‘This Market Is Correcting Faster Than Expected’
The California press reacts to the latest housing numbers. “Homes sales in the Bay Area fell to their lowest level in a decade last month. Bay Area home sales fell more than 30 percent compared to a year ago, and the median price was up only 3.5 percent from a year ago and were down from a record in June, DataQuick reported.”
“The slowing appreciation could be bad news for people with creative financing who are counting on home prices to climb at a good clip. In cases where the borrower has skipped or deferred loan payments, creative loans can result in a borrower ending up with a larger loan balance than equity held in the home when housing prices flatten or drop.”
“‘It’s going to bite (those) people in the butt,’ said Sue Rainwater, a loan officer in San Ramon and past-president of the East Bay chapter of the California Association of Mortgage Brokers. ‘And we are going to see more foreclosures and short sales, and we are going to see more people who are unable to refinance because they are going to end up owing more than the home is valued.’”
“‘We’ve been saying for months that the whole market is slipping into a lull,’ said DataQuick spokesman Andrew LePage, adding: ‘There’s an awful lot of uncertainty over where the cycle ends.’”
“UC Berkeley real estate expert Kenneth Rosen is bearish. ‘I think it will be a weak market for the next 18 months and prices will go down 5 to 8 percent,’ he said.”
“The housing slowdown hasn’t missed the high-end of the market, luxury homes in the San Francisco Bay Area registered a small 0.3 percent gain in the second quarter from the first quarter, according to the First Republic Prestige Home Index.”
“‘Homes are being priced more aggressively to sell because buyers have more options,’ said Katherine August-deWilde, COO at First Republic.”
“Buyers are moving to the sidelines anticipating that prices will fall. ‘Over $2 million, our inventory is up and buyers aren’t in a terrible hurry,’ said Tara Rochlin in Orinda. ‘We’re seeing more sellers willing to negotiate and lower their prices.’”
The Daily Breeze. “July served as another reminder that the South Bay’s formerly high-flying housing market has hit the brakes. Most South Bay communities saw the number of home sales drop in July compared with a year earlier, with the greatest plunge, 54.3 percent, coming in the 90274 ZIP code of the Palos Verdes Peninsula, according to DataQuick.”
“Also in July, most of the South Bay saw either a drop or stagnant growth in year-over-year home appreciation, with the biggest dip, by 10.7 percent, coming again in the 90274 ZIP code. Lawndale’s median home price still fell 1.5 percent to $512,000. Hermosa Beach’s median price fell 5.4 percent to $970,000 while Redondo Beach’s median dipped 1.3 percent to $750,000.”
“‘What it means is that this market is correcting itself faster than what people expected,’ said Patrick Duffy, an analyst for Costa Mesa-based Hanley Wood Market Intelligence, which tracks the real estate industry.”
“‘I do feel like it has turned around, that it’s more of a buyer’s market,’ said Sandra Sanders, who oversees 500 real estate agents in the South Bay. ‘It’s going to be better for us to service our buyers now that we can show them more than one house, and there’s not the pressure that they have to buy the first house they see or else the price is going to go up. It’s going to be more of a joy for buyers to buy.’ And sellers will have to show flexibility in their price expectations, Sanders added.”
“In Torrance, business has dropped for mortgage processing, co-owner Warren Snyder said. Meanwhile, business is booming at Snyder’s other venture, American Credit Repair, because ‘people are up to their necks in debt,’ he said.”
“Snyder said he expects a steep decline in home prices over the next 12 months as some homeowners see their mortgage payments double when their variable-interest-rate loans adjust to a higher fixed rate. The slowdown, and decline in some cases, in home appreciation means that homeowners may not be able to solve their financial bind by simply selling their residence, Snyder said.”
“Duffy, the Hanley Wood analyst, agreed that homeowners are under increased financial pressure. ‘You have higher energy prices, higher gas prices, you have higher interest rates for adjustable mortgages and you have a market that’s flat,’ Duffy said. ‘So, I think that’s weighing very heavily on people.’”
And the new affordability index is out. “The percentage of first-time buyers in California able to afford a median-priced home stood at 23 percent in the second quarter of 2006, compared with 30 percent for the same period a year ago, according to a newly developed index released today by the CALIFORNIA ASSOCIATION OF REALTORS®.”
“In the more than two decades since CAR first conceived the HAI, the mortgage finance landscape has changed dramatically. The range of mortgage products available to buyers as well as underwriting criteria has changed. CAR developed the new index measuring affordability for first-time home buyers to better reflect the realities of today’s real estate market.”
““‘We’ve been saying for months that the whole market is slipping into a lull,’ said DataQuick spokesman Andrew LePage”
The candy coating continues. By “lull” I’m assuming he really means brain-dead coma.
Oh, you beat me with the quote, but what I was going to focus on was “We’ve been saying this for months”. WTF? No they weren’t.
Oh, Patrick Duffy, I loved Step by Step.
The other one I liked was “more of a joy for buyers to buy”. Boy Mabel, I can’t wait to put us in a financial situation that we will never be able to get out of!
Chad, great points!!! I really get irritated when CSN and other MSM say that they have been talking of a slowdown for months… no they weren’t!!!! More of a joy for buyers… what bs.
I can’t listen to the phrase “buyer’s market” anymore. Supply is exploding, demand is falling off a cliff but prices haven’t budged much. You were much better off buying into the seller’s market in previous years, at least you had a chance to make a profit. You have no chance now.
“We’ll see some weakness in the short term, but in the long term, we view this as a buying opportunity.”
Eshwar Menon, portfolio manager at Loomis Sayles Equity Fund, 3/31/2000.
“Nurse, pull the plug. The patient has slipped into a lull. Contact the morgue. This lull will surely kill him.”
Compare and contrast the Dataquick quotes:
Now:
Then:
I think they rotate out spokespeople so we can’t call them on their crappy forecasts.
They are wrong. As of yesterday prices in Southern California have officially dropped. Article at: http://www.realestatedecline.com
So much for “plateauing of prices”….
