‘A Soft-Landing Could Include Price Declines’
Some housing bubble reports from California. “Los Angeles County home prices in July rose at their slowest pace in six years while values in San Diego County continued to fall, more evidence that the Southland’s real estate market continues to slump, data released today show. Sales in Los Angeles County plunged 25%, the eighth consecutive month of declines, according to DataQuick.”
“Leading the way is San Diego County, where prices depreciated for the second straight month. San Diego’s median price fell 1.8% to $487,000 last month compared to the year-ago period, while sales dropped nearly 30%, DataQuick said.”
“Even the most bullish housing analysts and real estate agents expect the rest of Southern California to eventually follow suit. ‘The market isn’t exactly falling off a cliff but is slowing more rapidly than we’ve seen in a long time,’ said Andrew LePage, a DataQuick analyst. ‘Price growth is descending consistently but gradually,’ he added. ‘Everyone’s always said a soft landing could include minor price declines.’”
“Signaling an end to the San Fernando Valley’s real-estate boom, the median price of a home increased in July by its slimmest margin in a decade amid a lingering sales slump, a trade association reported.”
“The median price of a previously owned home rose just 1.2 percent, or $7,000, last month from the July 2005 level, said the Van Nuys-based Southland Regional Association of Realtors. And it fell $18,000, or 2.9 percent, from June’s record $625,000. Inventory has been steadily rising and at the end of July had soared an annual 127 percent, to 6,381 properties.”
“Sales have now fallen for nine straight months, plunging by 32.8 percent, to 809 transactions, in July. That’s the lowest number sold in July since the 800 total for that month in 1993. ‘I think what we need to see is the asking price in some (cases) to come down and buyers to realize it’s not a fire sale. This is not ‘92 or ‘93 when foreclosures were the norm and the bottom was dropping out of the market, (said) Jim Link, the association’s executive vice president.’
Inside Bay Area. “Stockton landed on the top 10 list of the nation’s cities with the highest foreclosure rates in the second quarter, according to a report released Wednesday. The Central Valley city was No. 8 on the list, with 1,228 homes in some stage of foreclosure.”
“The San Francisco-Oakland-San Jose region saw foreclosure rates climb 23 percent from the previous quarter. Realtors and experts blamed rising mortgage rates and a leveling off or falling of home prices for the increasing foreclosure activity. ‘If there’s a little glitch in the market and an owner loses a job, there’s no wiggle room,’ said Dave Konesky, a Realtor in Tracy. ‘Values are not rising like they were, so you can’t just go out and refinance.’”
“Konesky said the foreclosure activity is high among first-time buyers, who, he says, are not used to the expenses of home ownership like the high summer PG&E bills for air conditioning in the Central Valley.”
The Modesto Bee. “A long period of frenzied lending activity has given way to growing nervousness among people seeking new or refinanced mortgages. At Capital Pacific Mortgage, brokers are seeing consumers concerned about buying a home because it won’t grow in value as quickly as before.”
“‘With fewer people looking for homes, asking prices are more likely to stay the same, or even drop, said Capital Pacific’s Modesto branch manager, Sondra Yates. ‘Buyers don’t realize that it’s their market,’ she said.”
“People looking to refinance their mortgages are also nervous, industry experts said. Many of them bought their homes with adjustable-rate mortgages. As rates go up, they could find themselves with monthly payments they can’t afford.”
“Modesto’s Roxanne Myers is caught in a refinancing dilemma, she said. She has an adjustable-rate mortgage that’s about to go higher, so she wants to refinance. However, she also can’t afford the monthly payment on a fixed-rate mortgage, she said.”
“‘It’s scary,’ Myers said. ‘I’ll probably get another ARM that’s fixed for five years. I don’t want to sell, but that may become a reality.’”
“Because houses appreciated so fast, many people gravitated to buying and selling as a quick way to make money, mortgage brokers said. Now, real estate is returning to its status as a dependable moneymaker over the long term, they said.”
“‘You’re getting the same house cheaper than you did six to eight months ago,’ American Residential Mortgage’s Patrick Payan said. ‘Real estate has always been a long-term investment.’”
‘Despite realtors optimism and sellers’ reluctancy to grip reality, current interest rates, increased inventory, slowing depreciation, and the rising number of foreclosures have transformed San Diego—and most of California—into a buyers market.’
Ben,
i read your interview on msnbc about your blog. it feels good to be vindicated by reality.
anyhow, there is an article in the nytimes that you might want to post. it is about the strong possibility that economy will not have a soft landing. Considering that stagflation is becoming a reality each passing month. Bernake also does not appear to have the gut to do the right thing by raising more interest despite the core inflation of 2.9% which is 0.9 % higher than where he likes it to be- talking about hypocrisy. we are all in for a wild ride six months from now.
“‘You’re getting the same house cheaper than you did six to eight months ago,’ American Residential Mortgage’s Patrick Payan said. ‘Real estate has always been a long-term investment.’”
A long-term investment? Haven’t seen that term uttered in quite awhile.
DataQuick analyst. ‘Price growth is descending consistently but gradually,’ he added. ‘Everyone’s always said a soft landing could include minor price declines.’”
