‘A Free-Fall’ For Home Sales In California
Some housing reports from California. “Though prices have stabilized in recent months, the Southland remains one of the nation’s most expensive housing markets. Still, there are pockets where home values have merely crept up instead of rocketed ahead at warp speed. You just have to know where to look.”
“Head into the San Gabriel Valley, and the best bargains are in Azusa, said Marty Rodriguez, a veteran agent in Glendora. There, buyers still can find tiny homes for $365,000 to $405,000. ‘If you like flat-roof houses and some wild colors, you can find an old fixer in 700 square feet,’ Rodriguez said.”
“Foreclosure activity in California in the second quarter jumped by 67 percent over the year-earlier period, according to figures released Monday. ‘Year over year at the end of the second quarter of 2006, foreclosure activity in California has increased more than 67 percent,’ says Alexis McGee.”
“‘Both Las Vegas and Phoenix were impacted by speculators,’ says Ms. McGee, and more than 25 percent of new home sales in both markets were going to out of state investors who had no intention of ever occupying the homes they purchased. Now those who came late to the party find themselves squeezed by rising interest rates and resulting negative cash flows, she says.”
“‘The speculators are definitely on the run, and walking away from properties they cannot afford to hold and cannot sell at a profit,’ says Ms. McGee. ‘A more severe situation, however, is in California,’ she says. ‘A primary reason is the overwhelming use of so-called creative mortgage products people were sold in order to buy ever more expensive homes.’”
“More than $1 trillion of these exotic mortgages were due to reset in the next 18 months, she says, ‘and payment shock to such homeowners would be severe if not financially fatal.’”
The LA Daily News. “Last week started on a sour note and ended the same way. First DataQuick released its sales and price report for July that showed weakness in the residential market for the eighth consecutive month. On Thursday, the California Association of Realtors reported that affordability for first-time buyers is at record low levels in most of the state.”
“And on Friday, Boeing Co. told its workers in Long Beach that production on the C-17 military cargo airplane is ending. Is this going to be an economic train wreck like the one that happened in the early 1990s?”
“No, concludes economist Christopher Thornberg in a somewhat surprising assessment since he’s been one of the biggest bears about the California real estate market.”
“The market’s in a free-fall as far as sales go. Prices have a longer event horizon, though. ‘The housing bubble pops (and) you don’t get a rapid decline in prices,’ Thornberg said. Here’s Thornberg’s take. ‘I think there is..potential to have a mild retraction in prices, nothing dramatic. Housing prices are going to go down. The key is they are going to go down slowly, not rapidly.’”
“When the last boom cycle ended, the median price fell 36.7 percent from a high of $245,000 in November 1989 to a low of $155,000. He expects sales to retreat to the level of 1993 or 1994 and price declines totaling 10 percent or more.”
“It’s not a collapse, though. ‘It had to run out of steam. All this appreciation was a function of irrational exuberance,’ he said.”
“He expects sales to retreat to the level of 1993 or 1994 and price declines totaling 10 percent or more.”
That and a salary increase to $200K and I should have no problem buying a home in California.
Funny thing, I’m not going to see $200K any time soon, and prices will fall to 2000 levels which is about where they should be anyway. It’s really pretty funny, prices go up 2 - 3 times in California, then we expect only a 10% correction? Even with a 50% downward correction, prices would be high!
Economists NEVER see anything coming. But they do seem to be pretty good at writing 30 page reports afterwards on why it happened.
It’s hard to keep a perfect track record if you make predictions. Better to stict to “predicting” the past, then you can always be right.
Hey, watch it. I predicted this next week!!
..as Peter Wolf (J. Geils band) said,,,
You don’t always see it comin’,
but you always see it go,
bubble, must get popped, somewhere down the line,
c’mon everyone (refrain)
I’m a HUGE fan of the guys from Boston but “First I look at the Purse” might be more appropriate?
Hey, I tried…..:)
yea, but first i look at the purse.
i sware i didn’t see that reply just before my last post. lets lock pinkies and say what goes up a chimney.
You cannot predict man made phenomena that are about to happen. There are too many random and artificial variables in economics for reliable forecasts.
I agree you can’t predict the timing and extent, but you can predict the likely sequence of events. Witness the consensus of the readers of this blog. The sequence of events has fallen out just as predicted 6 to 9 months ago.
Many prediction were made on this blog, some of them contradictory, and much hasn’t fallen out as predicted. Especially the stickiness of prices downward still surprises, past experience of busts not withstanding. The general bubble consensus, however, has been confirmed by the events so far.
I don’t understand. Weren’t the UCLA economists really bearish, until now? Now that the correction is happening, they’re suddenly backing off?
I still have to hear any economist proclaim that they predicted back in early 2000-2001-2002 that there will be a massive run-up in residential real estate. Ken Heebner of CGM made a huge bet on homebuilders back in 2002 and unloaded them in early 2005 - does that fit the bill?
this is funny too: ““Head into the San Gabriel Valley, and the best bargains are in Azusa, said Marty Rodriguez, a veteran agent in Glendora. There, buyers still can find tiny homes for $365,000 to $405,000. ‘If you like flat-roof houses and some wild colors, you can find an old fixer in 700 square feet,’ Rodriguez said.”
700 square feet for 405K. that’s hysterical.
I’d pay 405K for 700 SF…if it was along the coast somewhere.
Azusa ain’t coastal!
If he had said “405K in Azuza is hysterical” I would’ve agreed 100%, regardless of SF.
Over or unlooking the San Gabriel wash. Up the 39 some good flyfishing (c & r) on the west fork. Near the old Miller Plant. I remember it well.
O.K., how about 374 sf for $685,000. It is on the coast. http://marinpos.blogspot.com/2006/07/mouse-hole.html
C’mon, put your money where your mouth is…..not.
Azuza is a strange community. Long known as the gateway city for going into the San Gabriel Mts, it has always somehow been a bit low on the toten pole as far as livable communities of the SG valley. There is evidence of heavy immigrant infiltration in the south sections of city, though the upperend closer to the mountains may be gentrifying. Not an especially polished SG valley community as San Dimas, Arcadia, Glendora,or Covina.
It’s funny how you lumped Arcadia with San Dimas, Glendora and Covina. San Dimas maybe but definitely not Glendorsa and Covina but as with every community, those towns have pockets of money.
Sorry i mean’t West Covina, not Covina, which definitely has some declining pockets. Glendora is a mixed picture. perhaps not as affluent as Arcadia nor Sierra Madre, and with pockets of aging residential areas whch haven’t been touched by the majic wand of gentrification.
yeah, but the article touts Azusa’s proximity to downtown L.A.: 70 miles closer than Victorville!
Funny thing about this 10% decline prediction — it seems to come out of the clear blue sky with absolutely no appeal to fundamental factors to back it up.
So let’s just remember three of the omitted fundamental factors before we get too enamored of Thornberg’s prediction:
1) Exotic lending, e.g. 100%-financed I/O Option ARMS. These loans are the housing-market equivalent to buying stock on 100% leverage. The foundation for the Great Crash of 1929 was laid by stock prices driven skyward through margin purchases, and the groundwork for the Great Housing Bubble Crash of 2006 was laid by exotic lending which decoupled the household home purchase budget from affordability.
2) Appraisal fraud — we have read here repeatedly that only appraisers who were willing to “play ball” with overpriced deals got the business.
3) Abandonment of lending standards — “anyone who breaths can get a loan approved.”
Sorry, Dr. Thornberg, but these factors and others have mutually reinforced one another to drive prices above fundamentals by a far larger margin than 10%, and prices typically overcorrect on the downside…
not much news one way or the other here in culver city. i am getting word through a c0-worker that lives in lancaster that the dead inventory is out-of-control up there.
Note to Thornberg: This is not your 1993 or 1994 housing market.
I personally believe with the sheer amount of extreme leverage used to finance the housing market, prices will drop harder and faster then anyone even on Ben’s blog are imagining.
How many illegals were in California in 1993 or 1994? Future housing demand for California and Arizona! If you think it’s bad now:
“By 2050, there will be 100 million Hispanics concentrated in the U.S. Southwest.”
http://www.drudgereport.com/flashpjb.htm
What a bunch of poop. Let’s just take current growth rates and project it endlessly into the future!!!! Soon, Amazon will grow into that $130 share price, and my 2 BR cottage in Watts will be worth $2.5 million!
I’ll keep this bookmarked though. Anytime Pat Buchanan start to make a lucid point about the quagmire in the Middle East, I’ll re-read this little “gem”
“Anytime Pat Buchanan start to make a lucid point about the quagmire in the Middle East”. Are you kidding? He’s been against this since the outset, but you didn’t know that did you? Don’t let your ignorance fool ya.
Trust me, I am very familiar with his thoughts on the ME. However much I agree with his message about Iraq, his xenophobic propaganda immediately discredits him.
Beating around the xenophobic bush, eh? That’s your propoganda. Why should anyone trust you? You discredit yourself with a vague reference that he was somehow in favor of the of the Iraq war. He’s not pro-Israel enough for you? I can only hazard a guess. In the book, he writes that “conservatives now routinely denounce as “racist,” “nativist” and “xenophobic” anyone who argues that mass migration from the Third World risks disuniting and even destroying America.”
Instead of killing the messenger, consider the real possibility that 100 million hispanics will be occupying the southwest by 2050. That is the point to be argued. This is not OT. Like it or not, illegals are a huge factor in the real estate industry, e.g. a source of cheap labor as well as a growing pool of buyers and renters. 100 million??? Can you say Aztlan Plot? You don’t have a problem with that or refuse to believe it because Buchanan says it? Perhaps you live in a safe, fenced-gate community somewhere in the northeast and like to preach about the need for diversity and tolerance. I live in Arizona and I’m sick of the graffiti, gangs, crime, garbage and overcrowding. Send them home and build a fence!