GREAT NEWS ON SILICON VALLEY SURFFROGGY
MADE MY WEEK… AND MONTH
May be great content, but the tabloid format gives me a headache!!
Check out this quote from the Dataquick president in an article today:
“How much of today’s demand has already been met? If the market is indeed going through a lull, expect low sales and flat prices through fall and on into next year,” DataQuick President Marshall Prentice said.
Sounds like none of them can keep their stories straight.
“How much of today’s demand has already been met?”
All of it. Along with all of the next-five year’s worth of demand. Thank you Mr. I/O and Mrs. Neg-am!
Right… now replace “whole market” with “David Lereah”.
“In the more than two decades since CAR first conceived the HAI, the mortgage finance landscape has changed dramatically. The range of mortgage products available to buyers as well as underwriting criteria has changed. CAR developed the new index measuring affordability for first-time home buyers to better reflect the realities of today’s real estate market.”
Wow, just change the rules. You don’t actually have to be able to afford to pay off a house, just buy it and hold for a few years with an interest only loan.
What a load of crap. I’m sure it is just a coincidence that CAR changed the formula at this point in time. Any math folks that can run the numbers based on the old formula? I was looking forward to LA (which hasn’t seen a price drop) start to show an affordability index below 1%. Jesus. These people are truly priceless.
I’ll kick this dead horse again (boy, these things sure rankle when you’re in a bad mood).
Another twist to the formula–the “first time buyer.” It is no longer just the median priced home with 20% down, it is the “first time buyer” paying 10% down on 85% of the median. However, as far as I can tell they haven’t excluded people who already own homes from this sample. So, as I read it, they intend to say that 23% of the population, were they first time buyers even though most are not, can afford a home that is 85% of the median. Someone correct me if I’m wrong on this. My guess is that of people who don’t own a home yet, substantially less than 23% could afford a home priced at 85% of median.
And another thing
For those who don’t know, before this “adjustment,” affordability in the LA Region was 1.9% (see http://money.cnn.com/2006/05/18/real_estate/NAHB_housing_affordability_index/index.htm), It has jumped to 19%. So this little accounting adjustment is no small matter.
Figures Lie and Liars Figure.
What were they supposed to do, when their affordability number was about to go negative? I imagine that this has been in the works for some time now.
I don’t think an affordability index can go negative. Zero is the limit right?
OK, lets just use their new index. I’ll bet that SoCal’s affordability index was probably 100% in 1998 (and every year going back 20, 30, 60 years.) And now it’s 23%? Here’s an idea: change all mortgages to $1 down, 0 payments and negative amortization for 40 years, and then one helluva balloon payment. That’ll boost your affordability index!
When this disaster plays itself out will anybody ever trust the real estate industry again? I think they are destroying the next generation of buyers.
Just consider the numbers of buyers they are putting into inflated housing today…thousands of people have bought overpriced homes in the last 12 months and they can tahnk their realtor for the help.
Just consider the numbers of buyers they are putting into inflated housing today…thousands of people have bought overpriced homes in the last 12 months and they can thank their realtor for the help.
This is nonsense! Nobody was “put into an inflated house”! People stepped up and signed on the dotted line! They waited in line for days to buy those houses. Most of them were drooling over the money they were going to make on the appreciation that was virtually “guarenteed”!
No sympathy here. These buyers are getting exactly what they deserve. As has been said on this blog many times: bulls make money and bears make money, but pigs get slaughtered.
Yeah CAR change is including interest only loans into the affordability index.
Mr. Buyer please just get an interest only loan instead of renting so that our realtors will keep getting comissions. No need to pay off the house, it’s all good right. We know there is slow down now, but this housing slow down could change at any moment and you will be priced out forever.
CAR - stands for Cheaters, Anglers, and Ripoff Artists
I thought it stood for California Association of Retards… Oh well you learn something new everyday.
I had to do a write up on this in my blog. The important thing is that they now use 40% of gross income to spend on the house payment versus 30% of gross in the old formula! 1320 x 12 / 39600 = 40%
That makes sense, because the average American has more discretionary income available because falling gas prices, lower inflation, etc., so we can afford to spend more on housing. NOT!
“C.A.R. began producing its Housing Affordability Index (HAI) in 1984. At that time, fixed-rate mortgages were the prevailing form of financing a home purchase, while the calculations used to produce the HAI reflected a 20 percent down payment. The methodology also assumed a monthly payment for principal, interest, taxes and insurance that was no more than 30 percent of a household’s income.
C.A.R. developed the new index measuring affordability for first-time home buyers to better reflect the realities of today’s real estate market.”
Used car salesmen have a lot to learn from these hucksters. They will do Anything to deceive. I’m certain, the lying sacks-of-guts, LAY and DL are proud to be associated with such a resourceful group of liars.
“‘What it means is that this market is correcting itself faster than what people expected,’ said Patrick Duffy, an analyst for Costa Mesa-based Hanley Wood Market Intelligence, which tracks the real estate industry.”
Alright, now everybody owes me a dollar. Why is it what was so glaringly obvious; going up 25% per year can go down 20%?
Enough of this math cr@p. Let’s talk human nature. -IF- things were to correct only as fast as expected then there would be no bubble because prices wouldn’t have risen faster than anyone expected either. Look, there’s smart money and dumb money. Dumb money takes Intrawest private at the peak of a bubble (Fortress). Smart money sells his EXTRA home in Orange County at the peak (Buffet).
The correction is a normal cyclical event. Smart money loves it. Dumb money on the other hand didn’t just decide to ignore the business/economic cycle but took out a margin position against it. What we are seeing now is a margin call of historic proportions.
Cote,
Looks like your -20% prediction is getting closer and closer to reality. What a call !
Add to the dumb money Wachovia purchase of Golden West. How dumb can someone be, buying at the top of a historic RE cycle. Buying from really smart people makes the buyer a dummy.
You are right about the smart money loving cycles. As Buffett says “Volatility is the friend of the long term investor.”
I stil dont expect that 20-25% until 2008! I will buy you an ice cold one Cote’ if you are correct!
Maybe we can meet outside the Bakersfield Courthouse for the sentencing of David Crisp. You bring the beer, I’ll bring a big ole can o’ whoopa$$.
