A Housing Bubble Deja Vu For The SFV?
The Daily News makes a comparison with the last housing bubble. “This year’s San Fernando Valley residential real estate market might have started with a pop, unlike last year’s, which began with sort of a bang. The 851 single-family home sales in January 2005 ranks as the fourth-highest number since 1,057 transactions in 1989. Last month’s sales total, an anemic 582 transactions, ranks 13th.”
“To find any deja vu in this, we’ve got to go way back to 1990, which had the seventh-highest sales total. But that January’s count fell 27.2 percent from the prior year. This year started with a hefty 31.6 percent decline to the lowest level in nine years.”
“There are some striking similarities, and differences, between then and now. Both years started the same way the prior one ended. In May 1989, sales began falling under the prior year levels; that malaise lasted 22 months. Looking back, it’s the point when that real estate bubble began to burst.”
“This January’s sales decline is the fourth in a row and that pattern is expected to continue. At their respective points in time, both markets were past their prime. The last boom market peaked in 1988 with 15,263 sales and the next year they fell by 16.4 percent. This crest came in 2003 with 13,878 sales and the annual declines since then have been much more tepid. Both years started with high energy prices, unrest in the Middle East and a Bush in the White House.”
“A seven-year price decline in the annual median price, halfway between the most and least expensive homes sold, also started in 1990. Now we are at a record $605,000, a whopping 163 percent higher than where 1990 started.”
“Jim Link, executive vice president of the Southland Regional Association of Realtors, does not see a price decline accompanying this fall-off in sales, just a moderation in the rate of appreciation. ‘A year from now, I think it will be a single-digit increase but it will be higher than it is now,’ he said of the median.”
“He was just as optimistic in January 1990, anticipating that full-year sales would match 1987 or 1989. Single-family sales ended up plunging 31.6 percent that year, a suddenly familiar number.”
“Analysts and industry executives don’t expect that kind of a train wreck this time around, though. Of course, no one saw the last one until it flattened the market.”
That’s because all the ‘analysts’ and ‘industry executives’ are too high up in the ivory tower to see what’s happening on the street.
On behalf of the real estate industry, I’d like to apologize for the lousy job we do in educating the consumer. It’s embarassing to be a realtor and read this crap. No wonder the general public thinks we’re a bunch of losers.
I’m trying to do my part in north SD county:
North SD Stats
jim, you be the man, if i lived in ca you would be my buyers agent, i bet you sleep good at night, it helps to be truthfull, cuts down on the law suits thanks azrenter
“On behalf of the real estate industry, I’d like to apologize for the lousy job we do in educating the consumer. It’s embarassing to be a realtor and read this crap. No wonder the general public thinks we’re a bunch of losers.”
Gee CJ, you’re an industry turn coat. Aren’t ‘ya supposed to f*ck your client’s and their buyer’s real good, and then help hold them down for your “hip-pocket” appraiser and broker to take their turns too?
Why so bitter??
This is my life. For every two people that are willing to take a fair look at what I have to offer, theres’ one who puts the blinders on and thinks it’s funny to ridicule me.
Jim,
There is a lot of unnecessary and nonproductive carping and sniping that goes on on these blogs. People seem to be highly emotional about real estate. I have been the whipping child for a good number of bloggers . Some people seem unable to step back and think rationally. Just remember “sticks and stones may break my bones…”.
Jim,
Your integrity comes through loud and clear in your posts. I know a lot of folks have vented on the RE industry here due to bad past experiences with realtors (including me — my last realtor tried to convince me to buy in SD w/ an I/O ARM, since “CA real estate prices always go up”), but I apologize to the extent that I or anyone else here has unfairly subjected you to collateral damage. Your website is very informative, and a great service to buyers and sellers. I would recommend you to anyone I met who is in the market for a home in the SD area. And I sincerely wish you the best with what looks to be a tough market over the next few years. Your business model of trying to keep seller expectations in line with market reality seems like the way to go.
Best,
GS
P.S. Jim, I will also share the best advice my dad ever gave me, “Don’t let the bastards get you down.”