“Like it or not, illegals are a huge factor in the real estate industry, e.g. a source of cheap labor as well as a growing pool of buyers and renters ……”
I agree with impact 1 & 3 …… but buyers? What, 5 families to a house? Before you say this is already happening, remember that the growing Hispanic population in the west has a glacier growth speed effect on housing demand and value (I assume that explains the 2050 timeline). Our current housing crisis (and our 2006 housing situation) is on fire as we speak. The housing debacle we find ourselves in will not be ‘bailed out’ IMHO by illegals in large numbers who find it affordable …. in the short run (4-5 years). They will not bail out this run-up in prices …. no time to do it. Too much short term financial crisis for a long term solution.
Not taking sides in a discussion that has obviously been well ‘beaten’ in the past, it looks to me like where we’re headed for housing should probably stay with topics and impacts within the next decade. Going beyond that would truly require a crystal ball …..
(hell, next week could require a crystal ball …..)
this is for fred the hooper. how convenient to blame the liberals for the immagration problem. it couldn’t be due to the republican fiscal rapists going into to these countries and expoiting the hell out of them and sucking out there natural resources arm-in-arm with their puppet regimes. why do you think we are so beloved in Venezuala et al. then they cut a deal with their puppets to loosen up the immagration restrictions so the people don’t revolt. buchannan is the biggest hypocrite going. what do they care, they don’t have to rub shoulders with them in their ivory towers.
what is your problem with 100m hispanics? isn’t that what we need to compete with low wage labor from china? if we have a few more hundred millions of them, a trade surplus with china will be within our grasp, and maintain our pre-eminence and status as the largest economy in the world for all time. with our population of only 1/5 of china, they will surpass our economic size within our lifetime. and there goes all the privileges and benefits of being number one.
Since when do we want to compete with China for cheap labor? We will never win that one! Minimum wage workers and below add little if anything to our economy.
And as for what is so bad about 100M Hispanics? Nothing, as long as they aren’t working under the table or at a minimum wage job. Otherwise, they generally take more from our system than they contribute.
Fred said nothing about liberals, he quoted Pat as blaming Conservatives…if the liberals had their ways, our border would be closed to all but refugees and companies would not be allowed to outsource. Ah, but that isn’t quite as fun as likening Conservatives to Hitler, is it?
Hasn’t Pat Buchanan basically called the Iraq campaign a quagmire from the beginning? There’s your lucidity data point.
I know arguing on the interweb is like winning in the Special Olympics, but I have to point out that “Hispanic” refers to an ethnicity and not a race.
Now we’re picking on the differently-abled too ?
I am an orange grower, and I use 100% American labor and no illegals. I have a special currently, 3 oranges for $20.
“By 2050, there will be 100 million Hispanics concentrated in the U.S. Southwest.”
100 million people is approximately the entire population of Mexico. I guess if Mexico empties out, I can get some inexpensive beachfront property at Cabo San Lucas
Hey Fred,
If you have a problem with people calling those with your viewpoints “racist” and “xenophobic,” then you might want to stop conflating “illegals” and “hispanics.” I especially like your comment below that implies that they are responsible for all gangs, crime and graffiti. The real icing on the cake is your idea that we should “…send them home and build a fence.” You’re a real humanitarian, huh?
BTW you can’t send all Hispanics “home” (whatever that means). Let me point out the distinction again: not all Hispanics are illegal immigrants. Why don’t we send those pesky Europeans home and build a seawall?
Stop scapegoating the indigent. Release your pent-up, impotent white-rage on a Realtor or something.
PS You are a real xenophobic, racist piece of work.
HTH
impotent white-rage
What was that about racism?
Hooper’s a Japanese name, right?
This level of “other-hatred” and paranoia on both sides is absolutely fascinating and I will be amazed to see where it ends.
You both will be bought and sold while you tear at each other.
Chill, dude, mine was a joke. I agree the white-rage comment was probably out of line, but you haven’t seen a whole lot of minorities signing up for the Minutemen, you know?
Sorry I didn’t catch your joking tone, I can see it now.
I actually saw a “30 days” (a series from the “Super-Size-Me” guy) where a legal Latino immigrant who spoke fluent Spanish and was a member of the minutemen spent a month with an illegal family.
So, no. I don’t know. I try very hard NOT to know.
One part of me finds it sad and another is just bemused. These issues are used to blind people to the real theft going on.
I’m as white as they come. I was just race-baiting.
One could point out that many hispanics were here before any “white’ europeans, especially those with native american blood.
Spanish was also spoken in much of CA before English.
Hmmm…maybe the Hispanics could then give Cali back to the Chumash and they could cede it to the Aztecs, or maybe even the Asians that crossed the ice-bridge 25,000 years ago? The point being that there was always SOMEBODY here before someone else. Who’s land is it really? God’s? Gaia’s? None of the above?
I’ll take the realistic stance that the land CURRENTLY belongs to America and one thing is certain, despite all of it’s shortcomings, Cali is still a heck of a lot better than anything going on in Mexico or anywhere else in Latin or South America.
With this in mind, we need to immediately seal the Southern border, deport all 12 million illegal aliens and make English the one and only offical language. BTW, I have no problem with any LEGAL immigrant of any type, although we should strictly limit legal immigration to those that have money, education, marketable skill, etc. (Australian-style.) No more hordes of uneducated underclass clogging emergency rooms with anchor babies and ESL in the classroom. We’ve had about enough of that don’t you think?
There will be a mass out-migration from the US once the economic catastrophe picks up some steam. Mostly illegals, but even some legals too.
AGree with Darth Troll and Hooper, though I would not go intO hysterical denuciations of illegals nor make racial remarks against their race or ethnicity. Have had quite a bit of contact with the immigrant Hispanic community here in Scal, and there are many immigrants who just want to come here and make a decent living. Unfortunately, there are some bad apples also who have abused and scammed the system, through all kinds of fraud and criminal acts which it would take several pages to document.
That being said, There needs to be a severe tightening of our borders now. The best would be a triple-layer, razer-topped fence with deep ditchs, with a dirt road running between the second-third fence, and surveleance cameras with night vision all along the fence. Border posts should be sited each 500-1000 ft with regular roving patrols every hr. The minite men are constructing 11 miles of this type of fence ona private property near the border, and this type is used by the israeli’s to keep out Palestinian infiltradors.
Thismust be the immediate aim and first priority for the upcoming passage of an immigration bill. Without first tightening and sealing out borders, all talk of amnesty, deportation, sanctions is nonsense.
I send over 300 e-mails, letters, faxes on this issue back in 2003: My barrage of e-mails along with other concerned citizens was what put this issue on the front burner, 20 years too late in my opinion.
I say “Mexicans for everyone!”
Funny how the eastern europeans saw the same fences as the walls of their prisons!
“No more hordes of uneducated underclass clogging emergency rooms with anchor babies and ESL in the classroom. We’ve had about enough of that don’t you think?”
So you’re kicking southern rural blacks out too?
Just like the 30’s… People fretting about the fake immigration crisis ought to read history more. The backlash against immigrants has only begun, once the economic trouble really starts, it’ll get uglier than you currently guess.
And people will leave in droves, just like the ’30s.
Bruin,
Controlling Immigration is not impotent white rage. It is the responsibility of any sovereign nation to protect and control borders. Take your so called “humanitarian” tripe and feed it back to the college professors that brainwashed you.
College professors bad; racism good.
Sending all Hispanics home is not “controlling immigration” ,either, you ignorant honkey. See every line of the above post.
The impotent white-rage comment was just for schtick purposes, but I really am seeing alot of it coming out after I mentioned it. Immigrants are not the source of your problems, your lack of any skills or charisma (including reading comprehension skills is probably the culprit. I bet you 1)feel enraged by this, 2)are white and 3) can’t do anything about it, right? That’s what I’m getting at.
HTH
PS Just to help you out, the word “honkey” above is intended to get your impotent white-rage going again. Have a great day.
I agree with Fred on this, and am proud to be a RACIST.
The propaganda that started with the Immigration Reform act in 1965 was that America was a Nation of immigrants, is just that, PROPAGANDA. Everyone has heard that repeated so often it is a “truism”, but it isn’t. Until recently, most Americans were “native born”.
But if you want to say we are a nation of “immigrants’”, then America has been a nation of WHITE EUROPEAN IMMIGRANTS, basically an extension of Europe, for the most part, with the exception of the Slave trade..
But everything that made America great….came from the EUROPEANS. Period. Art. Science. Industry. Civilization as we know it is from a bunch of White guys. Think Beethoven, Mozart/ Gallileo/Newton/Currie/Ohm/Wright brothers/Leonardo/etc. etc. etc. I know, it’s all very “EUROCENTRIC”, as a Plague of of the modern world.
Africa has contributed mostly nothing to science/mathematics/architecture/law/etc, etc, etc. (Although we have a black history month to try and prove how much Africans contributed to the new world). Neither have the many other “NEW” immigrants. They come to take. The history of Western Civilization is now threathened as the various third world groups(you name the group) seek to relocate to predominately white countries because that is where all the stuff is (the result of industrialization). And everyone of them are RACISTS. I don’t see any Mexicans demanding Immigrant rights for Russians. NO! They want to bring their “brothers” here. They are not happy just to be here, they think everyone of “their” KIND should be here, too.
Buchanan is 100% right.
America is becoming Babylon, and as a White man, I think it’s a BAD thing. Their is no benefit to me in turning the Country into an extension of South America.
And, you are wrong. All the gang crap and crimes that have been happening in my neck of the woods have been Latin Kings/MS13/ etc, etc. Third world trash that have no right to be here.
We have new “gang” enforcement groups with the local sheriffs office. This is a NEW problem as we have seen the number of illegals rise.
I don’t care about “world competition”. I am sure we can get along just fine without all the world trade, if we simply go back to making things here.
But the corporate shills don’t want that…but that is another dicussion altogether.
You, like all your brothers, are a RACIST. You simply won’t admit it. You want to change the discussion to America “needs” the “Hispanics”.
How did we every become the once greatest country and civilization on this planet with a bunch of White Guys running everything? I am sure we can find a way to get along without more of you.
Have a nice day.