- Whew! Only a ‘minor price decline’.
Good news from Jim -
it’s not a fire sale. This is not ‘92 or ‘93 when foreclosures were the norm and the bottom was dropping out of the market, (said) Jim Link, the association’s executive vice president.’
“This is not ‘92 or ‘93 when foreclosures were the norm and the bottom was dropping out of the market, (said) Jim Link, the association’s executive vice president.’”
Bubblefucius say: “Don’t worry, just wait… you’re still young.”
Everyone always said that a soft landing would entail contacting the earth so give no concern to the earth rushing up rapidly to meet us!
With your handle and your post, I figured that I would add a saying from a favorite song.
Hurricane by David Wilcox
“Speed doesn’t kill, impact does.”
In the stock market, bad traders let a “trade” turn into a “long-term investment” all too often. They can’t just admit the trade is wrong, cut their losses, and move on. I’m going to take a wild guess here and say that lots of these “flips” will magically turn into “spectacular long-term, rental properties” … properties throwing off negative cash flow as far as the eye can see.
And that identifies a amature from a pro. Don’t try to wring every penny from a trade. All too often it takes every penny you made, and more!
Real estate as a primary residence is NOT an investment. Counting on a ROI from your primary residence is a surefire road to disappointment and insufficient retirement planning.
Is that your website in your name.
If so, your section on American Fairytales is great. I posted it here a couple of times.
You and John T. Reed have some great RE info.
2 months in a row SD! RE only goes up so this should be the end of the downturn…
And this is occuring in the supposedly strong summer season. Wait for the stats when we get into the fall. Its gonna be brutal. The realt-whore quotes should be pretty entertaining then.
‘Everyone’s always said a soft landing could include minor price declines.’
Revisionist history. Last I checked a landing doesn’t go under land.
Since the market has been flying at the outer limits of the atmosphere, I would imply a “soft landing” to infer prices will return to “normal”, IE the fundamentals. That is NOT a CRASH, just a return to a normal market, and in San Diego could well mean a 50 - 70 % correction. I would not see prices swinging negative, but who knows if enough fore-close and credit gets as hard to find as I suspect it may, folks will only be able to buy what they qualify for with a solid 20% down.
If prices come down 50% or more folks will only be able to buy what they can afford with cash on the barrelhead.
NOT a CRASH, just a return to a normal market, and in San Diego could well mean a 50 - 70 % correction
lol. The ‘87 crash in the stock market was nowhere near 70% correction.
LOL — Alan Greenspan is not around to save the housing market, the way he bailed out the stock market in 1987 with the first execution of the now-famous Greenspan put…
http://www.investopedia.com/terms/g/greenspanput.asp
AG tried to to spur business investment in the U.S. with low interest rates. What we saw instead was a massive housing bubble. Every recent effort to kick start this economy has seen met by the same inward turning. This dog, as they say, won’t hunt.
Our economy is BASED on work ethic and Americans ability to earn a decent wage. Due to factors including off-shoring, cheap imported labor and automation, wages are going nowhere but down. It’s not that the dog WON’T hunt, it CAN’T! The massive debt buildup in large part is a reflection of much higher prices and stagnant wages. I guess I had better not use the word protectionism, so it looks like this is the beginning of a much bigger adjustment that very few of us are going to like, but we cannot have a world economy, and the kind of huge disparity we see from one country to the next.
Exactly right, GS.
New “Atlantic” article examines the disparity between stagnant worker wages and historically lavish CEO “earnings”. Didn’t go into packing the boards with congenial types. Basically stated high earnings weren’t going to investors, toward business investment, or wages. Just another massively out-of-kilter economic trend I’d file under unsustainable.
No, but the Nasdaq fell 75%. Although not overnight. However, housing bubbles don’t burst. They leak sloooooowly for many years before hitting bottom.
This one truly is “different”.
Instead of a 3 to 5 year “hiss” you will hear a 1 to 2 year “whooosh”.
If 20% down becomes the norm again, prices are gonna tank so hard in San Diego you won’t believe it. I don’t think we’re ever going back to 20% down, but I could be wrong. If that happens with the next two years, look for > 50% correction easy. How the hell are first time buyers going to save 20% down on a $500,000 $hitbox. $100,000, are you kidding me?
Worse yet, even after they’ve got 100k for a downpayment, a fixed rate 30-year on 400k at today’s rates plus maintenance, taxes, insurance, maybe HOA would easily be around $3,500/month minimum. How do you spell, ‘aye ay ay”?
¡Ai Yi Yi!
Exactly! I graduated college, married and moved to the SF Bay Area in 2003. (Much to my folks disgust since they had left the Bay Area in the early ’80s because of cost of living and poor quality of life
) We looked at home prices and started saving all of my wife’s salary. Coming up with $100k for a downpayment is easily do able but that’s not the problem. Despite what some around here think monthly payment is a valid way to think about a home purchase. It’s just that you need to be looking at the payment on a 30 year fixed mortgage not some exotic option ARM. My biggest frustration in life is I want a stable place to live not an investment vehicle. And renting is defintely better financially, but is also a pain. Landlords don’t want to put money into their investments and we’ve lived in 3 places in 3 years, I’m tired of moving!!!!