Thanks for the support - I owe you a beer now!
CJ, you sound like a nice guy caught swimming with the sharks. While I have not personally been screwed by your industry, I have seen too many young couples fresh from school who are simply trying to follow in their parents footsteps in starting a family and getting settled down, but they are going to end up destroyed because everyone from the corner realtor to the Wall St MBS brokers are out for blood. In the end, I too as a taxpayer will likely get drawn into paying for this disaster. Just remember the next time you read about the super rich directing their lobbyists to deregulate the next industry; regulations don’t hold us back, they hold us up!
Jim,
I appreciate your comments and your website. I gave the website out to my (very good) agent here in Northern Virginia and she and her husband liked it a lot, passed it along to everyone they knew, and made a point to thank me later.
Nice website, good to see a bit of realism.
From a long way away here in Oz it looks like SD is set for a horrible shakeup. I hope it’s agents like you that are still in business at the end of it.
SF BayQT~
Get back on AIM. I was at Outback when you messaged LOL!
DOES ANYONE, ANYWHERE EXPECT A BUBBLE TO BURST? If I read this BS one more time about “appreciation slowing,” I am going to hurl my dinner!
What did you have for dinner?
The most notable difference between this bubble and that of the late 80s are the price increases due to relaxed lending standards. Had credit guidelines stayed constant, this bubble may not have been as severe or as long in duration.
They have, in essence, doubled home prices by doubling the pool of buyers with relaxed lending guidelines. They have also expanded inventory to account for this faux pool of buyers, which will lead to a glut of homes and a correction beyond the starting point.
Very good point you have. The access to easy credit is one of the main problems we are dealing with. If the easy credit drys up expect a sudden pop of bubble. Anyone with a pulse gets a loan now. I am proud of my credit history but get a little pissed at people getting loans who have not proven themselves. The reckless people can kill a market.
I have 2 questions here about the late 80’s:
1) how say that easy lending was not present then, yet I know of people whose loan officers told them to lie on their application (income level etc) and there was the whole S&L scandal. To be sure, I believe that this time it’s bigger. the hedge fund & foreigner financing through derivatives is way bigger than S&L’s (i think). But i’m just asking…
2) General question: how come there were no YoY national price declines in 1989-90-91, as there was in 1932? Was the bubble not big enough?
You’re right, the money has always been there for anybody who wants it. In the old days you had to phony up tax returns to get it, now you just fog a mirror.
mo -
To answer your question 2), perhaps one explanation for there not being a national y/y decline in US home medians in the early 90’s was because the bubble runup was localized to parts of the East and West coasts (primarily Boston-NYC-DC/Va and then SoCal and the Bay Area; as I’ve been led to believe).
It was not the widespread phenomen it is today, which apparently includes So FL, PacNW, Vegas, Chicago (?) and many other areas thanks to low rates and questionable lending policies.
I’m willing to bet that sometime in the future, we will discover the “natural” peak of the bubble was in 2001/2002 in So Cal (at least in San Diego, LA might lag a year or so). It was the lax lending standards that caused the furious price escalation we’ve recently witnessed. If you look at past numbers, you can see a slowdown in 2001 or so, even before 9/11. That was the peak from which we could have had an orderly decline, IMHO. Now, we are in for the mother of all crashes, and everybody will suffer the consequences. (Yes, Flat, even the govt workers.)
In 2002, when my neighbors and I would watch what new buyers were paying, we laughed and all agreed the bubble was peaking — we certainly wouldn’t pay what they were (doubled from only 3 or 4 years earlier). Go to 2004, and all of a sudden, nobody believes it’s a bubble anymore (prices had doubled, or more, yet again). See, it had gone on too long, and people really started to believe in the new paradigm.
Gonna be some ugly times ahead.
My personal experience was this:
We bought a small starter home in Corona for $155K in late 99. It was 1495 sq. ft., and it had appreciated about $50K by late 2001. We surmised the home could never be worth more than that based on its size, and sold it.
We then purchased a new larger home with more features in late 2001 which we moved into in early 2002. It more than doubled and we sold it, with the same concerns as the first, in July of 2005.