Deal! LMAO!!
David Crisp, as the prices fall I wonder what skeletons will pop out of his closet. Per David Crisp’s resume he has no college education and the concept that money is finite may have never occurred to him. David Crisp’s definition of finite is “wow what a fine night in Bakersfield”. Sorry Crisp money does not grow on trees hope your creditors don’t come knocking.
Things are getting bleak for these guys based on what I am hearing. I will update once I have solid information. Don’t want to spread to many rumors, but the $hit is going to hit the fan soon!
What does college education have to do with this?
College education has nothing to do with it.
Look for 20% by Labor Day, 2006….3 weeks from now. We have the internet and cable TV to despense news by the minute. This reminds me of march, 2000…the dot.com crash occurred when are the CNBC goof balls and their economist friends said it was going to be a small correction.
This is a bloodbath
I know at least 200 people who owe me a dollar! They all said I was a doomsdayer and unAmerican because I kept saying BUBBLE. I have been sending emails daily for a year and half to all of these folks. I know many of them visit here and let me just say (I assume you are reading this) - I TOLD YOU SO!!!!!!!!!!!!!!!!!!!!!
You know, living within your means and saving money is pretty stinkin’ unAmerican. I think they made the right call.
Hope they didn’t buy a house in the last year.
I hope they DID.
When will the sellers finally capitulate? Any predictions?
I want to see a relative V bottom in the local market where I might purchase a home, soon and a retest of the bottom before I buy back in.
June 2007 will be the first lemmings who -knowingly- jump off the cliff. Remember, a whole stinkin’ boatload of early boomers are starting to push the last kid out of the nest. Next June a bunch of last children will be finishing colege and the parents who bought 20 years ago will have seen a year of bad housing. They’ll take the hit and bail. The unwilling lemmings, thise pushed by rates and ARMs will also be tapped out about then as well.
“V” bottom? No way. The lemmings will hit and bounce 3-4 times before piling up on a bottom. YWVwv_._ that’s the future.
do you think a bust as long as Japan’s is a possibility?
No. Not possible. For all my doom and gloom we don’t have their problems, we have different problems. We aren’t xenophobic nor are we ageing rapidly and we have a polycentirc economy and a tradition of resilence and adaptability. I know these sound vaguely racist and I’m sorry but I am talking large cutural generalities and there isn’t room here to use all the clever words that say the same thing with sounding racist.
US:L Deep sharp, bad taste, 3-4 years at most resume normal appreciation from a drastically lower level (reversion). Oh BTW, somebody today complained on my blog that I’m in denial. Snigger.
Possible? Yes. Likely? No.
Let me explain:
To a certain extent we propped up Japan during the fall. Our continued expansion gave them a market for products and yen. This time there is no one to prop us up and when we go down there will be nowhere else to hang onto.
I think ultimately this will be a blessing, although too quick of a correction has it’s own negatives.
Here’s hoping to 3 years of pain, 3 year of plain, and then back on a historically even keel.
My worst fear however, is a short, brutal, and completely disorienting depression. I will celebrate a slowdown at the mall, I will not celebrate it’s closing.
We have much worse problems than Japan. I lived in Japan from 1990-2000, supposedly the worst part of their slump. People still saved approx. 10%-25% of take home pay. I always thought the Japanese people were head-and-shoulders above American counterparts in their dedication to job, customer service, etc., etc.
America is full of people who want to get something for nothing, which is what the RE bubble was all about.
People still saved approx. 10%-25% of take home pay.
Right… so when the Japanese saved those yen, who borrowed them? We did.
Who’s going to want to borrow dollars in a few years? For that matter who’s going to have any to lend?
My fear is the wheels come off and no saving/lending/borrowing occurs at all. That would be a big problem.
The debt service drain just grows larger and larger as the credit spigot is strangled by falling asset prices.
Hang on tight.
But, Robert Lightyear said: “No. Not possible.” Used TWO periods to close the door on the issue. We are better than Japan. Period. Not Possible. No.
I think it is happening here already. In my area of the san gabriel valley there are more than 4 houses that have dropped more than $100K. I’m loving this!
Margin call is correct. At least the stock broker has to make sure you understand margin debt risk.
If houses correct 10% and someone has to refinance ARM from 2005 peak they have no equity and BALLON payments. This could happen to someone who put 10% down
“UC Berkeley real estate expert Kenneth Rosen is bearish. ‘I think it will be a weak market for the next 18 months and prices will go down 5 to 8 percent,’ he said.”
Wow, this “expert” SURE IS bearish predicting the downturn is gonna last a whole 18 months with losses in the 5 to 8 percent range. I hope the market can handle such dire forecasts.
For the market, that is dire. 1 year ago they were looking at 20% up forever. Now a possible drop. I shudder to think.
This is where we all say that we expected it.
Nice thing about Ben’s real “I told you so-ers” and the fakes — ours are documented and archived.
I remember when people use to post that “1st” shit all the time - on the old blog.
It was fun the first 10 or so times, but now it just feels like bragging.
Sorry. This is the first time I have said it - I think!??!
Yea right !!
LOL.
I was talking about me saying “I expected it” many times over the last several months. Sorry for the confusion.
The Daily Breeze. “July served as another reminder that the South Bay’s formerly high-flying housing market has hit the brakes. Most South Bay communities saw the number of home sales drop in July compared with a year earlier, with the greatest plunge, 54.3 percent, coming in the 90274 ZIP code of the Palos Verdes Peninsula, according to DataQuick.”
“Also in July, most of the South Bay saw either a drop or stagnant growth in year-over-year home appreciation, with the biggest dip, by 10.7 percent, coming again in the 90274 ZIP code. Lawndale’s median home price still fell 1.5 percent to $512,000. Hermosa Beach’s median price fell 5.4 percent to $970,000 while Redondo Beach’s median dipped 1.3 percent to $750,000.”
Looks like high end isn’t immune after all. This has been pointed out several times by bloggers here. In fact, the high is getting harder for now. Haven’t seen this much yet in the SF Bay Area in the high end but sure it is coming soon.