Diogenes…you nailed it. An interesting side bar is the Black on Black racism that I have observed and read about in South Florida. The new African Blacks imigrating don’t like the “African-Americans” because they aren’t really “African”, and the Caribbean Blacks also clash with all the others. You are right that everyone is a racist and if we don’t do something about preserving our national culture, language, and borders we are all screwed. All immigrants should be required to show progress at assimilation and pledge an oath to the United States of America. If that doesn’t appeal to them, then they should immediately return to where they came from. European colonists were civilizing most parts of the world until it became politically incorrect and they ceded power back to the “natives” in many colonies. Once reverted back to the natives, most of the advances (agriculture, technology, medical care, etc.) dissolves in just a few generations (look what is happening to South Africa, and imagine how much better the world would be if the British kept their colonies in the Middle East (i.e. Iraq). I am appallied that our government isn’t doing more to protect the citizens from this societal degradation. That is supposed to be their number one priority. Yet due to the ACLU and other commie organizations, it is “politically” incorrect to do what is right. There really is no argument to what you stated, it is obvious and unfortunately most people put on blinders and try to ignore what is happening.
Just in case anyone thinks we’re all a bunch of racist idiots here, may I just be the first to say that this tripe is really poorly thought out gibberish, filled historical inaccuracies and oversimplifications. And they’re insensitive jerks.
Just wanted to get that out there. If you keep silent, people think you agree with the jerks.
Jim D, rather than just calling people jerks and racists, (which I am not), especially since you don’t even know my race, please provide some factual feedback as a rebutal to the above statements. Diogenes may come off as a bit extreme, but please provide any historical facts that prove him wrong. I will gladly hear what you have to say as long as it is factual and not liberal giberish. Simple, single examples to the contrary (anecdotel evidence) do not count…I want a broad thesis on why Diogenes is not correct in his assessment. I am a nationalist and want what is best for all Americans for the future. I am not a racist.
Jim D, one more thing. In regard to your statement,
“If you keep silent, people think you agree with the jerks.” I do agree with that. However, I feel you are a the narrow-minded individual that isn’t comprehending the obvious, NOT Diogenes. People shouldn’t back down from commenting out of fear of being called a racist from folks like you. I just can’t understand why you would want to give up your country to becoming a second or third world nation. Please counter with ANY logical argument. Too much diversity separates the populace, it doesn’t create harmony. Wake up and have a nice day.
I have a few questions:
1) Do you really think that your alternate history true?
2) Do you believe that the Holocaust occurred?
3) What is the name of the white nationalist organization that taught you all of this?
4) Do you think the world would be better if you died, or, alternatively, if you had never been born at all?
BTW which brothers? Do you have any reason to believe that anyone you are addressing is Hispanic? I already let everyone know that I was “as white as they come.”
test
I should probably let this die but…
Your whole alternative history rests on the idea that all positive influences on culture have come from Europeans. First of all, what you mean to say is that all such influences on Western culture (including its American incarnation) came from Europeans. You ignore all other cultures as unimportant or otherwise undesirable. But I digress. As a matter of history, your fantasy is untrue. You list several artists and composers who contributed to Western culture. It is true, but not surprising, that Westerners had the largest impact on Western art and music. But what about philosophy? Many hellenistic texts were first translated into English not from Greek but from Arabic. Ever heard of the “Dark Ages?” If not for non-Europeans (viz. Arab and Persian Muslims) preserving and carrying on traditions in medicine, science and philosophy there would be no Western civilization.
I am no historian so I will not attempt to show every contribution made by every non-European to Western society. Neither do I feel compelled to do so.
In the American context specifically, it is, prima facie, absurd to require parity in the contributions of a power-wielding overclass and those of their slaves who have been deprived the substantive freedoms which, inter alia, are preconditions of such contributions. PSA: In Idaho-White-Nationalist-Milita-Speak, that sentence reads “If yu’uns are plantation owners ya’ll can do stuff what were important an’ all cuz you got the time and money an’ whatnot, but them there slaves can’t on account of pickin’ the cotton an’ all.”
Not only is it absurd to require parity, but you ignore the fact that it is the very labor of slaves that freed Eurpoean Americans to innovate and make contributions to this society. This line of reasoning holds after abolition as well, albeit to a slightly lesser extent.
A similar line of reasoning holds for immigrants who provide cheap dehumanizing labor so that we can have a class of bubble-bloggers cu m Philosopher-King-White-Nationalists who perform very little labor.
Everyone happy with that?
You = Blathering racist. Quod Erat Demonstrandum.
Good Day.
I’m no economist, but how can prices NOT go down more than 10%? The irrational run-up in prices totally defied the underlying fundamentals, so why should we not expect a crash and burn scenario? Differences between this and the last market:
• High amount of speculation, dramatically increased by the internet, which wasn’t even in popular use back then.
• High usage of exotic loans, again which were hardly in existence.
• High increase in home equity borrowing.
• High siphoning of jobs to other parts of the world, this time largely in higher-paying jobs, but masked by the job boom created by the RE bubble.
The conditions last time around were way better, yet prices dropped 37%.
Not to mention long term interest rates dropping from about 10% to 7% to lessen the blow.
At the beginning of 2004 there was trend break in CA and NV and prices soared tremendously by 2-3 times. If prices fall back to that level of the end of 2004 they will then be pretty much in line with prices in say the Boston area. And prices in Boston are declining… The CA/NV bubble is unlike other areas and should crash much more.
Sorry should be beginning of 2004.
Prices in many San Diego areas are already down 10-15% — and most people don’t even realize it yet. I have quite a few examples of homes on the market priced below mid-2004 levels, and they are NOT selling. Don’t know how Thornberg thinks this is going to be mild. Time will tell…
Bring it on I say! I want to move back to Cali soon.
While I disagree with Thornberg on the amount, I tend to agree on the prediction that this will take some time. I have seen how people react when they find themselves going under - they will borrow money from credit cards, friends, family, whatever to hang on in hopes that things will get better before they run out of time.
Here in S&M, I noticed the market start to freeze up about six months ago. The same inventory has been for sale for months, especially at the high end. Next, I expect to see properties go off the market for a while, and only come back after the owners have depleted their last resources and are well along in the foreclosure process. Then I expect to see some serious price drops. But that could take another year or more, and could take some additional time to play out, since each individual situation will run on its own timetable.
And, who knows? We could start seeing the current inflation start filtering through to people’s incomes, for example. That would push back the day of reckoning by causing an effective reduction in loan payments as a portion of income. Of course, pigs could start calling in IFR flight plans next week as well.
You’ve nailed it……
And the ‘serious price drops’ will be accompanied by a bidding war between the nail biting fence sitters, pushing the price up for that property just slightly above asking, signaling to sellers that those bastard buyers are just waiting to steal their home too.
“There were 5 couples that bid on that house honey ….. that leaves 4 losers who just played their hand …… they want a home in this neighborhood alright…… let’s go 30K above that sale and see what we get ……”
You get ’sticky’ until 2010 ……
(and hey, pigs seem to be a pretty organized chaos with very little direction needed….. more than can be said for our airports)
At the point of “serious price drops” I don’t think there will be a big enough pool of buyers to start bidding wars. We have to remember that those of us who got out and are sitting on the sidelines with cash are in the extreme minority.
Exactly. I hate to say it’s different this time, but the amount of creative financing and the extent of the population using it leads me to believe Thornberg understates the case. The one thing going for the housing market (asset bubble) is the huge amount of resources (financial industry) that have a vested interest in somehow keeping it going and the rat-like ability of individuals to cling to a sinking ship.
Things to do today: Stir hornets nest. Check.
Takeover of the Southwest by Illegals well underway:
Arizona Republic
Aug. 22, 2006
http://www.azcentral.com/arizonarepublic/news/articles/0822minority-majority0822.html
“Minorities, with higher fertility rates, larger families and younger workers, are concentrated in the younger population, while many middle-age and senior residents are Anglos, he said.
“You have both a generation gap and cultural gap, so to speak,” Frey said.
He said minorities who migrated en masse to California in the past decade, swelling its population to minority-majority status, are now heading inland, while more are coming to the West from other parts of this country and abroad.”
“And on Friday, Boeing Co. told its workers in Long Beach that production on the C-17 military cargo airplane is ending. Is this going to be an economic train wreck like the one that happened in the early 1990s?”
“No, concludes economist Christopher Thornberg in a somewhat surprising assessment since he’s been one of the biggest bears about the California real estate market.”
Why is it that no “economist” can see that the loss of RE related jobs will be greater or equal to the loss of areospace jobs in the 90’s? Hence, the economic “train wreck” is happening right now….just verrry slowly. When the foreclosures start spiking and 2.7 trillion dollars in loans have yet to reset….”Houston, we have a problem!”
Answer: “It is difficult to get a man to understand something when his salary depends upon his NOT understanding it.”
–Upton Sinclair
There’s another explanation: economists –like generals– are often fighting the last war and fail to see the differences between then and now. CA’s economy is now RE dependent in a way similar to how is was military spending dependent during the Cold War. That plus all those minimum payment optio-ARMers puts us into uncharted waters.
It truly is “different this time”, but not the way bulls think.
The most challenging thing for an economist to do is removing the rose colored glasses.
I was waiting for someone to comment about the Long Beach plant. I have read several times over the past few years that the 1990 downturn was caused by layoffs in Aerospace, and that “this time is different” because the SoCal economy is much stronger and more diverse.
Hey, wait a minute, there’s a big article about how the last aerospace plant is closing.
The economy is VERY diverse in SoCal - there’s builders, lenders, RE agents, … furniture stores, …
Seems to me there’s enough data and impirical information to build a model. Then just start turning a few knobs and see when the model shows a collapse in housing.
Incomes levels
Lending stds
interst rates
mortgage resets
inflation
energy costs
inventory levels
affordability
…
… a few more and go.