We now rent and wait. But this is why I see a retracement to LOWER than 1999, factoring for the new found glut of inventory.
Funny you choosing 02′ as out of bounds. I sold my two rentals in 02′ and my primary residence in 03′. At that time the values were off the hook.
Then it would have took 10 years in net rental income to equal my the ammount I netted on my sales. I also factored in $75/mo/yr rent increases. This nuts and bolts no crap income evaluation made me unconcerned over future possible appreciation, whic was crazy in the next 3 years.
I have made in excess of 35% ROI off of the cash from my rentals. Swapped into securities, mostley insurance and gold/silver miners (tchc, gnw, bvn, gg). The bonus is I no longer have to deal with tennants and their problems.
It is really amusing to me to see all these new RE “Invesotrs” that speak off the cuff about renting their units. I ran a property management operation for a small RE broker, less than 200 renatls. Believe me when I say “IT SUCKS” !!!!!!!!!! Renters SUCK, it only takes one bad to 20 good to really piss you off. The bad ones have a million sob stories that you have to listen to and that is when the fun just starts. How many of you have had to deal with phonecalls from some drunken shitbag at 2:00am on a Tuesday night that has had his plumbing backup into his tub while he is slaughtering chickens in his garage with a skill saw??? No shitter there.
Or.
Junkies behind on rent sending their 11yr old girl with the rent ($220 when they owe $1,400) and asking for something to eat because here parents are too fucked up to feed her. Then when they finally leave your unit (owing your $2,200 youll never see) with every tile/window/fixture broken with a hammer and the house saturated with pet shit/urine so bad you can’t breath inside the rental.
These are things I grew accutumed to and have no problem revisiting again (for the right price). The dammage you obtain insurance for, the junkies with hungrey kids you just give till you can’t, then you evict them. Being a landlord is not a glamorous endevour it is a real job and hard work.
All these appreciation worshiping loan refinancing wizards are in for a huge wake up call when they try to collect rent for a living. When that time comes I will gladley step in and purchase their “INVESTMENTS” for 10 x rents and provide a valuable service being a landlord.
Ca Renter,
You remind me of the saddest bubble tale I have heard to date. A fellow I work with has been a renter since moving to SD in 2000. He could have comfortably bought a home then given his income (~50% over the SD median), but his dad, a realtor in another state, advised him that prices were too high, and that he should wait until they correct before getting into the market. Five years and 200% worth of appreciation later, the guy was totally priced out, and doomed to a life as a renter.
So if prices already seemed “too high” in 2000, where does that leave them 200%-worth of appreciation later???
Lets see here. Prices at the peak of this bubble are 163% higher than at the peak of the last bubble and this bozo doesnt think we will see any price declines like last time? I’m going out to buy a home right away. It must be different this time.
Surffroggy, real estate only goes up! My Realtor (TM) told me.
Does anyone know the percentage increase in prices during the boom of the 80’s? I note that the Article states we are up 160+% from 1990. Is this inflation-adjusted or real dollars?
It would help to have those numbers for the 80’s. I could at least try to guesstimate the drop we are looking at by comparing the price drop (to the bottom) in the 90’s.
the sfv is a toilet bowl just north of LA. 1.5 million commuters must hop on 2 or 3 freeways daily to get into west or downtown LA. it’s the perfect breeding ground for housing price reductions.
And yet they continue to rise because of bs agents and stubborn sellers. I have 17 homes for sale in my neighborhood (10 of which are a new development) in VAN NUYS. Talk about a toilet bowl. Here are the average specs (taken directly from a flyer I picked up this weekend).
3 Bed
2 Bath
1500 sq. ft.
ON A BUSY STREET
$649,000
Similar house on my street but with 4 bed, $678,000.
I can see the realtor now: “We better list this one high. Last year there was a big boom in March, April and May. We don’t want to miss out on that. Don’t worry. It will sell. January and February are always slow. 3 months isn’t that long for a house to sit on the market.”
VAN NUYS for God’s sake.
It’s just wrong.