I think you are wrong. Lenders will soon wake up to the mistaken notion that they can control risk when buyers have no skin in the game, and also relearn the lesson that the size of a downpayment is negatively correlated with the risk. But first we need to have prices fall back to long-term equilibrium levels before downpayments will even be feasible for most credit-worthy buyers in the bubble zones…
What is your definition of lender?
Is this true even if they can keep selling off the loan?
My definition of lender is the bag-holder who eats the cost when a buyer goes belly-up; I realize that it is hard to say who this “lender” is, given the repackaging of risky household debt into MBS — could end up being the US taxpayer or Chinese Central Bank, at the end of the day…
But “they” won’t be able to “keep selling off the loan” indefinitely, as the death of the conundrum will be accompanied by a shortage of greater fools.
Desert Dweller,
When you think about the fact that some areas are already off 20%, those 20% seconds are already out their investments. You want to pony up 20% for the second mortgage/HELOC knowing that this is just the beginning of the downturn and that most of these borrowers are taking out ARMs because they can’t afford a fixed payment on their fraudulently-stated income? I sure wouldn’t touch these for less than 25% interest, minimum. The only entity that might be willing to do so would be the US govt, in an attempt to prop up this bloated market. Let’s all hope (and write our representatives) that doesn’t happen.
A ‘Normal’ market according to Gary means 10-15% increases per year. What say the bretheren? hehehehehehehehehe
Is there a Nobel price for RE BS? I nomonate this guy:
“The market isn’t exactly falling off a cliff but is slowing more rapidly than we’ve seen in a long time,” said Andrew LePage, a DataQuick analyst.
“Price growth is descending consistently but gradually,” he added. “Everyone’s always said a soft landing could include minor price declines.”
“Price growth is descending consistently but gradually”! No, prices are dropping. Now they are even dropping y-o-y.
perhaps we will have a “soft landing” onto a “permanently high” “souffle”.
Don’t forget that when the souffle settles it turns into a crepe.
Don’t you spell that C R A P?
What?! Weren’t these pundits recently defining a “soft landing” as single-digit YoY appreciation–a flat market at worst?
You owe me a new laptop monitor, dammit, from all that Pepsi I just shot out my nose that drenched it.
Funny freakin’ comment.
It won’t really be a buyers market until buyers are buying instead of waiting.
Sellers should heed the words of the comedian Emo Phillips, “Wake up and smell the coffin!”
The one guy quoted in the article said, “Buyers don’t realize that it’s a buyers market.” The issue, to me, is that there are no buyers left to absorb the amount of product in the market. Until we hit bottom it is not a buyers or sellers market, just a falling one.
Is it really a buyer’s market if the buyers don’t want any part of it? Perhaps the people who need to be told what type of market we are in are the sellers.
A fool’s market
A “bagholders trying to unload market “.
I like the “Seller needs a buyer with buckets of cash and a box of stupid market”.
He meant that a house listed for 700K won’t be bid up to 750K like a year ago. The fact that you can now buy a 700K house that was worth half as much 3 years ago for 699K, makes it a buyers market.
Now I know what happened to all the dolts from school that appeared to have no future. They all went into “the industry”.
“Until we hit bottom it is not a buyers or sellers market, just a falling one.”
Good way to put it.
The part that didn’t post the first time:
‘Signaling an end to the San Fernando Valley’s real-estate boom, the median price of a home increased in July by its slimmest margin in a decade amid a lingering sales slump, a trade association reported.’
‘The median price of a previously owned home rose just 1.2 percent, or $7,000, last month from the July 2005 level, said the Van Nuys-based Southland Regional Association of Realtors. And it fell $18,000, or 2.9 percent, from June’s record $625,000. Inventory has been steadily rising and at the end of July had soared an annual 127 percent, to 6,381 properties.’
‘Sales have now fallen for nine straight months, plunging by 32.8 percent, to 809 transactions, in July. That’s the lowest number sold in July since the 800 total for that month in 1993. ‘I think what we need to see is the asking price in some (cases) to come down and buyers to realize it’s not a fire sale. This is not ‘92 or ‘93 when foreclosures were the norm and the bottom was dropping out of the market, (said) Jim Link, the association’s executive vice president.’
“This is not ‘92 or ‘93 when foreclosures were the norm and the bottom was dropping out of the market,”……….YET!
OT… Article on CNN Money…
Bubble sitting: The pros and cons
http://money.cnn.com/2006/08/11/real_estate/bubble_sitting/index.htm
>> Where the market is heading: Says Bredemeyer. “You need to know what your market is doing. (This is where a professional appraiser comes in.)”
Sorry - it cut off my comment, which is: these “professional” appraisers have been a huge part of this bubble problem. The last person I would ask for advice would be from someone as crooked as a dog’s hind leg.
I certainly agree with your assessment, and would go a step further and say that at the appraisers’ feet should be laid the ultimate blame. After all, are they not the last line of defense? Are they not the last (supposedly) disinterested party whose ONLY responsibility is to determine if the value is correct?
Had the appraisal mechanism worked properly, maybe this bubble would never have happened.