I agree with you experts should have the ability to predict some kind of time frame for a collapse in the housing prices from the available data, Az Bubblepopper. I wonder how many of the 53K+ listings in the greater Phoenix area are by people who want to capture the $200K equity in their stucco crap box before the market plummets so that they can move up to a better house and neighborhood. Thousands of people have cancelled their new home purchases this spring and summer because they are unable to sell their current house. I read recently that there is virtually no market for 1980’s and 1990’s vintage homes. Buyers want only new or near new homes. IMHO this group of sellers still have their homes on the market and will not drop their prices until new homes are at a price they can afford. If this is true, the FB’s will have to lead the way through foreclosures if we are going to see meaningful price drops. I recall a recent post that talked about soaring default rates in places like Colorado and Texas. However, the Colorado problem loan rate was cited as 1 in 480+ homes (third highest in the nation). Is this going to take years to collapse? Maybe the number of non occupant flippers is high enough to get things started. Although I am not minding renting, since it is better than loosing money in a declining market, I want to own my home in the not to distant future. Any comments?
There is no way to predict how long something like this will take. After all, who could have predicted the 15-year drop in prices in Japan?
What’s even more amazing about Thornberg’s current position (and I credit Carlsbad Jim’s site for the reference) is his acknowledgement that during the month of July, California added exactly 900 jobs. That’s not 9,000. Just 900. Which, he says, when you consider that jobs added in California should be approximately 25,000 / mo, is the equivalent of ZERO.
Yeah, and prices will go down by ONLY 10%. C’mon, Chris, get with the program.
I know many of us are getting impatient. On top of it these ‘experts’ like Thornberg predict 10% fall, no big deal.
But a lesson in history at this time will do some good to all of us bubbleheads !
++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Of Bubbles Past: A Chronological Listing of News
Headlines from the Last Housing Bubble
There’s been some confusion on the blogs about just
what went on during the last housing bust in Southern
California. I was there then; I lived through it, I
owned property, and I can tell you it was no fun at
all. Then, like here, like now, people were saying
things like “housing has never gone down here before
(so it won’t ever go down)”, “housing always goes up”,
“houses aren’t like stocks”, “we’re special”, etc.,
etc., etc.
Below you will find a chronological listing of
selected Los Angeles Times articles originally
published between the years of 1985 and 1997
(inclusive) culled from their archives. The similarity
among headlines from then and now is quite
informative. But of course, the housing bubble of
today is far, far more extreme than it was then.
1985-1986: Housing is booming, inventory is low.
Housing Starts Surge 14.9% During January, Best
Gain in 20 Months
Los Angeles Times (pre-1997 Fulltext); Feb 20,
1985; pg. 1
Inventory of Housing Dips in Southland Unsold New
Homes Declined by 3.2% from End of l984
DAVID M. KINCHEN; Los Angeles Times (pre-1997
Fulltext); Mar 16, 1986; pg. 1
Housing Sales Boom Keeps Inventories Slim
DICK TURPIN; Los Angeles Times (pre-1997
Fulltext); Aug 24, 1986; pg. 1
1987: Housing still booming, prices increasing,
inventories low.
High-End Home Sales Push Up Median Price
Dick Turpin; Los Angeles Times (pre-1997
Fulltext); Mar 15, 1987; pg. 1
Inventory of Unsold Homes Sets New Low
Los Angeles Times (pre-1997 Fulltext); Mar 15,
1987; pg. 1
Fewer Homes, High Prices as Mortgage Rates Climb
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Sep 10, 1987; pg. 1
Fixed-Mortgage Interest Rates Surge Woes Mount for
Home Buyers, Brokers
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Sep 10, 1987; pg. 1
Unsold Homes Inventory Drops for Third Time
DAVID M. KINCHEN; Los Angeles Times (pre-1997
Fulltext); Sep 13, 1987; pg.1
1988: People start to question the boom. Realtors
assure us the boom will continue. Houses aren’t like
stocks afterall.
‘88 Outlook Bright for U. S. Real Estate
Dick Turpin; Los Angeles Times (pre-1997
Fulltext); Jan 10, 1988; pg. 1
County’s Median Resale Price of Homes Reaches
$179,999, Costliest in California
JOHN O’DELL; Los Angeles Times (pre-1997
Fulltext); Mar 23, 1988; pg. 5
Unlike Stocks, Home Prices Rarely Collapse
JAMES FLANIGAN; Los Angeles Times (pre-1997
Fulltext); Aug 28, 1988; pg. 1
Southland Inventory of Unsold New Homes Lowest in
Decade
DAVID M. KINCHEN; Los Angeles Times (pre-1997
Fulltext); Sep 11, 1988; pg. 10
J. M. Peters Reports Skyrocketing Sales for Second
Quarter
MICHAEL FLAGG; Los Angeles Times (pre-1997
Fulltext); Sep 14, 1988; pg. 5
Limit Issue Driving Up Home Prices
Dick Turpin; Los Angeles Times (pre-1997
Fulltext); Sep 18, 1988; pg. 1
Hot Housing Sales Belie Doom Forecast
Ryon, Ruth; Los Angeles Times; Sep 25, 1988; Vol.
107, Iss. 297; 8; pg. 1
1989: Prices are very expensive; affordability an
issue. Sales slow and prices drop. Mention of risky
loan types.
Housing Prices in State Climb 3% in February
Furlong, Tom; Los Angeles Times; Mar 29, 1989;
Vol. 108, Iss. 116; 4; pg. 1
Stock of Unsold Homes Drops Dramatically
DAVID M. KINCHEN; Los Angeles Times (pre-1997
Fulltext); Apr 2, 1989; pg. 9
How First-Time Buyers CAn Get Their Piece of the
Dream
Myers, David W; Los Angeles Times; May 21, 1989;
pg. VIII1
State’s Home Sales Drop 14% Median Price Tops
$200,000 for First Time
Crouch, Gregory; Los Angeles Times; May 25, 1989;
pg. IV1
Sales of Existing Homes in State Fall During May
Furlong, Tom; Los Angeles Times; Jun 23, 1989;
Vol. 108, Iss. 202; 4; pg. 1
Orange County Home Sales Drop by 22% in May
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Jun 23, 1989; pg. 1
Realtors Tackle New Topic: How to Handle Slow
Housing Market
Myers, David W; Los Angeles Times; Oct 1, 1989;
pg. VIII1
Prices Drop, Sales Slow in State’s Housing Market
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Nov 29, 1989; pg. 1
Housing Affordability Rises Outside L.A., Orange
County
Kristof, Kathy M.; Los Angeles Times; Dec 06,
1989; Vol. 109, Iss. 3; D; pg. 1
Survey Cites Four California Banks With Possibly
Risky Realty Loans
JAMES BATES; Los Angeles Times (pre-1997
Fulltext); Dec 30, 1989; pg. 1
1990: Prices take a serious plunge. One article claims
that housing booms are a bad thing and we should hope
prices stay low. Increasing mortgage rates are blamed
for the bust. The word “recession” is mentioned. Gloom
and doom.
Home Sales in Southland Plunge in ‘89
Samuels, Alisa; Los Angeles Times; Feb 8, 1990;
pg. D2
The Number of Homes for Sale Sets a Record Real
Estate: San Diego becomes buyer’s market, with 4,000
existing homes listed in January.
GREG JOHNSON; Los Angeles Times (pre-1997
Fulltext); Feb 13, 1990; pg. 2.A
Pray That the Housing Boom Stays Dead
Jones, Robert A; Los Angeles Times; Apr 24, 1990;
pg. A3
Climbing Mortgage Rates Hurt Existing Home Sales
Samuels, Alisa; Los Angeles Times; Apr 26, 1990;
Vol. 109, Iss. 144; D; pg. 3
California Is Nearing the Edge of Recession, UCLA
Forecast Warns
Anderson, Harry; Los Angeles Times; Jun 29, 1990;
Vol. 109, Iss. 208; D; pg. 1
California Real Estate Market Continues to Cool
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Jul 26, 1990; pg. 1
Home Sales in July at Slowest Pace in 4 1/2 Years
Furlong, Tom; Los Angeles Times; Aug 28, 1990;
Vol. 109, Iss. 268; D; pg. 2
Realtors Hear Gloomy Price, Sales Forecasts
Myers, David W; Los Angeles Times; Oct 7, 1990;
pg. K1
O.C. Home Resales, Prices Fall Sharply Housing:
Realtors group attributes slump in county and state
figures to fears of recession.
MICHAEL FLAGG; Los Angeles Times (pre-1997
Fulltext); Oct 26, 1990; pg. 5
Housing Slump in California Seen Worsening
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Nov 21, 1990; pg. 1
1991: A “dead cat bounce”? Some folks wondering if the
bust has bottomed out or not. Sales are abysmal (e.g.,
-42%). Other parts of the country showing some signs
of recovery.
Back to Basics
Inman, Bradley; Los Angeles Times; Jan 20, 1991;
pg. K1
Re-Assessing When Home Prices Fall
Boyer, Jeanne; Los Angeles Times; Feb 3, 1991; pg.
K1
California Still Among Lagging Areas, Fed Says
JAMES RISEN; Los Angeles Times (pre-1997
Fulltext); May 2, 1991; pg. 1
Reading Signs–Is Market at Bottom?
Inman, Bradley; Los Angeles Times; Sep 8, 1991;
pg. K1
County’s New-Home Sales Plunge 42% for Quarter *
Real estate: New figures indicate the market is
sputtering again after a brief recovery. The inventory
of unsold houses rose by 15%.
GREGORY CROUCH; Los Angeles Times (pre-1997
Fulltext); Oct 4, 1991; pg. 5
Home Sales Decline in California
Los Angeles Times; Nov 26, 1991; pg. D1
Home Sales Decline in California Housing: The drop
in mortgage rates fails to spur sales in the state,
but sales of existing homes across the country edge up
in October.
Los Angeles Times (pre-1997 Fulltext); Nov 26,
1991; pg. 1
1992: No one is buying; housing is an investment that
no one will touch. Desperate political efforts being
made to encourage house buying. Rock bottom prices and
lower mortgage rates encourage some purchasing. The
year ends with some buying. Another “dead cat bounce”?
It’s not clear.
Move-Up Home Buyers Pretty Much Left Out Real
estate: While Bush’s plan may boost first-time
purchases, it does little to dispel caution in the
other key housing sector.