Van Nuys is bad enough, but how do you account for BAKERSFIELD???!!
Two interesting points to consider:
1) Peak home prices from 89/90 were not reached again until 2001. IOW, it took a second bubble just to reach the highs of the previous bubble!
2) The last time national housing prices touched their historical median was at the bottom of the market in ‘96.
In my area, it took 8-10 years to get back to the prior peak (not factoring in inflation). I consider this a normal cycle and i am anticipating the same this time around. Maybe I am overly optimistic. Interest rates are a wild card.
VAN NUYS for God’s sake.
It’s just wrong.
___________
Ditto that.
van nuys….like it’s a quaint little danish town or something. the first, last and only home i ever owned in the valley was in van nuys
van nuys is a $h*t hole
yeah but Van Nuys has a prosperous industry. Ron Jeremy and Jenna Jameson can pump out at least another couple thousand movies apiece…
In the last bubble burst, did they have as many FBs stretched to using 50% of their income to pay for their overpriced houses?
I think not… I think the complexity of this bubble is that in the last one, there were still a majority of mortgage holders using fairly traditional methods of financing… and that posed enough risk. But now we have a Bay Area with 82% using risky exotic loans… now how can they say appreciation may stay flat rather than prices declining?
There are going to be many more casualties in this episode of Financial Follies.
I was a real estate lawyer in the 80’s. There were alot of 1yr Arms, no doc loans, some negative am loans and a decent amount of mortgage fraud (i.e. silent seconds, lying on loan apps etc.)
This is SO shaping up like the 1990 bust in So. California. Sales plunged but prices held fairly steady as sellers refused to admit that the party was over. After awhile they grudgingly started lowering their prices.
Good old SFV. I work in Van Nuys, see it every day. Section 8 housing getting bulldozed to build luxury condos http://www.shermanwayvillas.com, starting at $390k, what a steal! SFH have more than quadrupled since 98 (150-600k!). Credit bubble central IMO, nobody who can really afford a $600k sfh lives in Van Nuys (well maybe a few porn execs, no, nevermind, they live in Sherman Oaks). Anyhow, was at work today, besides tons of for sale signs, no lack off “FOR RENT” signs anywhere in the valley i.e. no housing shortage. Lots of old-timers probably took the opty. to sell and move to Fl. Van Nuys used to be a different place, American Grafitti was set there and Marilyn Monroe went to Van Nuys High School. Now, $650,000k, ru freaking serious??????
the sales here in the valley are off at least 50% and surrounding areas as well .starting to see price reductions here and ventura cty,a 50% off in prices is coming but it will take 5 years to hit bottom.just waitin with cash in hand in my rentcontrol bldg.my cds pay my rent and i have no debt.living a stress free life finally after all these years.
Not gonna take that long someone’s gonna blink long before that
Jim Link is a typical RE executive with little between his ears but acreage of vast magnitude . They only know how to buy and never know when to sell. I know a lot of stock brokers like this. Not once have they ever advised me to short a stock. I am sure as I am typing this comment that Jim will be licking his wounds in a couple of years if you can even find him.
If RE was the same as selling stock and bonds these agents and advisors would have to varify if this product was in the best interst of their client. Kinda like selling annuities to littl old ladys. YOU DO NOT DO IT.
Great article/info find Ben.
Extremely difficult to get key stats from the late 80s early 90’s to help compare to today.
We purchased our home in ‘88 for $98k (distress sell-fixer), in Riverside, CA. In 1991 we refi’d to lower interest rate from 10% to 8%. Appraisal came in at $127k. In 1996, we tried to refi again and couldn’t. Value only came in at 75k. Luckily, we were able to have our taxes lowered thanks to prop 13. We just sold our house 2 weeks ago for $400k. Maybe that will give you some indication of peaks and bottoms.
We will be waiting a few years to purchase again.
Angela
Wow - great profit Angela. Your story shows that if you can hang in over the long haul, things can have a happy ending - even in the most brutal of markets. It’s the people that must sell during a downturn - job loss, illness, move, unable to make payments etc., that get into trouble. Sometimes it is simply no fault of their own (except for the inability to make payment cases), and that is the brutal part of all these wild cycles.
nice to see a newspaper article from southern california that isn’t as biased as the OC Register.