Anyone see PIMCO’s latest housing report?
Get this - over 50% of this years refi’s have been equity take-out refi’s into HIGHER rates.
How can this bubble not end in a recession?
http://www.pimco.com/LeftNav/PIMCO+Spotlight/2006/In+Focus+Housing+Project+Simon+Interview+08-2006.htm
Regarding House ATM withdrawal/spending, the idiot from Pimco states:
“This can continue as long as there is equity in the homes and as long as lenders are willing to make the loans. Over the last six years, the boom in housing has created $5 trillion more value in homes than mortgages have gone up, so there is plenty of equity in homes.”
Is he actually suggesting that an equity “surplus” of 5 Trillion supports an argument that the housing ATM still has “legs”? How disingenuous a position can this be?
Consider this: At 12/31/03, the equity surplus was actually 8 Trillion.
(Links for the interested, but you gotta do the math):
Debt: http://tinyurl.com/q9sme
Equity: http://tinyurl.com/rruno
So, in just over the last 2 1/2 short years, we’ve pissed away half of our national home equity, and this at a time when homes have appreciated in value at an unprecedented parabolic rate. Only problem is, the rise in our debt consumption has been even MORE parabolic.
IN ORDER FOR THE U.S. CONSUMER TO MAINTAIN HIS CURRENT LEVEL OF SPENDING, (which is to not even suggest that spending would actually accelerate in such a way as to support corporate EPS growth at the current annual rate of 16%), the spread between national home equity and mortgage debt must be reduced to a level that, if experienced on a micro level, would (traditionally) require mortgage insurance to get the deal done. AND, this assumes that home values do not depreciate.
Utterly ridiculous. And his picture is goofy, too.
I read the report. It is incredible! Blows me away how many people lack common sense.
I’m not surprised by the number of idiots. That’s pretty much a constant. Wht is different is that these fools have been allowed to act on that stupidty by the lenders. Now the banker says “yes” instead of “WTF”.
“A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.”
-Mark Twain-
Soon we might get to see how bankers behave under tornadic conditions…
Simon:” The rising inventory of new homes for sale is due to a lack of buying”
This is from some bigwig at PIMCO, brilliant. Also, I saw Ken Heebner on CNBC yesterday, the message was good (Housing sinking) but his delivery was pathetic.
Or are totally desperate!
I could imagine what they said back in Holland during the early 1630’s. “Tulip bulbs priced at $75,000 have created quite the buyers market now that they have diminished in price by $5,000 to $70,000. Now is the time for buyers to take advantage of this condition.”
This San Diego real estate market is going to get pulverized. Does that possibly equate with a really hard f**king landing???, because that’s what I’m predicting.
People who were not able to pay the cost of owning the home with a traditional home loan should NOT have been allowed short-term-fix-financing…period!
That is what got us into this mess and that is what is going to make this whole thing unravel. I don’t feel one bit sorry for these people, but they NEVER should have been allowed to buy these over priced stucco boxes in the first place.
“Modesto’s Roxanne Myers is caught in a refinancing dilemma, she said. She has an adjustable-rate mortgage that’s about to go higher, so she wants to refinance. However, she also can’t afford the monthly payment on a fixed-rate mortgage, she said.”
This is not a unique case…
I think this will be a shock to a lot of FBs who have an ARM and “assume” they will be able to re-fi into something affordable when their rate re-set is upon them. A few headlines on that should start the phones ringing at the lenders’ offices, only to result in more and more bad news. That should pump up the listings numbers.
They probably thought prices would keeping rising and if they could not afford the payment of a refi they would just sell for a profit. No doubt a lot of realtors and loan brokers told their clients this.
Actually, I would bet that a lot of them thought they would be earning more. Enough to cover the increase.
No…They were assured by the RE & MTG brokers and appraiser that things would just keep going up and appreciation would be their salvation - a ponzi scheme. Can you really blame them (FB’s) for everything if they are being dealt this kind of real estate smack. Most of these people would never have a chance of buying houses in these markets if there was no bubble. The “American Dream” - House, new SUV in the driveway, plasma bigscreen tv in the den etc… is relentlessly sold to them in hundreds of ways every day everywhere they look. Who is extending these people the riskiest kind of credit when couldn’t qualify for a conventional fixed loan or more “reasonable” arm.
It’s the Real Estate/Mtg industry that deserves much of the blame. They’re the ones who know better.
Also I think the people here would be astounded how many people looked at the ‘2% annual increase’ clause, and assumed that meant the payment increase rather than the rate increase.
However, she also can’t afford the monthly payment on a fixed-rate mortgage, she said. [...] ‘It’s scary,’ Myers said. ‘I’ll probably get another ARM that’s fixed for five years.
Yeah, scary is right! Scarier than she thinks, too.
Apparently she hasn’t looked at the rates for 5/1 ARMs lately. Sorry hon’, but they’re not nice and low like they were when you bought that place. In fact, according to BankRate.com, a typical 5/1 is only 0.29% below a fixed 5-year.
It’s hard to believe that a quarter point difference separates the can’t-afford (fixed rate) from the maybe-can-afford (5/1 ARM), unless she gets into a nasty teaser rate with big points up front that they can build into the principal — if her appraisal can even support it.