But isn’t LA different? How could we be seeing decreases? They aren’t making any more land in the South Bay. I think there may be an evil conspiracy afoot here against the honest hard working lie-realtors and mortgage go-brokers out there
I’m not at all surprised to see a slowdown in the higher priced houses, such as in the PV 90274 zip code. The people that are buying in that zip code are generally not first time buyers. These are typically experienced home owners and/or professionals that have a lot of money. Often these people are more educated, more experienced, and more likely to understand just how ridiculous prices have become. These people know the value of their money and don’t tend to buy at hugely inflated prices. Also, many people would like to move to areas such as PV eventually, but it’s not an urgent need, thus they can wait and see how prices trend before taking the plunge.
That’s because this time the high end was purchased with mega leverage by people that could not afford it. Before, high end homes were purchased by credit-worthy high end purchasers. The major gravy was at the high end on the way up. The biggest pain is at the high end n the way down. Imagine the resets on a $1.5M shack at the beach for neg-AM I-O 115% financing loans. They qualified at 3%. Somebody is yelling FIRE in the South Bay and the scambling for the exits has started…
http://www.dailybreeze.com/business/articles/3589186.html?showAll=y&c=y
The South bay does get quite a bit of exposure on this blogsite. Looks like the lower-working/mid class pedestrian communities of Gardena and Carson show increases in YOY of 11.1%. Maybe because they were priced rather low($450,000 in 2005) relative to the rest of the SB? Lawndale is somewhat of a lower-end blue collar community, not much higher in livability scale than Hawthorne, which is a mess.
There are a lot of large industrial parks and refineries in Carson/Torrance area. Torrance has at least some hi-end relatively robust industries here and there. Apparantly the presense of several large refinery operations(E.G Mobil,Chevron)does not affect the livability factor in the SB. The huge LA dept of water and power Scattergood power generation plant is right smack in middle of the SBay Beach cities shoreline -yet it apparantly has not affected the average median 1.4 mil Manhatten Beach prices .
IMHO, the Sbay is somewhat overrated as a whole, with exception of ManHatten/hermosa beach, which are still overpriced. Traffic is always a nightmare all over the SBay. The SBay does have a good relatively hi-end jobs sector(Energy production, Aerospace/defense, port jobs,retail, Banking). Problem is the beaches are rather difficult of access and may have pollution problems. Do they still have any decent fishing off redondo beach pier?
Lack of large accessable public open spaces/large green-belt areas is another drawback in the Sbay. Manhatten beach has the best Park system: torrance has a few large parks(treeless at that) scattered about but thats it. Palos Verde Pennisula has large greenbelt areas but the entire PV pennisula is almost one gigantic country club preserve which discourages visitors.
The Daily Breeze. “July served as another reminder that the South Bay’s formerly high-flying housing market has hit the brakes. Most South Bay communities saw the number of home sales drop in July compared with a year earlier, with the greatest plunge, 54.3 percent, coming in the 90274 ZIP code of the Palos Verdes Peninsula, according to DataQuick.”
“Also in July, most of the South Bay saw either a drop or stagnant growth in year-over-year home appreciation, with the biggest dip, by 10.7 percent, coming again in the 90274 ZIP code. Lawndale’s median home price still fell 1.5 percent to $512,000. Hermosa Beach’s median price fell 5.4 percent to $970,000 while Redondo Beach’s median dipped 1.3 percent to $750,000.”
Looks like high end isn’t immune after all. This has been pointed out several times by bloggers here. In fact, the high is getting hit harder for now. Haven’t seen this much yet in the SF Bay Area in the high end but sure it is coming soon.
Sorry for the double post.
That’s ok as none of my posts have gone though today. Maybe this one will!
2308 Via Olivera, Palos Verdes Estates, California 90274 $1,499,000*
Status: ACT Orig Price: $1,599,000
These sellers must be asking themselves, after reducing price 100K, whose to blame for us not putting our house up for sale last summer. We just lost 100,000 big ones.
Not sold yet.
Speaking of California, it looks like Boeing is going to announce the shut down of the Long Beach plant tomorrow - that’s 5000 jobs plus another 5000+ jobs at their suppliers. One more sucker punch from the aerospace industry, just when you thought they had already left.
Here’s the story:
http://seattlepi.nwsource.com/local/6420AP_CA_Boeing_Cargo_Plane.html
What do you expect? A Rep Congress, Judiciary and Executive protecting jobs in a State that even the Dems ignore except as a source of money for their projects and reelections. 18 of the last 19 years the Feds have taken more from this state than they’ve returned. There is no political power to exert. We reelect those intellectual giants Diane and Barbara and then act surprised when our bed gets short-sheeted. That’ okay we can always complain to that great leader Nancy Pelosi for help. Sure, she’ll be all over increased military spending. Cripes, Kalifornia is so screwed.
Here’s the LATimes story.
Long Beach Condos, anyone?
http://www.lovelylongbeachcondos.com/
This is sad… think about it. Boeing’s plant, ex-McDonnel Douglas, used to employ over 40,000. Now what will it become?
Scuttlebut is that Southern California will be losing more Aerospace jobs. Oh, I know that Lockheed is going to ramp up JSF production in Palmdale. But LA has just become too expensive for engineering of any type.
Cest la vie. There is a reason United van lines is hauling multiples more weight out of state than in state. I did a little analysis on the “uhaul index” from southern California.
http://recomments.blogspot.com/
Neil
I’ve noticed a lot of engineering job openings in Upstate NY. (The Southern Tier).
SoCal is too expensive for almost any kind of manufacturing larger in scale than a surfboard shop, and too expensive for routine engineering. It’s still possible to do what I call “meta-engineering” here - that is, doing designs that will be implemented elsewhere. But it’s expensive - I just had to run the numbers for a local engineering group, and even at the local medians, the numbers are scary big. If you want top talent, you’re looking at *very* serious numbers.