The OC Register sucks up to the realtors it’s not even funny anymore. There was an almost $40,000 drop in the median priced home within a period of only 3-4 weeks. Of course they didn’t write it big that the housing price fell below $600,000 why should they after they used half the newspaper to show the public how the home price appreciated beyond the $600,000 mark in early summer.
Not only did they initially ignore how the median OC home price fell but they now write articles explaining why this was the case.
The OC Register sucks the Realtors so hard during this housing bubble and therefore I was shocked to see this kind of article that doesn’t defend the scumbag Realtors. It’s nice to see that not all news sources let themselves be influenced by their advertising customers.
(Didn’t mean to hijack this thread but really liked the article, especially the last sentence)
I’m going to keep asking this question untill I get a real answer. Why is it the realtors and mortgage brokers fault?? Especially since they are serving a demand. When the sellers loose their position from the bubblebusting then it becomes the realtors and mortgage brokers fault for not working hard enough.
I’ll try to answer, although I don’t completely fault Realtors (or speculators) directly, they are part of the problem.
The problem with Realtors: They lie and say the reason prices rose was because there was some (invisible) population explosion and that interest rates were the reason prices shot up. Very few, if any, mentioned the suicide loans or hinted that there just might be a bubble. Admittedly, some of this is due to youth/lack of experience. Buyers look to Realtors for guidance so they can make an informed and wise purchasing decision. If they are dealing with a listing agent, I have no problem, but a buyer’s agent should have to mention the current market conditions — including the reason for recent, abnormal price fluctuations.
If you reply that buyers should do their own due diligence, I couldn’t agree more. However, that is not what most Realtors will tell their clients, and if a client asks about these things, the agent often becomes arrogant and claims that they know more than the buyer, and the market will not come down. The buyer is told to hurry and buy at the peak of the market or else he/she WILL BE PRICED OUT FOREVER!!!
Mortgage brokers: I have more of a problem with these parasites than I do Realtors. They intentionally tell people to use suicide loans because prices only go up and they can sell/refi and extract ALL THAT EQUITY before they have to actually pay back the loan. They tell buyers that traditional mortgages are obsolete, and savvy buyers use these new loan products…they are the wave of the future, we are told with all certainty.
Again, people assume lenders wouldn’t loan money to them if the lenders didn’t think the borrowers could pay it back (makes sense, no?). Even thought buyers might have some doubts, they are quickly assuaged as the loan officers tell them how it’s simply not a problem and EVERYBODY is doing it these days. Very few people realize that lending standards and appraisals were there to protect the LENDER, not the borrower. Now, nobody is protected because when the sh!t hits the fan, all these loan outfits (brokers, not final lenders) will have shut down, and good luck finding the people who were responsible for the mess.
Don’t know if that’s the answer you were looking for, but didn’t want to make it longer than it already is.
It has to be SOMEONE’S FAULT!!!! In every catastrophe we need victims and victimizers, its no fun otherwise and it simply would not make good T.V.. Anyway, I really believe that a lot of “street level” realtors and brokers really believed in the new world order and a lot of them banked their future on it. But, there will be some perp walks, and some trials, just about the time the trials from the last bubble come to an end..we always need a good trial.
In 1986 I purchased a townhouse for $134,000 in Irvine. In Mrch of 1988 I sold it without a realtor for $218,000 for a 61% gain. Turned around a bought a larger home for $254,000 and sold it 13 year later for $300,000 , a 18% gain in 13 years. In between these years the home like mine down the street sold for $195,000 in 1996. A 24% Loss.
The problem here is:
“The Spring.”
We are currently looking at “The Spring”.
Problem is, it’s going to take until SEPTEMBER for the results of “The Spring” to filter in to the brains of the general public.
SMART realtors will see the signs of a collapse, and take the sides of BUYERS.
DUMB realtors will listen to David Lereah, Gary Watts, and Johnathan Lansner.