I think her later statement is the one she needs to concentrate on:
I don’t want to sell, but that may become a reality.
Sell low, honey, and sell fast.
You got it. No relief in ARMS these days. In fact, the inversion in the curve has meant that even the short term ARM’s like the 1 year give no relief. In most cases these days, the fixed rate offers a rate comparable to all the ARM’s. So folks like these that come in looking for a quick-fix-band-aid-loan are done. No wiggle room indeed!
Anybody know the statistics about how long the average buyer stays in their home?
I remember that a lot of people chose 5 to 7 year ARMs at low teaser rates, thinking they would save a bundle then move up (whether they knew if they had a prepayment penalty or not).
It could have been a viable strategy for some, if they followed their plan.
Roxanne, You better put on that red dress.
As a life-long Police fan, I appreciate that one…
the LIGHT was red, not the dress.
Hilarious!
LOL. Actually, Roxanne better be prepared to take off that red dress.
Modesto’s Roxanne Myers just needs a little ‘wiggle room’.
‘If there’s a little glitch in the market and an owner loses a job, there’s no wiggle room,’ said Dave Konesky, a Realtor in Tracy. ‘Values are not rising like they were, so you can’t just go out and refinance.’”
‘Price growth is descending consistently but gradually….
————————————————————————
Isn’t this another way of saying that appreciation has become depreciation?
…..and of course another sage comment from the RE industry “experts”
‘I think what we need to see is the asking price in some (cases) to come down and buyers to realize it’s not a fire sale. This is not ‘92 or ‘93 when foreclosures were the norm and the bottom was dropping out of the market, (said) Jim Link, the association’s executive vice president.
What an idiot!
He’s right, and buyers should listen to him and wait for the fire sale in about 12 months.
Haha! Brilliant!
As Mr Smithers would say “Excellant”
Sorry, the would be Montgomery Burns.
You are right! Isn’t there also a realtor ‘On the West Side?’
Cookie Kwan, Number One On The West Side.
(”Stay off the west side!”)
“Descending appreciation”, “soft landing”, “orderly decline”, this manipulative language in our society is becoming ridiculous.
‘I think what we need to see is the asking price in some (cases) to come down and buyers to realize it’s not a fire sale. ‘
Does anyone else smell smoke?
I wish someone could get their hands on the NAR bullet list with words not to use with the media.
Their blacklist has to include:
depreciation
bubble
unaffordable
overpriced
negative
….
“negative appreciation” has always been my favorite.
Now, real estate is returning to its status as a dependable moneymaker over the long term, they said.”
mmm…let’s try this soundbite for awhile. that otta get a few more buyers lined up.
Buy and hold!!! Just like all the rich people do it, see.
buy low and hold.
‘Price growth is descending consistently but gradually,’ he added. ‘Everyone’s always said a soft landing could include minor price declines.’
Bullsh!t; until very recently, ‘everyone’ has always said real estate prices always go up. Now they are saying they always go up, if you wait long enough. Japanese citizens are still waiting after 1 1/2 decades.
So far as price declines go, minor price declines could easily lead to major ones, as surprised would-be buyers adjust their willingness-to-pay to take into consideration the risk of losing money by owning an overpriced house. And major price declines could preclude a soft landing.
Home prices ARE dropping, I believe. I am trying to sell a very tiny duplex of my mother’s and we have dropped the price several times. At first it was over $600,000, now we are selling at $537,000 and are glad to take it. We had to drop we were not getting any real bites! I understood fully the market while our realtor and the other part owner did not. Everytime they asked me I told them “I really want to sell…I think it’s best to reduce now instead of later”. Our realtor, although a nice gal, keeps telling me that she doesn’t think the market will fall. I also am seeing “price reduced” in many areas of town…and yes, desirable ones. Oh, I am in Long Beach.
My coworker bought in San Pedro about 8 months ago…for $837k. It has to of lost at least 15-20%….I don’t dare ask him.
There is nothing I repeat nothing worth buying in San Pedro for 837k
Not true, everyone want to live there. Coastal living at its finest!!!!!
View of shipping cranes and boats. Wow!!
I forgot to say that my coworker” location is ‘Different’.
Anyone who thinks San Pedro has nothing but “views of cranes” needs his head examined. Point Fermin and South Shores have some incredible homes with beutiful views. Sounds like the same people that bag on everything and own nothing…
“Anyone who thinks San Pedro has nothing but “views of cranes” needs his head examined. Point Fermin and South Shores have some incredible homes with beutiful views. Sounds like the same people that bag on everything and own nothing…”
Ok, if your so friggin smart why don’t you go buy some overpriced property there this weekend. I’m sure it’s “different” there and not overpriced at all, so you’ll become infinitely wealthy.
Anyone remember that movie “to live and die in LA” . It was filmed in San Pedro, Wilmington, long beach Port areas. San Pedro Has real charactor. Lots of docks, berths, boats but also fisherman;s wharf and village. Almost all nicer homes are built upon the steep SP hills, many with rickety long stairs. Lots of old but well-maintained clapboards. SP Has a real Scandinavian/Russian/slavic charactor. There are some questionable run- down areas down close to the dock shore areas, but up in the hills SP is more like Palos Verde.
go down to Ports O Call Sunday for a fish lunch and tell me your impressions. what an eye-opener.