It’s almost like the inverse of the (in)famous “Sun Tax”. You now have to pay a serious premium to get high-quality talent here, because good engineers can have a better relative quality of life almost anywhere else (except Silly Valley, of course). There is now a well-established internal (US) outsourcing market for engineering, in places like Florida, Georgia, Pennsylvania, Nevada, Texas, Arizona, and I guess as Arwen indicates, Upstate NY.
Google recently opened a R&D shop in the east coast. I think it was NY!!!
The RE Broker/agent selling/advertising those LB condos
sure puts on the fluff treatment. “Great/fantastic views of the ocean”. Actually the view from an ocean blvd Hi-rise condo would be a 140% view of the humoungous Long Beach port harbor infrastructures(cranes and berths), and the ocean view would be of a great mass of tankers and cargo ships wallowing in the Harbor.
Not that owning a dntn LB condo is all thaT BAD. The Pine ave/shoreline drive nightclub life probably steams on weekends. Taking evening strolls out at the new Pike/harborwalk/Shoreline vilage/jetty cannot be all that bad. I can think of far worse places to invest/purchase a condo.
I an not shilling for this Condo website:
http://www.lovelylongbeachcondos.com/
As a matter of fact I could also pour on the Hard/soft sales pitch and get anyone to buy a condo in Dwtn LB if i chose to omit a few negative features of owning a
LB Oceanfront Condo( bad sections of LB only a few blocks north of ocean blvd, nasty truck traffic along 710fwy, port pollution, supceptibility of LB Harbor to a terrorist attack, ect, ad nauseum.
The RE Broker/agent selling/advertising those LB condos
sure puts on the fluff treatment. “Great/fantastic views of the ocean”. Actually the view from an ocean blvd Hi-rise condo would be a 140% view of the humoungous Long Beach port harbor infrastructures(cranes and berths), and the ocean view would be of a great mass of tankers and cargo ships wallowing in the Harbor.
Not that owning a dntn LB condo is all thaT BAD. The Pine ave/shoreline drive nightclub life probably steams on weekends. Taking evening strolls out at the new Pike/harborwalk/Shoreline vilage/jetty cannot be all that bad. I can think of far worse places to invest/purchase a condo.
I an not shilling for this Condo website:
http://www.lovelylongbeachcondos.com/
As a matter of fact I could also pour on the Hard/soft sales pitch and get anyone to buy a condo in Dwtn LB if i chose to omit a few negative features of owning a
LB Oceanfront Condo( bad sections of LB only a few blocks north of ocean blvd, nasty truck traffic along 710fwy, port pollution, supceptibility of LB Harbor to a terrorist attack, ect, ad nauseum.
Sorry for the double post. itchy fingers.
dont forget snoop dog and his blood crip rivalry.and i have a few asian boy friends who dont get along with either.long beach waS NICE IN THE 50S BUT BRING A uzi with u.
The California Governor has nothing to do with the states economy? Here comes the blame game! And who is allowing the wide open borders, so undocumented workers can arrive in Cal by the 1000’s….isn’t that a Federal response?
Stop making sense.Stop making sense.Stop making sense.Stop making sense.Stop making sense.
(Apologies to David Byrne.)
Now the NAR/CAR have there excuse for Job Loss bringing down houseing, instead of the underlying fundamentals. Well at least we know the truth.
OCBear
Wait a minute Whoa is this in conjuction with the plant they are closing in Anaheim. Wow L.A. is about to get real ugly.
“Folks, calm down. It isn’t like the 90s, and there can’t be a correction this time because there are no job losses in southern California.” Oops.
“The C-17 plant is the last major airplane factory left in Southern California, which once was a center for aircraft production. Earlier this year, Boeing delivered its last 717 passenger jet, also built in Long Beach…
An estimated 6,500 Boeing workers are linked to the C-17 program in Long Beach.”
There goes 6,500 high-paying union jobs out of the Long Beach area, plus those 5000 suppliers. LonG beach was never exactly a mecca for high-paying, hi-tech jobs even before this announced closing. Ditto for Much of LA county’s so-called high-flying Jobs Market.
How this will play out for the locaL LB economy is speculative, but back in the 90.s when LB Plant(It was McDonnell Douglas back then) downsized and layed off workers My relatives lost their LB home due to my Brother-in-law being one of the layed-off workers.
Look for possible RE repercussions in the eastside Long Beach/lakewood area.
I’ve been hearing a lot of wild and wacky stuff from my friends down in OC and Riverside. Let’s see, Gary Watts has got 4 months left to pull off his double digit appreciation YOY……how long before his latest revision comes out, or will he still be standing there come Christmas screaming he still has a shot at pulling it off?
Mr. Watts, you’re one of kind.
Unless I’m reading it wrong. He has taken the YOY appreciation for the first three quarters and averaged them out to show an 11.5% increase.
So instead of YOY he now calls it YTD
http://tinyurl.com/lbc8f
Even w/ this method, he’s going to have a hard time…But there is always 24 month over 24 month appreciation?
This guy is truely an A-hole.
correction. first two quarters + june
Yes, apparently that’s what he has done. He’s also given a new definition to the term “YTD”. The median in December was $621K, as of July it’s $639K, which according to my calculation is just a little bit lower than 11.5%, more like just under 3% YTD.
Oh My God, that was hilarious! Gary Watts’ is trying to simultaneously deny the bubble and encourage agents to make it look like its not popping. To quote:
“Please do not put a “price reduced” banner on your listings, and if you have one up, please take it down. It “falsely” advertises to the neighborhood that prices in the area are going down.”
What a hootnahalf! WHAT is this guy SMOKING?!? Difference between “factual” and “accurate”?!?
2. Listing Cycle:
a. Our listing inventory usually “peaks” in September/October and declines through January, February, March and into the April/mid May time period.
b. The buyers normally begin entering the market in February and stay strong through June.
c. However, this year is . . . INVERTED! The latter half will be more active.
