‘It’s Taking Some Sellers Longer To Get With The Program’
The Press Democrat reports from California. “Sonoma County home prices fell in July for the first time in more than four years, the latest sign that the once-booming housing market continues to slow. July’s median resale price was $595,000, down 3.3 percent from the same month a year ago, when the median stood at $615,000. It was the first year-over-year decline since February 2002.”
“In Sonoma County, home sales hit an 11-year low for the month of July and have dropped for 10 consecutive months in year-over-year comparisons. While the slowdown was anticipated since the market peaked a year ago, longtime brokers were surprised by the price drop.”
“‘I didn’t think it would go down as quickly this soon. I don’t think it’s hit bottom,’ said broker Beth Robertson in Rohnert Park.”
“To make homes stand out in an increasingly crowded market, sellers often are pricing homes at least 2 percent below what the same home could have sold for a year ago and pricing under comparable properties already sitting for sale. Sellers also are more willing to offer incentives to buyers.”
“Buyers haven’t faced such an advantageous market in a decade. Sellers still are adjusting after enjoying a run of strong sales and often soaring prices. ‘It’s a correction that was needed,’ broker Karl Bundesen said. ‘I think it’s taking some sellers a little longer to get with the program and realize the market has changed. There’s still sellers coming on the market unrealistically.’”
“‘A sense of urgency drove people into the market. Now what we have is the opposite of that,’ Coldwell Banker manager Rick Laws said. ‘And now the herding instinct is to wait and see if prices soften further.’”
From the Signal. “Despite record numbers of active listings and significant slumps in sales, local Realtors say the Santa Clarita housing market will bounce back. In July, typically the busiest month of the year, just 237 single-family homes changed hands, down 35.2 percent from July 2005. Correspondingly, inventory remained high with 1,814 single-family homes in active listings, more than triple last year’s 593.”
“‘It’s very simple,’ said (broker) Celia Gallardo in Newhall. ‘It’s now a buyer’s market.’ However, converting to a buyer’s market forces sellers to reduce prices, she said. ‘People need to realize that they are not going to get the prices they got last year,’ she said. ‘They need to come down by 20 percent.’”
The Lodi News Sentinel. “Her house has been on the market for only three weeks, but Lodi resident Trina Reese is skeptical as to whether it will actually sell. ‘Houses just aren’t selling,’ she said. ‘Last year houses down the street were selling at $650,000 within a week or two, but now it’s a buyer’s market.’”
“Paul Mertz, president of the Lodi Association of Realtors, said the market is still seeing stable housing prices, but a larger inventory. ‘Last year in July we had 133 homes on the market,’ he said. ‘Last month there were 470. This is a normal market where sellers just have to be more realistic about their expectations.’”
The LA Daily News loks at the new affordability index. “Rising prices and interest rates during the second quarter combined to drive down housing affordability across California to a record low for first-time buyers, a trade association said Thursday. The figure is seven percentage points under last year’s second-quarter level.”
“This is the first affordability index using methodology that is supposed to better reflect current market conditions. The index needed to be modified because of changes in the mortgage-finance arena. For example, the first-time buyer index is based in part on a 10 percent down payment, with the purchase financed by an adjustable-rate loan.”
“Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., agrees that this is a more accurate way to gauge affordability. But it paints the same kind of market snapshot as the old version, which was retired in January.”
“‘The news is still depressing,’ Kyser said. ‘Affordability is not going to improve. It’s going to be tough to deliver entry-level housing in Los Angeles and Orange counties.’”
‘It’s very simple,’ said (broker) Celia Gallardo in Newhall. ‘It’s now a buyer’s market.’ However, converting to a buyer’s market forces sellers to reduce prices, she said. ‘People need to realize that they are not going to get the prices they got last year,’ she said. ‘They need to come down by 20 percent.’
That’s more like it 20% reduction. That’s what brokers need to get sellers used to hearing, if they want to create some transactions. 2003, 2004 and 2005 were abberations in a mania, the sellers need to wipe those years from their memories.