JUBE SHIVER Jr.; Los Angeles Times (pre-1997
Fulltext); Jan 30, 1992; pg. 4
Home Sales in State Fell 6.2% in 1991
Shiver, Jube, Jr.; Los Angeles Times; Feb 12,
1992; D; pg. 1
Spring Thaw Real estate: The local housing market
is showing signs of recovery. More realistic selling
prices and reasonable interest rates have helped to
spur sales.
PATRICIA WARD BIEDERMAN; Los Angeles Times
(pre-1997 Fulltext); Mar 26, 1992; pg. 1
Housing Starts Increase 6.4% to 2-Year High *
Economy: A strong surge in apartment building leads
the way, providing economists with more evidence of a
sustained recovery.
JUBE SHIVER Jr.; Los Angeles Times (pre-1997
Fulltext); Apr 18, 1992; pg. 1
June Home Sales 3.5% over May but Trail 1991
Figure
Los Angeles Times; Aug 2, 1992; pg. K1
August Housing Starts Rebound 10.4%, U.S. Says
Marshall, Matt; Los Angeles Times; Sep 23, 1992;
D; pg. 1
California Home Sales Surge
Myers, David W; Los Angeles Times; Nov 25, 1992;
pg. D1
Sales of Existing Homes in California Rise Again
Myers, David W; Los Angeles Times; Dec 24, 1992;
pg. D1
1993: It’s definitely a buyer’s market. Some people
are saddened by the fact that current prices are 50%
of what they were in the 1980’s. The housing bust in
Southern California is clearly negatively impacting
the California economy and the national economy at
large. Sellers are desperate to sell (and some people
taking extreme measures like putting huge “for sale”
signs on their lawns for passing planes to see). Folks
who waited out the boom to buy at the bottom are being
handsomely rewarded for their patience. Proof-positive
of the contrarian investing style — be greedy when
everyone is fearful and fearful when everyone is
greedy. The “slump” may be ending.
Long Southland Housing Slump Finally Ending?
DAVID W. MYERS; Los Angeles Times (pre-1997
Fulltext); Feb 10, 1993; pg. 1
Housing Market Warming Up After 3-Year Slump Real
estate: Optimism returns to Southland with rising
sales. Number of homes on market is down.
DAVID W. MYERS; Los Angeles Times (pre-1997
Fulltext); Feb 10, 1993; pg. 1
A sad Westside story: Home prices have declined up
to 50% since late 1980s
Myers, David W; Los Angeles Times; May 28, 1993;
D; pg. 1
Couple Put Up a Big Sign of the Real Estate Slump
Housing: They write `For Sale’ in huge letters on
their lawn, hoping to attract attention from
passengers in planes and jets on flight path to LAX.
DICK WAGNER; Los Angeles Times (pre-1997; Apr 29,
1993; pg. 8
Home Sales in County Climb by 3% Real estate: The
market bucks the downward trend of neighboring areas.
But analysts say don’t be too optimistic.
STEPHANIE SIMON; Los Angeles Times (pre-1997
Fulltext); May 28, 1993; pg. 1
It’s a Buyer’s Market as Peninsula Home Prices
Tumble Real estate: Younger families are taking
another look at an area that was once beyond their
economic grasp. This could revitalize the school
district.
TED JOHNSON; Los Angeles Times (pre-1997; Jun 24,
1993; pg. 3
Home Sales Up 6.3% in State, 4.6% Nationwide Real
Estate: Analysts credit low interest rates and say
buyers are beginning to think that prices may have
bottomed out.
DAVID W. MYERS; Los Angeles Times (pre-1997
Fulltext); Jun 26, 1993; pg. 1
California’s real estate slump deepens
Miller, Greg; Los Angeles Times; Jul 27, 1993; pg.
D2
Southland home values lead U.S.–Downward
Myers, David W; Los Angeles Times; Aug 4, 1993;
pg. D1
Bottom Line: Housing Market May Be Mending Real
Estate: Despite a three-year slump, experts say prices
are stabilizing, especially for homes under $500,000.
PATRICIA WARD BIEDERMAN; Los Angeles Times
(pre-1997 Fulltext); Aug 22, 1993; pg. 1
Buyers Seek Bargains as Home Prices Keep Sliding
Real estate: La Canada Flintridge emerges as bright
spot with a nearly 21% increase in sales over same
period last year.
ANDREW LePAGE; Los Angeles Times (pre-1997
Fulltext); Sep 2, 1993; pg. 1
Sitting on the market: After the cash, owners
adjust to the region’s housing slump
Myers, David W; Los Angeles Times; Sep 20, 1993;
D; pg. 1
State’s bargain hunters boost new-home sales to
3-year high
Myers, David W; Los Angeles Times; Oct 1, 1993;
pg. D1
Home Sales Rise Sharply in State, Nation Real
estate: Size of increase surprises housing analysts.
Median price in California is down 4.3% from 1992
figure.
DAVID W. MYERS; Los Angeles Times (pre-1997
Fulltext); Oct 26, 1993; pg. 2
Jump in new-home sales spurs hopes of long-awaited
revival
Myers, David W; Los Angeles Times; Nov 3, 1993;
pg. D1
Drop in Southland Home Sales Slows in First 10
Months of ‘93
Los Angeles Times (pre-1997 Fulltext); Nov 28,
1993; pg. 4
U.S. home sales hit 14-year high
Myers, David W; Los Angeles Times; Nov 30, 1993;
pg. D1
Slump in O.C. Housing Market May Be Ending Real
estate: November figures show a major year-to-year
increase in the number of units sold. Median price
still sags.
JOHN O’DELL; Los Angeles Times (pre-1997
Fulltext); Dec 21, 1993; pg. 1
1994: Housing begins its comeback. People who had the
intelligence to wait for the bottom are buying now at
great values. Even rising mortgage rates are not
shaking the recovery.
Bright Spots Some Areas Showing Signs of Recovery
After Four-Year Slump in Home Prices
Los Angeles Times (pre-1997 Fulltext); Jan 16,
1994; pg. 1
Lenders scramble to keep housing comeback alive
Myers, David W; Los Angeles Times; Mar 30, 1994;
D; pg. 1
First-Time Buyers Who Waited Spark Housing Rebound
Real estate: After years of ice-cold sales, the city’s
Westside market is finally starting to heat up.
SCOTT SHIBUYA BROWN; Los Angeles Times (pre-1997
Fulltext); Jun 5, 1994; pg. 10
Home Sales Up 24% From Last Year
Los Angeles Times (pre-1997 Fulltext); Jun 26,
1994; pg. 6
June Home Sales Best in 5 Years Ventura County Is
Leader
Jack Searles; Los Angeles Times (pre-1997
Fulltext); Jul 26, 1994; pg. 8
Rising mortgage rates shake but don’t break state
housing industry
Lee, Patrick; Los Angeles Times; Oct 7, 1994; pg.
D1
1995: Some parts of the Southland are recovering
others are not. People with “negative equity” are in
despair.
Home Sales Rise 10.5% in State, Hit 5-Year High
JAMES F. PELTZ; Los Angeles Times (pre-1997
Fulltext); Feb 9, 1995; pg. 1
Southland Home Price Rebound Fails to Appear
JESUS SANCHEZ; Los Angeles Times (pre-1997
Fulltext); May 22, 1995; pg. 1
County Home Sales Slide 20.4% in May
DAVID R. BAKER; Los Angeles Times (pre-1997
Fulltext); Jun 13, 1995; pg. 1
Home sales surge 19% in May, raising doubts of
rate cut
Mowbray, Rebecca; Los Angeles Times; Jun 30, 1995;
D; pg. 1
Study of Homeowners Finds `Negative Equity’ a
Problem Real estate: Nearly 5% owe more than homes are
worth. Impact hinders the state’s economy, experts
say.
DEBORA VRANA; Los Angeles Times (pre-1997
Fulltext); Jul 6, 1995; pg. 1
O.C. Real Estate Sales Drop Property: Preliminary
figures for July suggest the county’s housing market
is still in a slump.
DEBORA VRANA; Los Angeles Times (pre-1997
Fulltext); Aug 1, 1995; pg. 1
1996: A tentative recovery is still in the making.
State’s housing market finally in turnaround
Sanchez, Jesus; Los Angeles Times; Oct 25, 1996;
pg. D1, 1
O.C. homeowners more confident
Fulmer, Melinda; Los Angeles Times; Dec 3, 1996;
pg. D.2
Ready to fly? Region’s housing prices on rise,
moderately
Sanchez, Jesus; Los Angeles Times; Dec 29, 1996;
pg. D.1
1997: Finally, housing has recovered.
Southland Home Sales Are Unseasonably Hot Real
estate: In O.C., October sales were 46.5% higher than
last year. Median price of $208,000 was highest since
1994.
E. SCOTT RECKARD; Los Angeles Times; Nov 14, 1997;
pg. 1
Median Price for O.C. Homes Surges 10.5%
E. SCOTT RECKARD; Los Angeles Times; Dec 10, 1997;
pg. 1
And the rest, as they say, is history.
If you wish to repeat this search, go to the LA Times
website, click on the advanced search tab. The key
words I searched on were “california housing real
estate” between the dates of 01/01/1985 and
12/30/1997.
desidude,
thanks for the helpful post.
Just so that credit is given where it is due
The post above is due to a poster on this blog (older version). I just saved so that I get to read it once in a while. Kind of of medicine to keep you going crazy when all my friends bug me about their home prices.
I consider it my duty to post this one in a while for the benefit of new comers (and old timers) on this blog.
I see several posters from ventura county , these days (newbury park, camarillo, simivalley etc).
I believe we should get together , probably the first month ventura county has a YOY -ve price appreciation!!
Robert, what do you think!!!
Desidude,
I’ve actually had this post printed out and tucked away in my office drawer so I can conveniently bring it out during those frustrating days like today when I read this drivel of an article which ironically came from that same LA Times.