1. It is extremely important they understand the difference between factual and accurate.
♦ The Media: Median price over the past year has risen 7.1% (June to June) – Factual
Resale homes (YTD vs.‘05) are up 11.5% and resale condos are up 10.8% - Accurate
♦ Affordability Index: The numbers state that so few can afford a home - Factual
A seriously flawed index using archaic methods that are no longer relevant – Accurate
♦ Foreclosures: The media states that foreclosures up 44.4% - Factual
In June of last year, 9 homes had gone to foreclosure vs. 13 this year - Accurate
♦ Interest Rates: Rates are up – Factual
The 10-Year Treasury rate has risen from 4.5% to 5.03% since January - Accurate
or will he still be standing there come Christmas screaming he still has a shot at pulling it off?
I can see his cunning plan now! On December 31st he will be standing at the courthouse steps signing hundreds of escrow papers… buying, buying, buying! Screaming: “20%! I told you it was in the bag, baby!”
I’ve lived in Palos Verdes, Ca for many years back in the 80’s. Most of the homes “on the hill” are track houses 30-40 years old - more likely worth considerably less than $ 1 million even at today’s prices.
There’s no accountability in the RE industry so “Scary Gary” will be able to say pretty much anything he wants to and can cook the numbers at will. I have no doubt that Gary will be proudly proclaiming his “I told you so” results on Jan 1st.
I truly hope he does because by Jan 1st, if he’s still sticking to his predictions, he’ll look like the world class idiot that he is.
This is the kicker; ( from the Affordability Report)
“The minimum household income first-time buyers needed to purchase a home at $482,000 in California in the second quarter of 2006 was $98,720, based on an adjustable interest rate of 6.48 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $3,290 for the second quarter of 2006.”
Yes, 23% can afford a home IF they use creative loan products. PLUS, they STILL need to have a HH income of $98k +!
What’s the TRUE affordability using 20% down, full docs, and a fixed 30 year? ZERO. That’s what.
These folks are whistling past the cemetery.
Wow, you nailed the biggest change. I always admired the previous CAR affordability index because it used traditional loans.
Good catch!
They use max 40% of income for housing expenses ((12x$3290)/$98720). Wasn’t that supposed to be 30% or am I old fashioned?
This is exactly my fuss! They also do not clearly mention that they changed this fact in their report. You only know that they did this if you did the math and compared it to their old methodology.
I do not know if I can harp on this enough.
That’s pretty standard in CA these days. Most friends of mine are paying 40-50% gross.
New economy, new math. This is the new economy of real estate.
Would you like some pre-ipo Webvan shares with that?
You know, this really broke a straw with me. I wrote my first letter to the editor regarding this. Who knows if it will get printed, but I am spreading the word on this.
Keep it up. I’m totally with you (see rant above). I’m planning on sending something out tomorrow myself to CAR asking that they publish the old version at least for comparison purposes.
i just talked to a mortgage broker guy i know and he said you can refinance using 100% financing (80% first and 20% piggyback 2nd) and even get a no doc loan.
talk about sweet financing deals for fb’s (and how screwed up lenders are!).
“‘I do feel like it has turned around, that it’s more of a buyer’s market,’ said Sandra Sanders, …….‘It’s going to be better for us to service our buyers now that we can show them more than one house, and there’s not the pressure that they have to buy the first house they see or else the price is going to go up. It’s going to be more of a joy for buyers to buy.’
Help! Barf bag, quick!!
Is she Suzanne’s sister?
“It’s going to be more of a joy for buyers to buy.”
Buy, into a falling market ? No, thanks.
…..But there is no joy in Mudville, mighty ATM is tapped out.
Happy Happy Joy Joy! (apologies to Ren & Stimpy)
BARF!
you bloated sack of protoplasm!
Little OT, but check this out:
Recession Watch
By Liz Ann Sonders
Chief Investment Strategist
Charles Schwab & Co., Inc.
http://www.schwabinsights.com/2006_08/mktoutlook.html
Liz Ann is no permabear. She was quick bullish a year or two ago. Her analysis seems right on.
Recession next year.
“With mortgage equity withdrawal having essentially replaced wage gains as the primary source of income gains over the last several years, consumers’ tapping of their home equity has allowed them to withstand the burgeoning cost of the aforementioned “essentials.” Although household net worth remains at record levels, 37% of it is now accounted for by real estate, up from 24% in 2000. The severe weakness in housing unequivocally reduces aggregate demand, has strong direct (home equity drawdowns) and indirect (net worth) effects on consumption, and reduces employment (30% of the growth in payrolls in the last several years was directly or indirectly related to housing). Consumers account for about two-thirds of GDP, and they’re under increasing pressure.
Business and jobs to the rescue?
One of the bulls’ base-case scenarios has been that healthy corporate cash levels and business capital spending would spur economic growth and leave a floor under employment, offsetting the weakness in housing. But, the expected boom in capital spending is losing its oomph. The biggest surprise in the second-quarter GDP report was that investment in business equipment and software actually fell 1%, the first decline in more than three years and a big reversal from the first quarter’s booming 15.6% growth. Might the merger and acquisition boom, share buybacks, and declining CEO confidence be giving obvious clues about the outlook for growth?
As for employment, the last three months may be a trend in the making. The average monthly payroll gain in the last 12 months (excluding post-Katrina September) was 154,000; in the last six months, it was 137,000; and in the last three months, it was a paltry 112,000. Two leading indicators of employment, the Temporary Employment Index and the Help Wanted Index, are both heading down sharply. Following similar drops in the past, a recession or major slowdown has occurred. ”
There ya go. Nuff said. Couldn’t agree more.
Wanted to share the latest from Liz Ann Sonders, Chief Economist at Charles Schwab, who is one of the very few unbiased economists who tells it like it is. Here is an exerpt, followed by a link to the whole article.
Housing’s crumbling foundation
The latest statistics are numbing: Mortgage application volume was down nearly 30% year-over-year in the week ending July 28; in June, housing starts were down 11% from a year ago, while existing home sales and new home sales were down 9% and 11%, respectively; the inventory of unsold homes was up nearly 40%; and most alarming, the decline in the growth of median existing home prices was the most precipitous since 1981.