- Agreed
‘They need to come down by 20 percent.’”
“Her house has been on the market for only three weeks, but Lodi resident Trina Reese is ******skeptical *****as to whether it will actually sell. ‘Houses just***** aren’t ****selling,’ she said. *****‘Last year ******houses down the street were selling at $650,000 within a week or two, but now it’s a buyer’s market.’”
Trina Reese is starting to ‘get it’ - but the universe seems to be spinning out of control and she doesn’t quite get it.
A 20% reduction is actually enough to sell in *today’s* market.
We will erase the gains of 2003 and 2004… but not today.
But the real pain doesn’t start until 2Q2007! We’re in for a wild ride!
Neil
Start fixating on 97′ prices. This 20% is just a warm-up. We’ll see prices down 30-40% in some areas by next spring, IMO.
wizard wisdom:
this is a way to calculate re prices without fear of overpaying. take the house price in 1997(before all the bubble activities), add to that 9 years of inflation compounded annually= to the current re price. simple.
That would be the calculation of a Templeton housing bear (90% off)
I prefer cap rates or a Gross Rent Multiplier approach.
-
http://www.files.bz/files/11251/RealEstateValuationMethods.xls
pray, do tell.
I think I like GRM, too.
Also, I think auger-inn is beginning to sound in predictions a lot like crashmaster101, he of the Boston area circa late ‘05.
The crashmaster lives! Although he kept saying 50% declines, not the loony level of Templeton at 90%.
this is a way to calculate re prices without fear of overpaying. take the house price in 1997(before all the bubble activities), add to that 9 years of inflation compounded annually= to the current re price. simple.
You need to add inflation + 2% home value per year.
If a House costed 100,000 in 1997, then it should have normally cost around 140,000 in 2006, assuming we didn’t have a housing bubble.
Why +2%???
The AVERAGE of home values may have historically risen faster than inflation - but that’s because the AVERAGE home has gotten bigger (sq. footage, bathrooms, etc.). One could presume that we’ve hit limit as to how far this growth in size can go.
A PARTICULAR HOUSE should rise no faster than inflation. There is no reason for it to do so. In fact, it CAN’T rise faster than inflation for any significant duration - that would be exponential growth. This would eventually yield housing prices infinitely higher than incomes (though, at only 2%, it would take a while).
This is completely bogus. There is no objective correct price independent of supply and demand, which are influenced by local environment (including regulatory environment–e.g., California in particular has lots of laws, regulations, and ordinances that have caused prices to be higher than in other parts of the country).
Auger Inn,
I like your opinion! It’s no fun being priced out. I once owned a place, a divorce last year forced me to sell to my ex. He was smart (sarcastic) to buy me out at the top and now I am sitting on some equity and renting until it makes sense to buy again.
Now a nice revenge would be if prices came down enough for you to buy back from your ex for cash.
Or better yet, from the REO department of the bank that forecloses on him.
I don’t get why the selling-complex has any interest in propping up prices anymore. The median may not be down, but when sales are down 30%, you know that comes out of the bottom line of every commissioned thief on the take. RE salaries are down at least as much as the sales are down by a high probability. I think the problem is they all believed their own BS and are mortaged and heloc’d into the next century, instead of being sales agents, they are margined speculators running bucket shops.
-
they dont necessarily want to prop up prices. they just don’t want potential buyers to ever believe things are over-valued.
It look’s like the brokers are starting to get the message that prices are to high and unaffordable. Although, I suspect many of these brokers were busy unloading their ” White Elephants”, in the last year, and didn’t won’t to scare the market before they got out.
Yep, they’re getting the message, straight from their bank accounts.
Great observation Suzanne
The selling-complex is in a catch-22 situation. There are no buyers left at current prices, but if prices decline many buyers (except for first time) will be so buried in their existing houses, they won’t be able to afford the down payment on a free lunch.
Ah…….YES
I said in a previous thread that agents will be a party to forcing prices down and now it is happening.
This process will quicken the fall.