I’d ask him face to face. Get in his friggin grill if you have to and say WTF were you were thinking about?
It’s too bad you’ll be paying that realtor a commission.
“Home prices ARE dropping, I believe. I am trying to sell a very tiny duplex of my mother’s and we have dropped the price several times. At first it was over $600,000, now we are selling at $537,000 and are glad to take it.”
Question? Would you consider this situation “dropping prices” or just too high of an expectation at setting the price? Would true dropping of the price be a home price that a seller drops the price below what they paid for it? Probably does not matter. I need a beer.
I posted a couple of days ago about the model townhomes I visited in Ladera Ranch, OC. Apparently, the 2 that are finished are now on zip realty at about 10k less than they were trying to sell me.
I can’t imagine the people who bought 8 months ago.
Would love you to let us all know what you sell for.
“Now, real estate is returning to its status as a dependable moneymaker over the long term, they said.”
Not. Real estate is returning to its fundamental status as a dependable drain on the family budget. But before it finishes returning, prices will have to fall, and it will prove to be a very costly money-losing investment over the short term, unless the government figures out how to keep prices on a permanently high plateau of unaffordability against the backdrop of a huge inventory glut. Good luck!
“unless the government figures out how to keep prices on a permanently high plateau of unaffordability against the backdrop of a huge inventory glut. Good luck!”
LOL. Sucks to be you, Bernanke.
Property Taxes are due in December here in Calif. I think a lot of people will try to sell before huge bills for $4000 (example on a 600K home) will come due. One more nail in the coffin.
“‘Buyers don’t realize that it’s their market,’ she said.”
Realtors (TM) either don’t realize or lie about the fact that it will not be a buyer’s market until prices deflate to match the fundamental value of a home as a place to live in. Home ownership will some day once again be rightfully recognized as a steady drain on the household budget through interest, insurance, maintenance, taxes, and depreciation, to name a few of the costs, leaving behind its recent status as a source of free money. Until then, it is a fool’s market.
I tend to believe that a lot of these Realtors that keep saying that don’t have a lot of experience. Probably less than 5 yrs in. They could not have experienced a downturn and with a straight face claim this to be a byuyers market. Anyone who thinks this is a buyers market is in for a very rude awakening in 6-12 months.
New townhomes in my area already 25% below last summers asking prices…
Were asking $415k last summer… 4 sold at that price…
Now asking $295k… Over 15 still on market at or around this new price…
what part of town?
Sorry fogot to include that… Northwest Florida… Destin, FL, to be exact…
Very tourist, second home, RE driven place… TONS of speculators the last few years.
Don’t forget to check for the latest Silicon Valley median prices at:
Santa Clara County:
http://www.viewfromsiliconvalley.com/id125.html
San Mateo County:
http://www.viewfromsiliconvalley.com/id157.html
Santa Cruz County:
http://www.viewfromsiliconvalley.com/id156.html
Um, the median prices there are still rising. What was your point?
‘I think what we need to see is the asking price in some (cases) to come down and buyers to realize it’s not a fire sale. This is not ‘92 or ‘93 when foreclosures were the norm and the bottom was dropping out of the market.
Precious. In some cases the asking price needs to come down. Buyers, on the other hand, need to realize that it’s not a fire sale! Childish little buyers, trying to get 2008 prices today! How dare you.
Question: When thinking of affordability for an particular area (comparing home price to median income), should the income be adjusted for some sort of multiplier to account for double incomes? Is it better to look at median household income or just median income?
Also, what are you folks on the blog comfortable with for the max PITI as a percent of gross for an individual with zero non-mtge debt and one year’s gross in reserves? Case example: a person is making 100K (8K/month or so) and has 100K in reserves after down pmt, closing costs, etc.
using a 30 yr fixed, of course
Quite honestly, I think someone with a $100K/yr income should not be spending any more than $2,000/mo and that is only if the house is in good condition and in a good location. No guarantee your income will forever be $100K or that it will increase over time (jobs are not as secure as before and incomes are stagnant/down). No gurantee you will have a pension or SS or healthcare coverage going forward. IMHO, we all need to save more than ever before. This is wildly deflationary WRT housing prices.
in Southern California, you have to base affordability considering a multiplier of at least 4 incomes of full-time working adults. And I think it’s reasonable to use the median wages figure, as these people do not pay income tax or payroll tax, and may get welfare to boot. I firmly believe we will never see affordability levels of 10 years ago. The days of a two income household with 2 kids in a 4-bedroom house are gone forever.
{”I don’t want to lie and say the local real estate market is great, but we’re really not that far off a normal market sales pace,” Link said. “And, while prices have softened and activity is concentrated in lower price ranges, there is absolutely no sign that the bottom has fallen out of residential real estate.”
Every business experiences peaks and valleys of sales activity, Link said.