With mortgage equity withdrawal having essentially replaced wage gains as the primary source of income gains over the last several years, consumers’ tapping of their home equity has allowed them to withstand the burgeoning cost of the aforementioned “essentials.” Although household net worth remains at record levels, 37% of it is now accounted for by real estate, up from 24% in 2000. The severe weakness in housing unequivocally reduces aggregate demand, has strong direct (home equity drawdowns) and indirect (net worth) effects on consumption, and reduces employment (30% of the growth in payrolls in the last several years was directly or indirectly related to housing). Consumers account for about two-thirds of GDP, and they’re under increasing pressure.
http://www.schwabinsights.com/2006_08/mktoutlook.html
She looks pretty cute.
I used to see her on Fox. She’s a hottie, but still a shill.
You will find, now that it is obvious to even the most diehard bull, that a lot of economists and investment advisors will be telling you that RE is crashing. You see, it does no good to be told that an investment is a bad idea DURING it’s crash. Particularly one as illiquid as RE. But this is exactly what we will hear now for the next several months. Advice that would have been actionable if given a year ago (when the posters on this blog were giving it out for free) yet none of these imposters were saying sell at that time. Now they will hand out warnings and advisorys at exactly the time that they are rendered meaningless in an attempt to garner credibility. How nice. Gee, thanks for the timely heads up.
Agreed. However, as some from this board can tell you, Liz Ann Sonders was well ahead of the curve, she stated her concerns and outlook as far back as a year ago. I have no stake in defending her, but I feel she deserves credit for saying all along what we have been saying and not what the “imposters” have been saying.
Still a few knife catchers left if the price is set way below comps. Better to take the $$$$$$ before 20% gets wiped out middle of next year…
Jeez, Housing Bear! Our posts are 4 seconds apart, how scary is that?!
lol great minds think alike?
Or you both got the same email from Schwab that I did
“Sandra Sanders, who oversees 500 real estate agents in the South Bay, said, ‘It’s going to be better for us to service our buyers now that we can show them more than one house.’
Oh, Sandra. The desperate, hungry remnants from among your 500 realtors will soon add new meaning to “servicing our buyers.”
This was one of my favorite bullet points from Gary Watts’ latest report:
1. In this market, be patient with your buyers. It is not uncommon to be working with them for 30 days or longer. It has been more than two years since they have had such a selection of homes from which to choose.
I can only imagine what agents have been getting away with over the last few years- show a buyer two homes and tell them to pick one.
Agents should be SERVING their clients. Agents can’t even speak properly.
When she uses ’service’ as a verb, this is what it means:
tr.v. ser·viced, ser·vic·ing, ser·vic·es
To make fit for use; adjust, repair, or maintain: service a car.
To provide services to.
To make interest payments on (a debt).
To copulate with (a female animal). Used of a male animal, especially studs.
Slang. To have sex with.
“CAR developed the new index measuring affordability for first-time home buyers to better reflect the realities of today’s real estate market.”
Uh … the “realities of today’s real estate market” are that homes are not affordable.
In early 2006 when the C.A.R. affordability index was approaching the low single digits in some regions, C.A.R. stopped reporting the numbers. Rather than admit that affordability is low, they came up with a new marketing statistic by:
* Using 85% of the median price (v. median price)
* PITI of 40% of household income (v. 30%)
* 10% down payment (v. 20% down payment)
* Adjustable rate mortgage (v. 30 yr fixed)
ABRACADABRA!!! More people can now afford to buy a home.
Thanks C.A.R.!
Nice to see your posts again, some of the most well thought out and functional posts of all of them.
I can’t believe they change the means of calculating an index that will be widely reported as “the affordiblity index” in the early stages of a crash! All potential homebuyers of California should file a class action suit against CAR.
I saw a Ren & Stimpy reference up above, so here goes from the obscure abyss..to the tune of “LOG”
What falls in price?,
that don’t feel real nice,
ya’ trapped in your house,
what takes all your money and makes you mad at your honey?
it’s house, house, house.
It’s house, house, it’s big, it’s brick, it ain’t selling quick,
It’s house, house, it’s making you look like a dick,
Everyone wanted a house, You’re gonna hate it, house.
Go ahead, try to sell the house. Everyone sell their house!
House, by I/O!
LOL! Brilliant!! I truly am among my people here!
(longtime lurker - totally addicted to this site. Thanks, Ben, et al.)
That’s odd: a fly, marrying a bumblebee… I TOLD YOU HOUSING WOULD CRASH, BUT YOU DIDNT BELIEVE ME! WHY DIDNT YOU BELIEVE ME?!!!
The funny part is that Gary “Let the Good Times Roll” Watts is *still* singing “Happy, Happy, Joy, Joy” from high on the mountain.
Per the SF Chronicle article Ben linked to above: That would be the second article in two days by Tom Abate, Business Writer, in which he failed to mention that SAN FRANCISCO COUNTY MEDIAN PRICE IS DOWN 1% Y-O-Y. My friends, that should be the headline, for heaven’s sake, given that the name of the paper has SAN FRANCISCO in it, and that negative y-o-y price numbers haven’t been seen in some years. But Mr. Abate instead chose shillery over integrity. Tsk, tsk.
it is already a rout. IMedian price is so misleading. I personally know of 2 instances where my relatives are tring to sell in Long Island for 2.7M Mc mansion and that is priced to last years comp and they have an offer for 2 M and my b inlaw is trying to sell in Denville for 1.1 m and is getting an offer for 850k how is that shoing the median as climbing. People are already getting deals at 30% less than last years price as the prices they are asking is what the last simmilar house sold for in last august
If median prices last year were based on 100 buyers who were mostly up scale but some midrange and maybe a few first timers, this year they’re based on 25 buyers, 19 of them are rich old people who are only interested in very comfy high end stuff and the rest are clueless rich kids whose parents gave them a bunch of money. Do you understand how “median price” might appear to be rising?
YOU GOT TO BE KIDDING ME WITH THE AFFORDABILITY INDEX!!!
Of course CAR changes how the calculate affordability because the great Gary Watts says the old way to calculate it is “archaic.” Yeah the new way of calculating affordability definitely reflects what people can afford. Give me a break. How can these folks get away with coming up with this garbage!!!