Look out below…………………..
“People need to realize that they are not going to get the prices they got last year,’ she said. ‘They need to come down by 20 percent.”
I sold my home in Santa Clarita for $715k last year (10/5)
Let’s see $715 less 20%= $572k
I high 5′d myself again.
$572K is still 30% too high for Santa Clarita.
Please don’t tell that to my fb (who is an exec for Countrywide- goes to show how clueless even people in the industry are!).
When did you originally buy and at what price? And are you waiting to buy again in the same area?
I bought that house in 1990 for $289k. It dropped in price to an estimated $200K, when that happened I was not let it going to happen again, I almost waited to late.
And I am not going to purchase in this area, I am renting and will probably move to Texas in 2+ years (wifes side family).
Desmo, I guess I can give you a high-5 because I sold a couple months before you . I must of lived near you . Remember the inventory was really low in Valencia last year . Look at how much inventory they have now .When I look at listings I see that the higher end is really coming down in price first .
I was in Valencia the other day and I was amazed by all those homes they were building near the 14 freeway . I just don’t see that new area as a good location ,but maybe some people do .
Fantastic, and yes, the 14 area looks like a giant gravel mine.
once went up a road going north off hwy 14(might be golden valley road) and about two miles up the low graded hill i saw a large standard cookie-cutter home development site on top of a low barren ridge, which overlooked what looked like a bulldozed strip mining zone. This is the Newhall section of Santa Clarita.
Have seen a lot of new home developments being built on Moonscape/desert wastelands in the IE/outer fringe desert boonies but this newhall site bears favorable comparison to those sites.
Well, I guess I live in the twilight zone…. In my small, gated neighborhood here in Valencia 91355, the houses just went up $100k in value in one month! A family that lived here got transfered to Oregon and their company over-paid $100k for their previously listed $649k house! Now all of the valuations are at $750k based on an erroneous appraisal!!! Can you imagine $750k for a Centex stamped out 2,000 sq. ft. home???? It really pisses me off since I rent one of these houses for $2500/mo. I hope they burn in hell!! I thought this market was coming down?? Why would I buy that POS when I can go across the street and buy a 2800 sq. ft. house in Bridgeport near the lake for $780k???? This simply does not make any sense! I am angry as hell at all this greed out here! The address is 26970 COLONIAL LN, Valencia, CA 91355 and it is listed on Ziprealty. There is no photo listed and I don’t understand why it says it has been on the market 100 days - there has been no sign in the yard! WTF?????
Look, we watched Rep Duke Cunningham pull this same shit. A defense contractor overpaid for his house then sold it for a loss several months later. This couple just got a 100K tax free gift from his company that was worked out behind the scenes(assuming they were in their house over two years and cleared 500K or less in Cap gains in the sale). That is all this is about. You won’t see it happening very often and good luck to anyone else on your block trying to sell for anywhere near that price. It just has farther to fall now.
Thanks for the clarification!! Patience is a virtue they say!
I am renting just down the paseo from you in Creekside, this place is falling apart, flippers trying to resale with no luck, NOD’s, REO, no sales. The Colonial sale was a fluke, sales are almost non-ex. and prices are dropping fast in the SCV. The commute is getting to be the worst in LA, smog, graffiti, crime
all on the rise.
“Her house has been on the market for only three weeks, but Lodi resident Trina Reese is skeptical as to whether it will actually sell. ‘Houses just aren’t selling,’ she said. ‘Last year houses down the street were selling at $650,000 within a week or two, but now it’s a buyer’s market.’”
$650K in Lodi (I had to spend a couple days there once) is more ridiculous than $2 million on the westside of LA.
Yep….Lodi, Stockton, Modesto…keep going. How about Turlock? Million dollar homes in Turlock. ALL of the prices in “no man’s land”, with the 2+ hour commutes are ridiculous.
BayQT~
I have in-laws in Fairfield who swear their tract home is “worth” almost $1 million. If you walk out of their front door and down the street for one minute, there is open land as far as the eye can see. I just say “OK” when they tell me what their home is worth (which seems to be every time I’m there!)