“For real estate, it’s the peaks that are abnormal, those periods when sales go absolutely berserk,” he said, “not the periods like today of adjustment and relatively calm, deliberate homebuying.”}
Anyone care to venture a guess as to what year Jim Link made the remarks above?
1992. Yep, just as the market was CRASHING. Hmmm, his remarks today seems so similar…
How ’bout this gem..
{”The market remains slow, but consumer optimism is growing,” said Jim Link, the Board’s executive vice president. “While we don’t expect 1993 to be a great year, there should be a modest improvement when the California economy works through the recession and finds its new pace.”}
Or this, from Jan ‘94, only 3 long years before we officially hit bottom.
{”Just a few months ago a buyer could go in with a low-ball offer and expect to win,” Link said, “but that won’t happen now.”}
One last comment from Link from 1991, just as the downturn was beginning…
{”A slowdown from those peaks had to occur and this is the re-adjustment period the market needs after every period of rapid price escalation,” Link said.
“But anyone who has owned a home for at least two years, did not lose money, even if they had to sell during 1990,” he said. “They merely saw a slowdown in the rate of appreciation or a slight erosion of the enormous equity accumulated over time.”
Instead of any fundamental loss in value during 1990, buyers gained leverage last year merely because there were too many homes for sale.
Owners who had to sell in that overcrowded environment probably had to make some price concessions, but what they gave away was what they thought was a continuation of the frenzied price increases of 1988 and 1989, not real value.
“Unquestionably, with high inventory, low interest rates and stable prices, this market provides unprecedented opportunities for buyers,” Link said.
“But, while some sellers may be crying over the end of double-digit annual price increases, the fact is the average residential sales price has increased 68 percent in the last five years,” Link said. “Sellers aren’t losing money in today’s market.” }
CAR and NAR will soft peddle this thing all the way down. Just like they did last time. The fact that the media goes to them for “expert analysis” is shameful.
Deb,
great find. This will play out just like in the ’90s, with a headline in the LA Times every three months proclaiming that we’ve hit the bottom and it’s time to buy. But, what else can we expect from the “experts”, honesty?
”I don’t want to lie and say the local real estate market is great, but we’re really not that far off a normal market sales pace”
Let me paraphrase:
“I don’t want to lie and say [A], so I will lie and say [B].”
DWR:
You have been around long enough to have seen this but others may not.
I POST LA TIMES headlines from 1988- 1990.
See the similarity to the current situation
See May -OCt 1989. Current situation mirrors that very well.
1988: People start to question the boom. Realtors
assure us the boom will continue. Houses aren’t like
stocks afterall.
‘88 Outlook Bright for U. S. Real Estate
Dick Turpin; Los Angeles Times (pre-1997
Fulltext); Jan 10, 1988; pg. 1
County’s Median Resale Price of Homes Reaches
$179,999, Costliest in California
JOHN O’DELL; Los Angeles Times (pre-1997
Fulltext); Mar 23, 1988; pg. 5
Unlike Stocks, Home Prices Rarely Collapse
JAMES FLANIGAN; Los Angeles Times (pre-1997
Fulltext); Aug 28, 1988; pg. 1
Southland Inventory of Unsold New Homes Lowest in
Decade
DAVID M. KINCHEN; Los Angeles Times (pre-1997
Fulltext); Sep 11, 1988; pg. 10
J. M. Peters Reports Skyrocketing Sales for Second
Quarter
MICHAEL FLAGG; Los Angeles Times (pre-1997
Fulltext); Sep 14, 1988; pg. 5
Limit Issue Driving Up Home Prices
Dick Turpin; Los Angeles Times (pre-1997
Fulltext); Sep 18, 1988; pg. 1
Hot Housing Sales Belie Doom Forecast
Ryon, Ruth; Los Angeles Times; Sep 25, 1988; Vol.
107, Iss. 297; 8; pg. 1
1989: Prices are very expensive; affordability an
issue. Sales slow and prices drop. Mention of risky
loan types.
Housing Prices in State Climb 3% in February
Furlong, Tom; Los Angeles Times; Mar 29, 1989;
Vol. 108, Iss. 116; 4; pg. 1
Stock of Unsold Homes Drops Dramatically
DAVID M. KINCHEN; Los Angeles Times (pre-1997
Fulltext); Apr 2, 1989; pg. 9
How First-Time Buyers CAn Get Their Piece of the
Dream
Myers, David W; Los Angeles Times; May 21, 1989;
pg. VIII1
State’s Home Sales Drop 14% Median Price Tops
$200,000 for First Time
Crouch, Gregory; Los Angeles Times; May 25, 1989;
pg. IV1
Sales of Existing Homes in State Fall During May
Furlong, Tom; Los Angeles Times; Jun 23, 1989;
Vol. 108, Iss. 202; 4; pg. 1
Orange County Home Sales Drop by 22% in May
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Jun 23, 1989; pg. 1
Realtors Tackle New Topic: How to Handle Slow
Housing Market
Myers, David W; Los Angeles Times; Oct 1, 1989;
pg. VIII1
Prices Drop, Sales Slow in State’s Housing Market
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Nov 29, 1989; pg. 1
Housing Affordability Rises Outside L.A., Orange
County
Kristof, Kathy M.; Los Angeles Times; Dec 06,
1989; Vol. 109, Iss. 3; D; pg. 1
Survey Cites Four California Banks With Possibly
Risky Realty Loans
JAMES BATES; Los Angeles Times (pre-1997
Fulltext); Dec 30, 1989; pg. 1
1990: Prices take a serious plunge. One article claims
that housing booms are a bad thing and we should hope
prices stay low. Increasing mortgage rates are blamed
for the bust. The word “recession” is mentioned. Gloom
and doom.
