, and so your offer won’t sound quite so insulting.
Personally, I have no problem with people making money on thier houses, as long as its not a ridiculous amount. You’d be offering her a decent appreciation on her property, which may allow her to ’save face’ and sell it at a resonable price.
Who knows?
My tuppenceworth, anyway
speedingpullet
Excellent advice.
August:
I know how enticing this deal sounds but I would I ask myself two questions:
“Do I really need to buy right NOW?
“WHY?”
You are self-employed. For how long? What are you averaging your income based on? (i.e. the last two years or the last 10?).
What is your backup plan if the economy really does tank in the next 5-7 years and the pool of potential customers who have the money for “discretionary” Ebay purchases dwindles?
Go ahead and make the lowball offer. You might be surprised. If she isn’t already in over her head, she might go for it in order to clean up the divorce. Nothing ventured…
If you don’t get the deal, you have lost nothing but a few hours of your time. And I’m sure that you will find places to rent if you need to move. Remember, no property is perfect, there is really nothing that you “must have” unless the deal is so right that you would be insane to walk away. It’s just a house, after all.
iTulip has an interesting take on the amount of debt in America. They graph the debt service to disposable income over the past 30+ years and, guess what, it is higher than it’s ever been. No wonder that the foreclosures are increasing without preceding job losses.
http://tinyurl.com/jok9l
Because not only are the ARMs and I/O payments increasing, so are their credit card rates. So even if you accelerate payments, interest on the balance has skyrocketed.
My friend has witnessed two shootings at the local park, which is full of homeless and gangbangers, 4 blocks away. Like I said, houses are 450K minimum. He rents for 950 a month, but has RE agents trying to talk him into buying a house for no money down, interest only, some kind of deal where you borrow your down payment, called 80/20, I think. I’d have to disagree with you on him being an idiot. He’s a very skilled and talented construction worker, and now has some sort of residency papers (just got them) and a social security number (recently), and is very responsible and hardworking. I just would not have lent him that kind of money, and I don’t think it’s a good idea for him financially to be in so much debt.
I wasn’t calling your friend an idiot - just the folks who actually pay that much for a tiny shack in a bad neighborhood.
The local catering truck (Roach Coach) sells the social security cards.
By the way, my construction worker sent me to a place called Huntington Park to pick out cheap tiles for a bathroom. Jeeezuss. I never would have known about the place or set foot there were it not for him writing down the directions to get there. Puro Mexicano, all around, not even a central American to be seen. My construction worker talks admiringly about it like it’s the Mexican Beverly Hills. Looked more to me like a cleaned up version of Ti Juana. Anyway, he laments the fact that he can’t afford a house there: they start at FIVE HUNDRED thousand.
not for long they don’t
Actually… per Ziprealty… Houses start around 350k (90255) Most expensive was 700. Overpriced? yep… but not as bad as he thinks, and it’s downhill from here…
LMAO the next time your construction worker comes around check his pockets for a crack pipe.
You know, no matter what prices do at this point, in the short term, the whole thing is like a big dry forest. It’s going to take one little tiny spark to send prices burning. And once things catch, the smoldering rot will turn into a huge fire. It may start in CA, or the UAE, or the moon, but once it catches, the wind will blow this blaze out of control.
-X
BubbleTrack.blogspot.com
OT, a fairly lengthy read, but great perspective and outlook on the bubble and where we are headed. If interested, and you will need to scroll about halfway down to
BY FAR THE WEAKEST RECOVERY
by Dr. Kurt Richebächer
http://www.thedailyreckoning.com/Issues/2006/DRUS080806.html
Mass. must still be lagging, the party might be over, but as far as I can tell we’re just now getting the bedspins….