I’d stay mum too. Those folks (your in-laws) will be shell-shocked when this thing is over. No way a Fairfield home is worth $1 million unless we have absurd inflation and that $1 million will be worth $300,000. Either way, its worth a hell of a lot less than they think.
“worth the equivalent of $300k or $300k in absolute dollars” either way …. I need to slow down and read my posts before hitting send!
that’s just about what they paid in 2001, and since then the builders have erected thousands more. Definitely no “running out of land” issues in that region any time soon.
$650K in Lodi ?
Are these people really nuts or what… Must be a former Beanie Baby collector… thinking it was here quick way to retirement.
These sellers were nuts and need their brains to be re-wired.
I have not been through Lodi in nearly 20 years, but nevertheless, $650k in Lodi?! Boy, wages must have come a long way since then…
Wages in Lodi haven’t moved unless you work for the city. There are very few high paying jobs (not including real estate jobs the last 5 yrs) in Lodi and Stockton and the people are just killing themselves with suicide loans. Live and learn I guess. The beatings will commence soon and the line forms to the left…..
“Jack Kyser, chief economist at the Los Angeles County Economic Development Corp., agrees that this is a more accurate way to gauge affordability. But it paints the same kind of market snapshot as the old version, which was retired in January.”
“‘The news is still depressing,’ Kyser said. ‘Affordability is not going to improve. It’s going to be tough to deliver entry-level housing in Los Angeles and Orange counties.’”
Affordability will improve as long as you keep changing the goal post, just like the BLS and it’s measurements!
Two months from now you will be using a no down payment/neg-am loan because that will “better reflect” the market conditions. What a bunch of BS. I hope somebody will publicly take these assh*les to task for this.
The market will fix affordability long before Kyser’s government sponsored approach to housing affordability has an impact.
This one has got me boiling mad. The whole point of an affordability index is to compare price/affordability from different points in time. YOU DAMN IDIOTS, if you change the index calculation you don’t make houses more affordable! You simply make the index completely useless as it can no longer be compared with anything else.
My mouth is agape at the stupidity of this guy’s quote:
“‘The news is still depressing,’ Kyser said. ‘Affordability is not going to improve.” Shucks. I tried changing the index, but people still can’t afford homes! I’m an economist, this should have worked…
The “New Housing Affordability” brought to you by the makers of the “New CPI”.
(note: these products are incompatible with “Eternal Reality”)
When one considers how this RE market got to it’s lofty perch of inflated prices (via ARMs, interest-deferred negative amortization loans and optional-payment schedules, no money down (”80/20s”) and buyers falsely inflating personal income to the tune of 100% or more), to call this a “slowing” market has got be the euphemism of the decade. For the last three years, the only thing driving RE sales was buyer’s fear (and expectation) that prices would continue to rise forever and they would be priced out of the market. Market fundamentals, like ability to afford the home, had next to nothing to do with this market: a true speculative bubble. Well, the bubble has burst. And interest rates are rising for the first time in years, energy and food costs are rising, real incomes are stagnant, and the word is out: home prices have peaked. The sellers with the overpriced homes and the ticking-time-bomb non-traditional mortgages are like so many swimmers in the middle of the ocean, surrounded by shark (buyers) who merely have to wait for [financial] exhaustion to set in before moving in for the kill. Slowdown my foot!!! The RE market is crashing. Within the next 12 months, prices in the bubble markets will revert to pre-2003 levels, driven by desperate short sales, foreclosures and builder discounts on glutted inventory.
Within the next 12 months, prices in the bubble markets will revert to pre-2003 levels, driven by desperate short sales, foreclosures and builder discounts on glutted inventory.
———————————
Yep. I’m already seeing prices at or under 2004 levels (for those who actually **want** to sell).
I figure we’ll be at 2001 prices by 2008/2009 unless the PTB decide to debase our currency.