Home Sales in Southland Plunge in ‘89
Samuels, Alisa; Los Angeles Times; Feb 8, 1990;
pg. D2
The Number of Homes for Sale Sets a Record Real
Estate: San Diego becomes buyer’s market, with 4,000
existing homes listed in January.
GREG JOHNSON; Los Angeles Times (pre-1997
Fulltext); Feb 13, 1990; pg. 2.A
Pray That the Housing Boom Stays Dead
Jones, Robert A; Los Angeles Times; Apr 24, 1990;
pg. A3
Climbing Mortgage Rates Hurt Existing Home Sales
Samuels, Alisa; Los Angeles Times; Apr 26, 1990;
Vol. 109, Iss. 144; D; pg. 3
California Is Nearing the Edge of Recession, UCLA
Forecast Warns
Anderson, Harry; Los Angeles Times; Jun 29, 1990;
Vol. 109, Iss. 208; D; pg. 1
California Real Estate Market Continues to Cool
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Jul 26, 1990; pg. 1
Home Sales in July at Slowest Pace in 4 1/2 Years
Furlong, Tom; Los Angeles Times; Aug 28, 1990;
Vol. 109, Iss. 268; D; pg. 2
Realtors Hear Gloomy Price, Sales Forecasts
Myers, David W; Los Angeles Times; Oct 7, 1990;
pg. K1
O.C. Home Resales, Prices Fall Sharply Housing:
Realtors group attributes slump in county and state
figures to fears of recession.
MICHAEL FLAGG; Los Angeles Times (pre-1997
Fulltext); Oct 26, 1990; pg. 5
Housing Slump in California Seen Worsening
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Nov 21, 1990; pg. 1
hey Sunsetbeachguy,
that was what I was referring to, but I couldn’t remember who had compiled it. Thanks for posting it, it truly is an eye-opener.
Nice sleuthing, Deb.
‘I think what we need to see is the asking price in some (cases) to come down and buyers to realize it’s not a fire sale. This is not ‘92 or ‘93 when foreclosures were the norm and the bottom was dropping out of the market, (said) Jim Link, the association’s executive vice president.’
Dah, no it’s not but it did set off my fire sprinkler system and now I’m under water.
http://www.theolsonco.com/address.asp?cnty=2&id=57
Anybody in Ventura County know how these Townhomes are selling?
Don’t know thw status of those townhomes but Camarillo has to be one of the better communities to reside in. That area where townhomes are at is real close to the main industrial park for Camarillo( a clean modern Park).
Camarillo is down at the bottom of the long descending slope from 1000 oaks/newbury park/westlake village up on the plateau, but it seems to resemble those communities in the high quality of it’s residential and commercial planning.
“Roxanne, you now have to turn on the red light…” Roxanne Myers’ predicament in Modesto is practically screaming for some Rainman lyrics.
We were always wondering when the education gap between the US and Japan and Western Europe would catch up with us. We need wonder no longer.
Well, the Japanese bought houses like suckers in the 80’s, just as the Brits and most of the Europeans are doing now.
Education is fine and good, but without humility and skepticism it can easily lead to an arrogant ignorance of one’s own blind side.
Sorry about jumping into this blog mid-stream but I have lived in Modesto almost 10 years now and stood on the sidelines watching this bubble happen right before my eyes. I remember looking at a house in ‘00, a 3 bed, 2 bath -about 1,400 sq. feet for $109,000. Three years later an identical house next door sold for $330,000. Last year they started building a tract of “Mc Mansions” across the street that were going to start at 600K. It’s interesting to see how the developer is scrambling to match his building with the markets pace. From what I can see now it looks like he’s content to finish all the homes on the outside of the development, leaving the streets on the interior undeveloped, just pads with utilities stubbed out. That way, any potential buyers won’t have to drive by vacant lots to see the new homes. Even now, most of the completed homes have stood empty for a few months. I think the only people making money in real estate in Modesto are the people building “For Sale” signs. You can’t drive down one street in the whole city without seeing at least two signs for every ten homes.
What makes it worse is the way the hometown paper, the Modesto Bee has been during this entire bubble episode. It used to drive me crazy seeing how they would take any negative news about real estate on a natioanl level and then spin the story so it seemingly wouldn’t apply to Modesto. About 2 years ago it dawned on me: The Real Estate industry OWNS the Modesto Bee. Think about it, I bet 45-50% of their ad revenue comes from RE. Do you think they are EVER going to print a story that might be perceived as negative by the local RE industry? No way! At least until the reality becomes too obvious to ignore, they are going to print whatever the local RE people want. There is simply too much money involved for reality to make the paper.