Right now, many would think you could flip a coin, and decide the outcome of “The Spring.”
I’ll bet my reputation on it.
“The Spring” will be a SLAUGHTER.
Birds chirping, for sale signs, and lots of cars passing by.
I’m laying it down now, right here, on this blog, just like I did four months ago.
This Spring will be the “Slaughter of the Speculators.”
50% price reductions, in ASKING PRICES, to follow by CHRISTMAS.
This crash will not take ten years.
This crash may take LESS THAN five years.
This crash will fall HARDER, and FASTER, than 90% (including myself) could have predicted.
It’s a Perfect Storm.
In the history books, they’ll be writing about this one for a long, long time.
My advice:
Sell what you don’t need.
Make your credit PERFECT.
Pay down ALL YOUR DEBTS.
And SAVE SAVE SAVE.
CASH will be KING, very, very soon.
Next year, you might see these signs:
“Sorry, but we DO NOT ACCEPT…”
Get liquid.
And Get Liquid FAST.
mrincomestream
thanks for sticking up for us honest realtors…
angela
thanks for posting an example of how high and low the pendulum can swing…
for the rest of you
take note, the market is changing in the l.a. area… after years of no reo listings, i got 2 last week, and i have others pending… defaults and trustee sales are increasing… looks like we will start seeing a rapid change in this market…
Problem is, from what I understand, the lenders holding the REOs are also trying to get too much for the properties. When they give up and start dumping wholesale, we’ll be getting somewhere.
Banks need liquidity. They are not in the market to be landlords.
I also heard from some banks that the reason for the somehwat lax standards is that prices keep going up, so worst case scenario is they foreclose and sell the house and still get 100% of the loan covered. When the market tanks many local banks will go under. Here in FL, some banks have 82% of their loans in some form of Real Estate. Talk about risky. In one area here the FDIC told some banks to stop lending money to developers. These developers and investors / speculators who made deposits are screwed. Lawsuit mania now. You may want to get back in the BK field Txchic :).
All the realtors will rush to go back to law school because this will be where all the money is.
They have no reason to wholesale them yet their balance sheets are still in the black and their inventory of foreclosed properties are light. Not even close to being time for that.
“I’m going to keep asking this question untill I get a real answer. Why is it the realtors and mortgage brokers fault?? Especially since they are serving a demand. When the sellers loose their position from the bubblebusting then it becomes the realtors and mortgage brokers fault for not working hard enough.”
Of course, the realtors and the brokers are not entirely at fault here. But they are at the front line of this feeding frenzy. They lie and distort facts to serve their brokering business, the more dumb money chasing up prices the better. Their job is to blitz the media with bullish statements to keep the greater-fool machination running. I think the leaders of their industry know what is going on. But they will not confirm any bearish facts or developments. Their mission is to serve their members, and their industry. And since they are not bound to SEC regulations, they don’t really have to disclose their vested interest. However, the majority of RE agents are as clueless about the fundamentals driving this RE mania as the barber turning RE agents that cut my hair. Their only goal is to secure that commission. They regurgitate whatever propaganda coming out of the NAR or their local RE associations. RE was not meant to posses speculating characteristic as it is with bonds, stocks, commodities, or currency. But over the last few years, it has become the extension of the massive derivative market. Its leverage is like that of derivatives. It is probably the biggest leverage allowable in all financial markets. It even beats currency. Where else can you borrow 105% to speculate? Therefore, buyers really have to no friends in this transaction. Everyone else stands to benefit once the buyer commits to the purchasing transaction.