“The sellers with the overpriced homes and the ticking-time-bomb non-traditional mortgages are like so many swimmers in the middle of the ocean, surrounded by shark (buyers) who merely have to wait for [financial] exhaustion to set in before moving in for the kill.”
Gotta say, I love this image. It’s exactly on the money.
lalaland,
Agree. Great description!
“‘The news is still depressing,’ Kyser said. ‘Affordability is not going to improve. It’s going to be tough to deliver entry-level housing in Los Angeles and Orange counties.’”
Too bad everyone, affordability will not improve. Inventory may rise, prices may come down, the market may crash like drunken kids in a tricked out Honda, but home-ownership will still be out of reach to all but the wealthiest elite of this country. Prepare for a society of fuedal landlords ye vassals and peasants!
If by “elite” you mean the top 2/3 of the country.
Instead of artificially dumbing the “affordability index” down the CAR ought to turn this index on its head to generate a “foreclosure index”. Personally I would find this number more useful .
Yeah but neither they nor their cheerleaders would find it useful. That’s the problem.
27109 Eastvale Rd, Palos Verdes Peninsula, CA 90274 $1,399,000*
Status: ACT Orig Price: $1,550,000
Don’t hesitate to make a reasonable offer on this property!
Above is from listing description. And for those of you in Kentucky, Palos Verdes is that large hill you see on pilot side of plane as you fly into LAX. It’s between Long Beach and maybe 25 minutes south of LAX.
I’ve been to several open houses for homes whose prices have been reduced $200K+ and had the realtor come right out without any provocation and tell me that “there is more room to maneuver- as long as it’s a reasonable offer”. Blood is in the water, maybe just a few drops but there will be more very soon.
I’ve been to several open houses for homes whose prices have been reduced $200K+ and had the realtor come right out without any provocation and tell me that “there is more room to maneuver- as long as it’s a reasonable offer”
Here’s the agent to the seller after you “more room” offer” “This offer is as offensive to me as it is to you. I think you better take it”
How about moving the decimal point?
Boeing’s Long Beach C-17 Plant to Shut Down:
http://www.latimes.com/business/la-081806boeing,0,4672358.story?coll=la-home-headlines
LA has a big job market, but this is going to hurt a bit. 5,500 workers at the plant plus 5,700 releated subcontractors. 11,000 jobs going away with a shaky housing market may makes things a little ugly.
With all the hype of “new jobs” we keep hearing about, I’m hearing very little about the detail of those jobs (who’s hiring and for what positions/pay). OTOH, we can definitely pinpoint which jobs are being lost (union and other well-paying jobs with benefits). Thousands of people **per company** — company names we all know and names which have been a part of “AMERICA” for decades.
Deflation, deflation, deflation…with inflation of money supply to try to stem the tide, IMHO. What’s that called again? Oh yeah, stagflation.
as many have said here before, inflation for the things you need, deflation for the things you want.
beautifully said!
There are a lot of new jobs - RETAIL.
“LA has a big job market, but this is going to hurt a bit. 5,500 workers at the plant plus 5,700 releated subcontractors. 11,000 jobs going away with a shaky housing market may makes things a little ugly. ”
That puts the finish to LA?Scal being a former region for large scale manufacturing of anything. What i see
throughout LA/Scal region is a lot of small scale/workshop level fabrication/assembly type operations:E.G. Printing/bindery, metals reworking and coatings, nuts and bolts assembly,machining, reprographics, and a lot of large scale distribution-type operations: all employing mostly min skilled recent immigrant laborers(or their 1st generation offspring).
There are large parts of the eastern San fernando Vallley(Van Nuys,SuN valley,ect) where you see these type of shops. Also the 710(Long Beach fwy) corridor cities(South Gate,Compton,Vernon,east LA, ect) have quite a few of these operations.
Greater LA region ( and Riverside /San Bernardino)has almost no large-scale, high-paying, Unionized manufacturing plants left at all. It’s all small/mid-sized workshop-level lite manufacturing/fabrication/assembly operations.