Now if one of the LA Times writers could just sack up and post this timeline in the business section I think it would cut through all this compromising BS that these realtors are desperately trying to make to get this disaster to further persist.
The LA Times SHOULD post the list. It would be GOOD reporting. It is the true history of the last bust. They kept claiming recovery over and over again…always asking…’Have we hit the bottom?’…Like they’re already doing now.
Desidude, thanks for keeping this one alive. I posted the link to this site a couple of times in the past. The link to the orignal site is:
http://www.rntl.net/history_of_a_housing_bubble.htm
I didn’t create this site and I don’t know who did but I bought my first house in 1989 in the OC area and this site nails my personal “learning” experience. I sold that house in 1998 for 10% less than what I paid in 1989 (without factoring in inflation).
Home prices fell for years. Home builders went BK. I sense this time things will be worse.
I am would like to meet as well. Have a lot of real estate stories but not a lot of time.
With press coverage and printouts of some of our favorite posts. We could even tour places like the shack in Oxnard that sold for $12/sq in and such.
Excellent history lesson. I lived in Santa Monica during this crash and remember it well. I’m surprised most of my nieghbors don’t seem to remember it. I’m now in Westlake Village where asking prices in my neighborhood appear to have fallen by nearly 10% since last summer. I suspect in real terms sales prices have already declined here YOY.
Re Thornburg’s 10% prediction, people must remember that he’s an academic so probably gets or expects to get consulting work from the REIC. I’m sure he’s aware of the crash, but doesn’t want to alienate potential clients.
I posted this compilation way back when. You can do me the favor of reading the original here:
http://tinyurl.com/8ryol
Thanks for the plug.
I crossed posted it on several occasions to the OC Register RE blog.
Didn’t get many comments, it probably exceeds the RE permabulls attention span.
I will link to your site in the future.
That’s cool. I am glad you did that.
I too bought in 1989, I give my self some latitude as I was 22 at the time. Was pretty much the worst financial disaster I have ever had. But I learned from my experience, I just hope it’s not a 20 year event so the 22 year old’s this time have a chance to try again armed with the knowledge of “Markets don’t always go up”.
Only time will tell.
OCBear
How funny and what a minor difference. I bought in 1994 at 23, great decison but pure chance.
I’m 22 right now. I’m not a bubble head, but I am a conscientious investor. From my REI education so far, I only plan on buying when the numbers make sense. Buy 30% below FMV in a level or climbing market. Or buy 30% below FMV + % decrease expected in a falling market. Or buy when the cash flow with less than 20% down makes sense. The numbers so far haven’t made sense, so I haven’t bought.
I don’t have much experience, but I don’t see why you can’t make money under any market conditions, you just have to be on top of the numbers at all times. I plan on bargain hunting when people are pleading for the sale of their home in the coming months and years.
Next time, please format this! It took me 1.5hours to summarize it down to two pages from ten, and I use wide margins! If somebody wants, I can post it, so that you have a formatted copy to keep. My summary is just the year synopsis, headlines, and dates.
‘I think there is..potential to have a mild retraction in prices, nothing dramatic. Housing prices are going to go down. The key is they are going to go down slowly, not rapidly.’”
Really? Based on what? Real incomes down y-o-y since 2001. Interest rates are increasing at the short end of the yield curve, growing risk aversion as defaults increase, and new banking regulations forthcoming will close down the liquidity spigot, so no more NINA loans. Consumer sentiment is declining, inventory is soaring, layoffs are increasing. So what is the mitigating factor that will make home prices stable?
I had high hopes when Thorneburg left UCLA’s Anderson team. I thought that meant that he was leaving so that he could voice opinions that were unpalletable to the school’s donors. Instead, it looks like he is going to become a pollyanna for the highest bidder.
If someone leaves academia for private practice I would assume they would reduce their outspokeness! Now they don’t get any base salary guaranteed.
If someone leaves academia for private practice I would assume they would reduce their outspokeness! Now they don’t get any base salary guaranteed.
But I think that’s the point.
Who is going to pay his consultant’s salary? You think it’s people like you and me?
Now that he’s left academia (or watered it down) he has lost all independence, and all credibility. Sad really.
He is still a tenured professor at UCLA, just not on the Anderson Forecast which relys on donations for funding (Wachovia for one example).
He is still a tenured professor at UCLA,
I realize that. But his new consultancy needs funding, no?
Thornberg’s been a little wishy washy, but today on CNBC he was definitely pushing the worst case scenario. They had him on with some bozo from CAR/NAR who was spouting the usual realtor bullshit. You should have seen the look on Thornberg’s face when the guy mentioned his appreciation predictions for the year. It looked like he was going to bust out laughing. I sure was.
I wish I’d seen that…instead I saw Schiller and I was so disappointed. Non-committal…doesn’t know if there will be a crash…And this is the guy that wrote Irrational Exuberance!
I’m tired of his wishy-washyness. Bear one day, middle ground the next. The guy doesn’t have a backbone.
I posted a history lesson (my favorite) , looks like it did not appear.
1989: Prices are very expensive; affordability an
issue. Sales slow and prices drop. Mention of risky
loan types.
State’s Home Sales Drop 14% Median Price Tops
$200,000 for First Time
Crouch, Gregory; Los Angeles Times; May 25, 1989;
pg. IV1
Sales of Existing Homes in State Fall During May
Furlong, Tom; Los Angeles Times; Jun 23, 1989;
Vol. 108, Iss. 202; 4; pg. 1
Orange County Home Sales Drop by 22% in May
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Jun 23, 1989; pg. 1
Realtors Tackle New Topic: How to Handle Slow
Housing Market
Myers, David W; Los Angeles Times; Oct 1, 1989;
pg. VIII1
Prices Drop, Sales Slow in State’s Housing Market
TOM FURLONG; Los Angeles Times (pre-1997
Fulltext); Nov 29, 1989; pg. 1
If you see the chronology above,
APR 89 inventory is LOW,
May 89 Sales drop
OCT 89 Realtors think of ways to handle slowing sles
Nov 89, Prices drop, sales Slow—-
SO friends we have couple of more months…..
Dont loose heart, dont get angry.
Our time will come
I posted this compilation way back when. You can do me the favor of reading the original here:
http://tinyurl.com/8ryol
Thanks for the plug.
IF, and that’s a strong IF, the timelines have a strong correlation, that means that the time to buy is… (calculates)… (frowns)… (re-calculates)… 2011?!?
Summarized from recent Bill Gross (PIMCO) commentary: In other words, houses peak 36 months after the last interest rate cut. Also mentioned was that house prices start falling 12 months after the highest rate, and fall for an average of four years.
Yeah, 2011. Wow.
Another way to think about it is that somewhere between now and 2011, the house that you really, really want to live in will be a lot more affordable than it is now.
Personally, I know what my price range is, and I know what will make me happy (a small, old house by the beach.) When those two things line up, voila! I’m back in the market. I’m not going to wait around for the media to finally ring the bell and tell me that the bottom has been reached and it is safe to play again. By that time, the thing will be well underway, and the all gems will have been snatched up.
But Chris, do you really expect unique markets like beach houses to take the same plunge as cookie cutter subs in central Cal? I wouldn’t. They may drop, but I would expect the drop to be much less than the majority (however, if the majority drops 50%, a “much less” 25% is still significant). Unlike most of the other claims that land in certain metro areas is finite … there really is only so much beach front property. Hence the arrival of beach front high-rise condos. One way you can look at the boom of the last few years is as a redistribution of wealth. Middle class people bought in 2001, 2002, 2003. Prices went up drastically. They sold in 2004, 2005 to other middle class people that stretched their budgets. Prices fall in 2006, the stretched middle class loses a bunch of money (wasted payments and money down, not their invisible equity) and either heads to forecosure or sells at a loss by bringing extra money to the table. The wealth of the second set of middle class was shifted to the first set of middle class. Now, they’re competing with you for that little beach house.
Another way to think about it is that somewhere between now and 2011, the house that you really, really want to live in will be a lot more affordable than it is now.
Right. If you want to try and time the bottom, then you are looking at roughly 2011 as one commentor pointed out. But if you want something that is comfortably affordable and you are not so concerned with getting the house at rock bottom prices as you are planning to live in the house for the long term and not turn around in
“Summarized from recent Bill Gross (PIMCO) commentary: In other words, houses peak 36 months after the last interest rate cut. Also mentioned was that house prices start falling 12 months after the highest rate, and fall for an average of four years.
Yeah, 2011. Wow. ”
Yes, I also figure 2011 will be the time to buy if you want to get a great deal in California (Bay area and Southern California). Any drops in percentage this year are just teasers. It will be a slow deflation of 8% per year I think. All those equity locusts who fled California and bought losing propositions are unfortunately stuck and many of them won’t be able to move back to: jobs, education, climate!
Good to have a So Cal thread so I won’t be so off-topic.
Just saw this thread on a **fishing** site, and thought I’d share with all my fellow HBB bears:
http://tinyurl.com/kh3et
some excerpts from various posts (sorry so long, but thought the posts were significant):
“It seems like I remember a thread dealing with socal real estate and the run-up. If I remember correctly, it seemed most replies thought the robust market would continue for the foreseeable future. What’s happening now?
The reason for my asking is that I have some friends that are trying to sell in Orange County, and can’t. They “low-balled” all existing homes on the market (in that area) and still could not even get people to look.”
“You ain’t seen nothing yet!! Not only are your friends competing with other resales homes,but now the new home builders are cutting prices to move inventory. It’s only going to get worse, a lot worse. Most sellers are in denial; it’s a buyer’s market and buyers know time is on their side and only a bargain is going to get them off the fence.”
“personally, i feel the only sellers that will get anything close to a good price are the ones that can afford to carry the paper themselves..anyone looking to cash out is going to take a bath.”
“wet confuscious say:
he who fish from 2 boat at same time,
get dunk when tide change.” (sounds like Rainman posts here)
“We’re trying to sell my late parents’ house in Medford, Oregon. The price is in freefall, with a large inventory available in that price range. Bummer.