That is exactly right. We are not at the hangover stage yet, they keep wanting to declare the end of the downturn. Oh no, not even close. We are at the party is still going on but we drank too much and the bed is spinning point. Trying to decide whether to rejoin the party or pay homage to the porceline god part. All of a sudden we realize that we can’t get up and the room is spinning faster and faster and the boom boom music from the other room keeps getting louder and louder. Now we spend our last few conscious moments praying that we don’t choke on our own regurgitated “all you can finance” smorgasbord w/ open bar. You’re thinking maybe the shellfish wasn’t such a good idea either and you’re starting to profusely sweat out the fourteen fancy martinis that you chased your food down with. The combination of food and beverage is starting to violently disagree with your delicate constitution. Later you plan to beat up your friend who invited you to the party. That’s where we’re at, a half past eleven on a Saturday night and you don’t have cab fare home but your host wants you to leave, now.
Now this is a very sobering read……….
http://www.dailyreckoning.co.uk/article/09082006.html
O’boy !!!!!
Let it reck!
This is the hangover that is coming:
http://petropestlaunchpad.blogspot.com/
Look out below!
I started to track the MLS listings 5 days ago and in just those 5 days I have seen 8 houses in Cupertino and 14 houses in Sunnyvale dropping their prices by about 3% on average. Those are the houses which have been sitting on the market for over 30 days.
What a change of time!
From above thread about Zillow. My Bad , numbers I had were all screwed up.
Here is real deal.
House had zillow zestimate of $812,104 as of today:
http://www.zillow.com/search/Search.htm?addrstrthood=2+delongis+ct&citystatezip=sparkill+ny&mode=search
AND…
House sold one month ago , end of June for…
$649,999.
http://www.domania.com/homepricecheck/search.jsp?address=2+delongis+ct&CSZ=10976&type=property&startyear=1987
Like I said , some mold issues , but zillow is way off. The rest of the zestimates on the street and in the area are way way off.
Try posting this again using tinyurl.
Regarding the Zillow thread above. The numbers I posted were a bit out of whack sorry. Here is real story.
House has a current Zillow Zestimate as of today of $812,104:
http://tinyurl.com/rwx2x
House sold a month ago , and hit Domania. Selling price was $649,999:
http://tinyurl.com/n2k4c
Like I said , there was some mold issues , but the rest of the zestimates on the street and the immediate area are way out of whack too. Way out. Notice that the seller did okay , having paid $367 six years ago as a new construction. As a history , the house listed a year ago at $729 , no takers , was taken off the market , and then relisted in about April or so. The 649 was, I believe , full asking price though.
This is oh so true. Among my late 20s and early 30s circle of friends/family in CA:
- Two families relocated last summer to NV (Dayton/Carson city area)
- One family relocated to AZ in May (Phoenix area).
- One family moved to WA in July (Seattle area).
- One family just put in for and accepted a transfer to North Carolina last week.
- One family has home on the market (priced way to high and sitting for 3 months already) to relocate to South Carolina.
- Others have “plans” to move to AZ, MO, or elsewhere.
It is irresponsible to think of this housing bubble as a party.
Many families in CA have been dislocated and spread across the country due to this unmitigated greed, and by irresponsible actions of those propogating the mess.
We will look back at this bubble as a defining point of our generation; like 9/11 or dot.bomb.
“Developer Gary Walton said he thinks the time will come when so many fees are tacked on that even fewer Californians will be able to buy a pricey sun-drenched home. ‘You know, I don’t think I have to worry about it because pretty soon nobody will be able to afford to buy a house (in California),’ he said.”
This is perhaps the most interesting thing I’ve seen on the site that indicates the future. He’s right. Tons and tons of young people are and will be moving out of the state, myself included. California has thrived off of a young, intelligent, idealistic population of inventors, tehcnologists, and researchers, all coming here for an opportunity. This opportunity is now gone.
Ironically, I’m finding that much of the atmospehere that exsisted in california for decades has packed up and gone elsewhere. Me and my wife are moving to Nashville. Growing city, new museums, schools, not to mention an education system ranked well above average no matter where you live, a new public transit system, and more importantly: a diversified job market and affordable living standards.
The main reason for this is that there are many young and educated people like me moving to these areas, and in turn will create the kind of environment that exsisted in california years ago.
Will;….I have to say, I don’t blame you for high tailing it…..
Thanks everyone for the advice (right on the money as always!) I know I can not afford to buy and yes I am bit worried about job security….but I really want to know, what are poeple who MUST sell going to when they just bought…how low will they go???