I have to wonder, in the future are they going to refer to the HAI by whether or not its a sequel, or better yet version 2? Like HAI-1 vs. HAI-2 or HAI the original v.1 or v.2? They are going to create a lot of confusion - last year the HAI for Cali ended at something like 14 (before they decided to stop publishing). Now how are they going to explain how HAI has suddenly doubled? Huge immigration of $300k/year jobs?
OC’s old HAI was under 2%, they had to re-invent the metric, can’t have affordability be a negative number.
Hey, the Feds calculate the inflation rate using the same type of number tricks, so why not? Next they will prove that black is white; and then get hit by a car while using a crosswalk…
Man, so much news that I am happy to see, yet so much of the same old deceit. I’ll start by joining in the chorus to blast the CAR for its insanely byzantine logic to describe the new housing affordability. It’s bad enough that the prior index was misused all the time. It was never an indicator that x% of the population could afford a traditional mortgage for the mid-priced (median) house. What it said was that half the population made less than x% of what it would take to get into the median priced home sold. The CAR never pointed out when reporters misused the number. Realtors misused the number when quoting it.
Now, after everybody is conditioned to the meaning of HAI in a normal, buyer’s, or seller’s market, they change things. This is a huge red flag. If you want to use a statistic that people can wrap their brain around, use the NAHB HOI, which already assumed 10% down, but uses (for now) underlying income distributions to determine the portion of the population that can “afford” the median home. Maddeningly, a reasonable market under the old HAI was 1.0, and the normal state for HAI was 0.5 (ignoring for the down payment discrepancy).
Sadly, the media will not help people become more educated. As an example, part 2 of my rant, the SF Chronicle is a joke:
“But existing single-family homes held their value better than the overall market in July, rising 4.8 percent relative to June, to put the median price at $674,000.
But the median price of existing single-family homes fell from June to July, according to DataQuick numbers.
DataQuick reported that, in June, when 6,585 single-family resale homes changed hands in the nine-county region, the median sale price was $689,000.”
As Beavis and Butt-head would say, “heh heh heh heh, ummmm… what?”
I should have written:
Maddeningly, a reasonable market under the old HAI was 1.0, and the normal state for HOI was 0.5 (ignoring the down payment discrepancy).
“heh heh heh heh, he said, ‘affordable’ heh heh heh heh heh”
The change to the HAI is just one more clear example that this country has become a total fleecing machine. Buyer beware has never been more important. It is every man for himself.
Does anyone have a link to the full report referenced by this article http://tinyurl.com/n3fqx ?
I particularly liked:
“ARMs made up three-fourths of all subprime home loans in 2005.”
http://www.acorn.org/fileadmin/HMDA/2006/Rate_Shock_Report.pdf
Oops.
Let’s look at the implications of this statistic for Los Angeles County.
Qualifying household income = $100,320
CAR’s first-time buyer home price for this income = $489,860
Which neighborhoods (by zip code) have a median home price close to this price? CAR’s data is not publicly available, but DataQuick has data available at:
http://www.dqnews.com/ZIPLAT.shtm (currently showing June 2006)
Consider the range $480K to $499K, which is +/- $10K from the stated affordable price. These zip codes have median home prices in this range:
Artesia 90701 $489K
Covina 91722 $489K
Duarte 91010 $485K
Gardena 90247 $490K
Inglewood 90302 $485K
Lakewood 90715 $480K
LA 90062 $495K
La Puente 91746 $483K
Norwalk 90650 $490K
Pico Rivera 90660 $493K
Rosemead 91770 $499K
Santa Fe Springs 90670 $485K
Whittier 90606 $495K
DataQuick lists 273 zip codes for LA County.
52 are lower than this range.
13 are in this range.
208 are over this range.
So these zip codes represent the 19th to 24th percentile of zip codes sorted by median home price. For families making $100K per year, these are the affordable neighborhoods, according to CAR.
All desirable areas clearly worth the cost of living there.
interesting data for those communities. 8 of the 13 are 605 fwy corridor cities(the bottom 8). The average home in those communities is the small clapboard/stucco 3-bed/1.5 bath on 5000-6000 sq ft lot all about 50 yrs old on average. They present a mixed picture: Most of those 605 cities, and probably all of the listed 13, have sections of their cities overrrun and rundown with lower working class recent immigrants(La puente is the worst).
Other sections, probably different zip code areas, are still relatively well-kept clean lower/middle class neighborhoods.This is true of Whittier, Gardena,lakewood, norwalk,sf springs, pico rivera, the areas i know best.
No, they are not in the same class as the polished, suburban coastal enclaves(E.G. south bay,South OC,West LA)but the 605 corridor has not yet reached the bottom of the cesspool as has the 710 corridor cities.
Take whittier: Area north of Whittier blvd in the old dwtn district aging a bit but still has evidence that it’s Presbyterian roots are holding up. The old restored dtwn section still a good shady walk with the old-town restored ambience, and there are still very attractive kept up neifgborhoods with atractive victorians immediately north of the dwtn going up into the hills.
There are probably areas south of whittier blvd which are undoubtedly run-down: though being a fairly good-sized city it would be difficult to access the exact state of the community.
http://www.acorn.org/fileadmin/HMDA/2006/Rate_Shock_Report.pdf
“In Torrance, business has dropped for mortgage processing, co-owner Warren Snyder said. Meanwhile, business is booming at Snyder’s other venture, American Credit Repair, because ‘people are up to their necks in debt,’ he said.”
Here is your new suicide loan…I mean mortgage. Oh, and if you have credit/debt problems in the future, come and see me.
This is funny stuff.
Wonder if this is a mortgage broker:
http://sandiego.craigslist.org/wan/195415627.html
No shame in being a stripper to support yourself. Not sure, but I think SD is only topless.
implosion…”topless only” is for strip clubs that serve alcohol. Full nude strip clubs are in SD, but can’t sell alcohol. I don’t go to the clubs, but it is always a political issue in San Diego and often in the news (root cause of one of the city commissioner scandals, where three commissioners were bribed by the Las Vegas owner of the San Diego Cheetahs strip club to try and change the rules).