And, we hear rumbles from California, which some think drive the real estate markets up north. If Californians cannot sell their $75,000 ranch homes for $1.5 million to finance their buying sprees up north, there goes our market too. Maybe the bust has reached Oregon.”
“Reminds me of 1989 to 1995.”
“Things are looking down right bleak out there! I live in the Santa Clarita valley and houses are popping up left and right for sale. There are several people on my street who have been dropping their prices fast. It’s almost like a bidding war in the wrong direction.”
“I am afraid we have taken a turn! The question now is not if the market will turn but how far down will it go? Only time will tell!”
It’s called ‘Inverse Appreciation’ ! hehehehehehehehe
Wasn’t me. : )
I scan a handful of Bubble Sites but I’m pretty much
Blogamus Monogamus on Ben’s site when it comes to posting.
BTW if you read that whole LA Times article by Diane Wedner it reads right out of the CAR playbook of propaganda. Piggington ripped her a new one on one of her recent bullish articles. I’m not a fan of hers.
http://www.piggington.com/the_bulls_strike_back
I guess Chris had us fooled. For 5 minutes there, everyone thought Thornberg had crossed over to the dark side. Now we learn the apple doesn’t fall far from the tree.
The bottom line is that middle class people can’t afford $500k-$700k homes. So California will either magically become a state full of millionares, or real estate there will death-plunge 40-80%.
It’s about affordability, stupid. My money is on the 40-80% death-plunge. This blog is so hugely influential, that you just know that Chris and Leslie and Gary and David must be checking in. Note to Realty Clowns and faux “economists”: you’re wrong, we’re right, real estate is hosed, it’s gonna hurt bad, case closed. This isn’t brain surgery. The crash is on; it’s everywhere you look.
Seriously… jeez.
“This isn’t brain surgery. The crash is on; it’s everywhere you look.”
i wish i could say we are all geniouses for predicting these unfolding outcomes. but lately it’s more like shooting fish in a bucket. the only thing we don’t have concensus on is how long and how bad.
that seems to fall somewhere between 10% and worldwide depression.
I agree that anyone who’s only recently begun making extremely bearish predictions deserves little credit, but those of us who’ve been posting such predictions on this and other blogs for 18+ months now certainly deserve something? Maybe a plaque?
How about a dirt cheap house in a couple years? That seems like a just reward.
How about a reasonbly priced house?
“Head into the San Gabriel Valley, and the best bargains are in Azusa, said Marty Rodriguez, a veteran agent in Glendora. ‘If you like flat-roof houses and some wild colors, you can find an old fixer in 700 square feet,’ Rodriguez said.”
Best bargains in Azusa?!?! Are you kidding me? Hey Marty, those wild colors are from the meth lab fumes. C’mon already!
And if you read the next paragraph in the referenced LA Times article, it starts with the following sentence:
“If smaller, older homes appeal, pockets of Watts might fill the bill.”
That thud you just heard was my jaw slamming right on top of my foot.
This is what happens when affordability is at record lows. The worst places start to be mentioned as possible places to live because that is all a first time homebuyer can afford.
Advice is It is Time to RENT. Hey Marty you have sniffing too much meth fumes.
Maybe you haven’t heard, but Watts is gentrifying. And what’s wrong with a cozy 700 SF gem in Azuza!?
> what’s wrong with a cozy 700 SF gem in Azuza!?
The given price of 365k maybe?
yeah, I bet this reporter wouldnt even set foot in Watts during the day much less after dark. Its unfortunate that the area is so crappy now. There are actually some very nice houses that are not near the projects. A lot of 2-3 bedroom houses on 6-7k lots, built in the 40s and 50s. Believe it or not, but Watts use to be a nice area until around 1967. Middle class, very tight knit community, lots of churches, great food…Jazz music so cutting edge that cats from NYC and Chicago would hang there.
Now of course a very different story. Drugs, violence, Drugs, prostitution, drugs, LAX noise, drugs, helicopters, drugs, crooked cops, drugs. You get the picture.
http://www.latimes.com/classified/realestate/printedition/la-re-bargains20aug20,1,1442065.story
“Houses there typically were built in the 1930s, are stucco or wood and sometimes occupy lots next to a new home. The area is seeing an influx of younger families with higher incomes, a phenomenon that often triggers higher home prices. In the neighborhoods that include Hickory and Grape streets and Lou Dillon Avenue, between 105th and 115th streets, buyers can find two- and three-bedroom single-family homes in 800 square feet for $300,000. The area is full of families, and as the crime rate has fallen, home values have risen, said Daniel Alvarez, an American Properties agent in Watts.”
My Comments:
Watts and nearby willowbrook area have lots of cramped tiny older streets with tiny old 700-800 sq ft clapboards. Area has been infiltrated with lots of recent hispanic immigrants, and is losing its African -American population thru outmigration. This area absolutely teems with immigrants. and there appears to be a new growth of sweatshop factories/Distribution warehousing operations along the Aamitos Rail Corridor which find an abundant sourse of cheap labor in the Watts/willowbrook/compton communities.
These area often have horribly-run ineffective city services, and compton has long been a cesspool of civic corruption and mismanagement. Yeah, you can find cheap small old fixers for under $300,000. but you have to comfortable with living in what is essentially Latino immigrant Slum(Barrios)conditions.
My friend took a CHP job up in Watts. I went to visit him and even off duty he packs a gun and 3 clips in his ankle just to go out. Someone is recommending first time home buyers with children should move to Watts? I hear Southern Lebanon is nice this time of year, maybe we should move there?
I worked as a Domino’s pizza franchise Manager back in the Late 80′-early 90’s, and had part of our delivery area in Compton, willowbrook,Scentral LA up to almost the fwy. Occasionally i had to go out on deliveries if we were short drivers. There were some streets around MLK hospital that were actually like the pictures you see of Beruit or felluja on fox, with armed hoodlums crowding the streets as if it were a mall on christmas.
Had drivers get shot at, or mobbed or chased down. Some of my drivers took to “packing heat” for self-defense. I actually had to redline out large parts of our territory( especially Gang-infested section-8 apt complexes) where we told the callers it was a no-delivery zone.
Compton-southcentral had real severe crime rates back in the 80’s-early 90’s. Actually transfered out of the Dominos (located on EL-segundo/Avalon corner shopping center)about 3 monthes before the LA riot, and yes, the whole shopping center got torched( saw it on TV).
Actually you would do better to compare large portions of willowbrook/compton/Scentral to a
slummy Tijuana Barrio(neighborhood) these days.
I am thinking 40 to 60% in the LA area over the next 18 months…Seeing 40K to 60K reductions in the Mid-Wilshire area over the last 6 weeks….(7,500 to 10,000 per week). Plus a lot of listing agents changing, angry owners, and a house flipper across the street has reduced his work crew from 10 to 3, going for a fast completion, and visits the site three times a day compared to once a week (AM, Lunch, and 6pm)…LOL
Here is a sample of what is going on in San Diego.
I pulled these active MLS listings from ZIP Realty and pulled the last sale price from the county assessor’s web site.
Note, some of these homes w/ double digit price declines and are not selling. It is going to get far worse once the rest of the ecomomy falters.
Note, these are active listings and I compute the cost of sales (agent fees at 5%).
14204 CAMINITO LAZANJA, San Diego (Rancho Bernardo), CA 92127
Type: SFR
Original List: $1,950,000.00
Current List: $1,500,000.00
List Date: 07/17/2006
Num. of Price Drops: 3
Last Sale Price: $1,466,900.00
Last Sale Date: 5/6/2005
Min Cost of Selling: $75,000.00
Min Loss: $41,900.00 (3%)
12838 HIDEAWAY LANE, San Diego (Scripps Ranch), CA 92131
Type: SFR
Original List: $989,900.00
Current List: $850,000.00
List Date: 04/24/2006
Num. of Price Drops: 5
Last Sale Price: $916,990.00
Last Sale Date: 11/9/2004
Min Cost of Selling: $42,500.00
Min Loss: $109,490.00 (12%)
2579 ARUNDEL, Carlsbad, CA 92009
Type: SFR
Original List: $1,120,000.00
Current List: $995,000.00
List Date: 05/25/2006
Num. of Price Drops: 5
Last Sale Price: $957,862.00
Last Sale Date: 11/30/2005
Min Cost of Selling: $49,750.00
Min Loss: $12,612.00 (13%)
2125 COAST AVE., San Marcos, CA 92078
Type: SFR
Original List: $799,900.00
Current List: $799,900.00
List Date: 05/18/2006
Num. of Price Drops: 0
Last Sale Price: $937,500.00
Last Sale Date: 06/01/2005
Min Cost of Selling: $39,995.00
Min Loss: $177,595.00 (19%)
12858 STARWOOD, San Diego (Scripps Ranch), CA 92131
Type: SFR
Original List: $1,049,000.00
Current List: $935,000.00
List Date: 04/01/2006
Num. of Price Drops: 5
Last Sale Price: $958,512.00
Last Sale Date: 04/26/2005
Min Cost of Selling: $46,750.00
Min Loss: $70,262.00 (7%)
670 KELLOGG ST, San Marcos, CA 92078
Type: CONDO/TH
Original List: $529,900.00
Current List: $479,000.00
List Date: 02/15/2006
Num. of Price Drops: 10
Last Sale Price: $529,424.00
Last Sale Date: 02/23/2005
Min Cost of Selling: $23,950.00
Min Loss: $74,374.00 (14%)
679 KELLOGG STREET, San Marcos, CA 92078
Type: CONDO/TH
Original List: $479,500.00
Current List: $425,000.00
List Date: 05/23/2006
Num. of Price Drops: 3
Last Sale Price: $480,000.00
Last Sale Date: 04/17/2006
Min Cost of Selling: $21,250.00
Min Loss: $76,250.00 (16%)
I don’t like being a pessimist…but I only have puts and no calls in my options portfolio.
Question for anyone “in the know”… LA, say… West of highland ave. not in the hills. Who on earth is buying now?!?! “income” duplexes for well over a million and a half?!? 3/2 1800SF for 1.3/.4/.5/.6 mil??? WTF is wrong with people? Please make them stop!