If Anyone wonders how the Median $500,000 LA homes prices are being propped up, It is all thru Bubble hype, Mania. and thru “suicide loans”. It is in fact complete hot air, which i hope will pop rather quickly.
Here some info on the quality of those jobs;
“We are all a little melancholy about it,” said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp, which lobbied Congress alongside Boeing and elected officials to keep the C-17 in production.
“These are good jobs,” he added, pointing out that the average wage for a Los Angeles County aerospace employee is $73,259, plus benefits. Kyser estimated that each unionized aerospace employee also helps support another 3.4 jobs.
In No Cali, you already have layoffs from HP, Intel, Sun and many others over 10,000. And thats still the beginning. Dell in Austin is hitting up on big layoffs too after this weeks big miss in numbers.
Good paying jobs to boot. That is what it really comes down to.
Don’t forget to add in all of the realitors and brokers that are soon to be out of work. My friend at work has a sister who is an agent and she hasn’t sold a house in 4 months! She just put her second home in big bear up for sale because they can’t make the payments.
eBay has the housing market priced correctly. We were watching an Irvine high-rise condo with a seemingly reasonable buy-it-now price of 710k. The high bid was 505k. That shows a drop of 29%.
Auction Listing
Of course they say it was selling at 949k, which would make for a 47% price drop. Even at that, who wants to live in a 1200 sqft box?
The monthly drip is getting louder, isn’t it? I’m seeing the value in those previous posts targeting an October surprise for the RE industry and in-denial sellers.
From Lodi News Sentinel:
“Sean Snaith, former director of the Business Forecasting Center at the University of the Pacific, said the slowing has more to do with the number of houses available than with prices or mortgage rates.”
“While mortgage rates have increased, they haven’t spiked,” he said. “The real impact on the market comes from an excess in inventory. The number of buyers hasn’t gone down, but the number of sellers has increased.”
OK, can somebody explain to me how the number of sales has gone down, but the “number of buyers hasn’t gone down”?
“While mortgage rates have increased, they haven’t spiked,” he said. “The real impact on the market comes from an excess in inventory. The number of buyers hasn’t gone down, but the number of sellers has increased.”
This has to take the cake!!!!!!!!
He surely didn’t say those words………He couldn’t be that big a moron…………..could he?
Maybe that’s why he’s the “former” director of the Business Forcasting center at UOP.
Actually he took a better job in Florida. Snaith has been a shill for the RE industry in the valley for years. He doesn’t really make a lot of sense when he speaks but he sounds good (to those without a brain), kind of like a used car salesman.
The problem is the city govt’s have been eating up his forecasts and spending money they don’t have by betting on the economic come. When the bill comes due there is going to be some serious hell to pay and Snaith will be safely on the other side of the country.
Are you implying that realestate doesn’t always go up?
State Adds Jobs But at Lower Rate
By Lisa Girion, Times Staff Writer
1:19 PM PDT, August 18, 2006
The continuing decline in home construction held California’s employment growth in July to only 900 jobs, state officials reported today.
By comparison, the state added a revised 18,600 jobs in June
900 jobs? In a population of 35 million? Ooooh. That’s bad.
That will hit such areas oF Scal as the IE where most of the construction has been occuring. It will also impact the immigrant community, largely recent hispanic immigrants(illegal and green card). If the Cal/US economy is indeed slowing down it is the lower marginal beginning-level min/unskilled workers who get the axe first. And youth unemployment skyrockets. Look for 10-30% unemployment rates in the immigrant/teenage population segment real soon.
I say that by fall/winter 2006/07 there will be consternation and rumblings among the lower-working class segments, with increased demand from city/state agencies for handouts.
A possible Scal economic slowdown will also impact hiring at the small business level for all types of businesses: rstaurants,mom and pop workshps, retail, franchises,ect. Again, the immigrant hispanic population will bear the brunt first along with innor-city teens and young adults. Look for rising crime rate esp sharo increases in all types of property crimes throughout Greater LA Metro region.