Sales statistics have been eroding because of mania exhaustion, and not because of any bearish media coverage. The numbers have gotten so obviously bearish that all they can do is soften the negativism in the data. And once they have exhausted every alley possible to keep the fools joining the game, the next logical move is to be the first out the door, the few left standing at the bottom. The home builders are active in that phase now. There is nothing any optimistic jaw boning by RE agents or their leaders can do to reverse the change in momentum. The Fed may be able to provide some cushion for the falling debris; however, there still will be extensive amount of blood on the street. But sadly, the real losers in this madness are the young families who truly just want to have a home to raise their children. Who bought into this logarithmic price escalation due to the reassurance of their agents that RE never goes down, if you don’t get in now, you will never be able to own your American dream. These families will spend decades under fulminant financial stress, and degraded quality of life. They will be the ones who have every intention to meet their obligations with the bankers, and try to ride it out, making ends meet every 4 weeks. Unlike, the reckless, aggressive, get-rich-quick speculators, who will likely walk away in default at the moments their fantasied wealth turned eminent loss. But after all the finger pointing, I am persuaded to believe that the one who is most responsible for this erosion in American life is Alan Greenspan. I will end here; this post is getting too long.
“Analysts and industry executives don’t expect that kind of a train wreck this time around, though. Of course, no one saw the last one until it flattened the market.”
Analysts, industry executives, and Federal Reserve Board chairmen should all be required to pass certification requirements in train siting, so they can adequately anticipate these train wrecks in order to minimize the damage on their impact.
“Now the economy is on sound footing and is much more diverse.”
HA HA!! This time not only do we have a much bigger bubble, but the economy and jobs growth are more RE dependent. Also, the last downturn really started in early ‘90, it just didn’t show up in the stats for a while. This was BEFORE the big defense lay offs! The defense industry cut backs definitely made things worse, but the bust would have happened with or without them.
I am hearing from real estate agents in the Valley that there is a sudden shortage of buyers. Things are still selling, but based on the sales going pending, the next few months will continue to be at least 30% off from last year. The inventory is up to the highest levels of the past 4 years, but this is February when listings are typically low. The last 2 times we had this level of inventory were the summer of ‘04 and last Thanksgiving before the end of year expirations. We should see dramatically higher inventory as we move into spring and summer.
The real determining factor in all this will be the lending. If lenders perceive risk and will no longer lend on their crazy easy terms, nothing can save the market. Once there is even a hint of declining prices, the borrowers stuck in crappy ARM loans with low teaser rates will be unable to refinance. It really is the perfect storm…a classic bubble…a credit driven ponzi scheme. Once there is no more new money coming in, the whole thing collapses.
Deb,
Thanks for your insight on the SFV. Although I laugh when I hear “it’s different here,” the SFV really is different. It’s built-out, very crowded, has good job prospects (relative to other areas) and has the “LA glamour effect”. I think prices will decline there as I’ve seen it before. My parents house (which the sold in 1989) lost about 40% — in Woodland Hills, a good area. That being said, LA is more resilient than most other areas, so if it starts to fall there, the bust is truly on.
Thanks for keeping us informed!
This presentation clearly shows the peak and bottom of the last cycle. Slide 8 shows the LA county peak in 1991 at over $200K and bottom in 1997 at under $150K. http://www.realestateclubla.com/pdf/Cagan_FireBurn_1104.pdf
Very nice presentation. But the author never explains how the affordability index will be corrected. Considering his sponsorship, I guess he couldn’t draw the obvious conclusion in his presentation.
It would be interesting to see this updated to the present, and some reasonable conclusions drawn.
That presentation is fascinating.
Those maps were great. I scrolled quickly through them and you can get a feel for the changes/cycles we’ve been through and are going to have in the near future!
I’ve got to find a comparable study for the SF Bay Area - if one exists.
Nice presentation! It’s difficult to find anyone, especially on a college campus, who will admit that the Yom Kipper war was related to the U.S. having to suffer through the 1973 Arab oil embargo and the resulting recession . Amazing what we endure for our “friends” costing us our prosperity and good reputation around the world.
Yeah, it’s all Israel’s fault. The bubble too. What a bunch of crap.
“Yeah, it’s all Israel’s fault. The bubble too. What a bunch of crap.”
Yom Kipper –> Arab oil embargo to U.S. –> terrible recession; are you denial of that connection?
great idea! if we stop supporting israel terrorists will establish a new afganistan, only this time it’ll be on an easier terrain right on the medditeranean coast, controlling all the religious christian/jewish/muslim sites.
Wow sounds perfect to me!