‘Who on earth is buying now?!?! “income” duplexes for well over a million and a half?!?’
GFs, soon to be FBs. Check out the cap rates. Those are “NO income” duplexes.
hehe… oh, I know that. I just can’t believe people are buying them. Guess there *is* one born every minute, and they all moved here…
NYC has online property records and they even have the scans of the mortgage docs online so you can see if people are buying via ARM’s. check your county property records to see if they have the same thing
i can see an economy of scale buying into a du or triplex for those who wish to co-invest with family members and actually live there. that turns a 950k place into 3 x 317k homes, which doesn’t taste quite as sour.
back to your original point,
the mid wilshire district is out of control. you have neat little pockets next to slummy housing pockets. it will correct in the next 18-24 months
I do see prices coming down a bit here, but it is still way out of control. I’m just wondering who is buying at these prices, in this environment. I could probably find a decent, relatively affordable place near a “slummy” pocket. But I have a gut feeling that there will be some uh, reverse-gentrification if the economy craps out in any meaningful way. So my sights are set on the more “established” areas. 4 years ago these areas were expensive, but not insane. I just don’t understand how someone could look at a 1700sf 3/1 on a 5000sf lot and say, “1.2 million? I’ll take it” boggles the mind. And I probably make the same or more $$ than the people who are buying this stuff. Nuts I tell ya. Oh well, patience is a virtue I guess… it ain’t easy though!
Erm, keep in mind that the last round of riots got as far west as Westwood. No way I would buy *anything* east of the 405 ever. I have no desire to spend my evenings on the roof with an AK-47 like the Korean landlords had to do last time (1992 as I recall).
You can have your “West of Highland”.
I can still remember when my parents had to evacuate my grandmother out of the Crenshaw district in 1965.
No Thanks. The next recession could be a bad one, and I don’t want to own property in the burn zone.
I remember my Dad, who was quite a hunter and member of the NRA, and had a varied assortment of fire arms, loaning guns to the neighbors to protect themselves. He retained a unregistered AK-47, with about 500 rounds, double banana clips to protect his hacienda and my mother.The gangs were burning and looting in LA on the edge of Inglewood. Moved my mother to Pismo in 2002.
I worked with a sales rep at a battery company who is of Korean descent and he told me a story about his involvement in the riots. His parents owned some laundramats in the riot areas of LA during the Rodney King riots. They had boarded up their businesses as soon as the riots got going, but decided to go back to empty out the change machine and coin boxes on their machines.
Before going in, they armed themselves with AK-47s. On the way to their shops, an LAPD officer stopped them and told them it was OK to take the guns in, but to make sure they didn’t shoot unless they had to. He also told them there wouldn’t be any police comming to their aid if they got into a conflict.
While they were taking money out of their first store, they placed a couple of guys on the roof with their rifles. A gang of rioters showed up, leaders armed with 9mm handguns, to loot their store. After a brief standoff, the rioters decided to leave since they were outgunned.
Remember that events like this do happen occasionally, and that the Government cannot be relied upon to protect you in these situations. If the store owners had not had legal access to guns, at best their stores would have been looted, and at at worst they would have been killed.
I own several rifles which I use primarly for target shooting (don’t keep them around for easy home defense access since I have kids), but I also sleep better at night knowing that if some major civil unrest event occurs, I can protect my family and my home. It sucks when you realize you need an assault rifle and its too late to get one.
You’re fine buying east of the 405, so long as you stay north of Olympic. At that point you’re talking Mid-Wilshire, Century City, Beverwil, there’s no way LAPD would let any riots go north of the 10. Echo Park or K town might be a bad idea to buy in, but there won’t be any rioting by 3rd street, guaranteed.
Heres my defensive perimeter for the next riot: barricades and police battalions running alonf a line starting at Hollywood and vine, then perimeter runs south along vine ave(sorry paramount) to olympic, then west along olympic all way to the 405(sorry can’t save the pico jewish district), then south along 405 to the 90 fwy then west all way to marina del rey. This would save at least 80% of the property valuation for all LA county.
Just buy in Burbank, Glendale or Pasadena. At least you get the benefits of having your own police force and not relying on the LAPD.
‘there’s no way LAPD would let any riots go north of the 10.’
Ummm… were you in LA in 1992? Say late April?
I would not want to buy a house east of Sepulveda. But then I’ve considered myself more squeamish about the riots. Ever see the typical shopper in Del Amo Mall in Torrance? Then yes, such rioting will happen in Torrance too.
Gotta relate to this story about the LA riots. I was managing a Dominos pizza in North Carson, LAcounty, (near Cal State dominguez) off avalon blvd. When we heard of the verdict in the Rodney king case( the verdict came in mid-morning i guess)and then we heard of the start of rioting near dwtn LA, we shut down at around 2-3 pm in afternoon. Took about an hr to close and i was out at about 4 pm. Man, the streets and all shops i passed thru were completely empty, no cars. It was as if an invisible plague had wiped out the entire population(Like in the Andromeda movie).
I lived 12-15 minites away and my route was thru a mostly indusrtial district so i had no problems getting home, but i never in my like seen a city completely emply of cars or people as i did that afternoon as i was driving home.
We were about 20 miles south of the epicenter of the riots(normandie and 50th st?) and about 15 min drive fron Compton, but Carson was a fairly safe hood.
I have noticed a trend in this area(between Highland ave and Fairfax district and from Melrose ave down to Olympic) for a group of entertainment folks(or incorporated individuals) to buy these duplexes/triplexs , and turn them into home-operated entertainment-media studios. They could also be leasing these same mult-units. Lots of older 3-4 unit stucco apt buildings in the Hollywood/melrose apt district. Being close to hollywood/west hollywood with its array of media-entertainment companies is probably why prices out of whack in this area.
Yeah, I have seen this happening for years now. Especially where Melrose and Beverly dead-end into Santa Monica Blvd in West Hollywood around Robertson.
This is only happening because everyone is deserting Hollywood right now - the studios (except Paramount, I guess) have all moved to Burbank or Culver City, leaving a vacuum where Hollywood used to be. No one wants their sound stages torched in the next riot. Hollywood is not defensible. Why do you think Roy Disney built those stages in Manhattan Beach? Defensible. Disney/Warners/Universal in Burbank? Defensible. Sony in Culver City? Defensible. Fox in West LA? Defensible. Dreamworks in Glendale? What do you think?
A modern studio contains millions of dollars worth of computers and billions of dollars worth of data. Put that in the way of a “burn, baby, burn” episode? Unthinkable.
uhh… not really true. Lot’s of industry stuff is moving back *into* Hollywood lately. Even some of the companies that fled west to SM in the 80’s and 90’s are coming back/expanding there.
As for Disney/Warners/Universal in Burbank… been there since the 20’s as have MGM/Sony in CC and Fox in WLA. Don’t think they were thinking about defensibility then
The Former Columbia studio in Hollywood…still there and working. Paramount, Ren-Mar, The Lot/aka Warner Hollywood… still there. CBS Television City. etc, etc…There’s a *lot* of studios/stages still there, and more sound/editing/marketing/graphics/advertising businesses than you can shake a stick at. The riots weren’t fun, but it wasn’t the end of the world. Mad Max was a fun movie, but I don’t think that’s what’s in store. If it is… Living in SM/BH/PP/Malibu ain’t gonna help.
Oh… and the houses in the area are overpriced…. hehe
Maybe from your perspective, but what I see is that even the documentary guys have moved out west here or to Burbank. No one who can avoid it goes anywhere near “Darkest Hollywood” anymore. And when the documentary guys move out, that’s the end, because their budgets are the lowest, so when they pay up to get out of town, you know it’s over.
And if the cops can’t stop the next wave of riots at the 405, the term “runaway production” will take on a whole new meaning as the entire industry relocates to Canada and Australia. Really, there’s only so much BS the industry can take, and there is now a critical mass of talent and facilities elsewhere.
Agree, Plysat. Old Paramount still ther in old Hollywood. Lots of studios, small media entertainment firms abount in old Hollywood. Actually Hollywood is a business-owners dream: lots of foot traffic, humoungous elclectic diversity, The Kodac theatre, The flotsam crowds milling thru hollywood blvd,old picturesque Churches and lots of restored historical bldgs, The bizzare freak shops, ect.
The Burbank area is a nice pleasant location for WB, Disney,NBC. ect but Old Hollywood has the Old Mystique.
Plysat and peter_m already nailed the comment, but “old” Hollywood is coming back in a big way. Miramax (well, whatever the Weinsteins are calling it these days), Revolution (quit laughing) is going to move there, I keep hearing that Digital Domain is moving there, various Internet companies are setting up shop, then you’ve got Hollywood & Highland, etc etc.
And Sony built their lot in CC because they got some kind of massive land deal from the city, not because it’s “defensible”. The neighborhood around Sony to the north actually sort of sucks, and to the northwest you’ve got Palms. If I were building a “defensible” location I’d want to stay away from Palms.
I don’t know why people are planning for the next riots. Last time it was started by the Rodney King verdict, but a lot of rioters were NOT black. They were even vandalizing stores in the Valley.
Here is a company everyone should check out if they are going to move to these “recommended areas”:
http://www.armorcore.com/
You won’t find these building marterials at Home Depot.
Considering prices have already fallen 10% in SD county from 519K last November 2005 to 489K this month, I would say 20% is in the bag here. . .maybe even 30% in the condo market.
A preview of a letter I sent to the OC Register today:
“Whenever a real estate broker tells us (letter, August 21) that Orange County property prices are high because of our beaches, weather, and proximity to Mexico (nicely spun as a “resort-laden foreign country”), I wonder: Is our weather three times better today than in 2001, so as to justify property prices tripling since then?
The recent runup in property prices has been driven by speculative excess, loose lending practices similar to those that preceded the late-1980s savings and loan crash, and the widespread exaggeration of borrowers’ financial means via stated-income loans. The broker assures us we can “just refinance” out of death-or-glory exotic loans when our incomes increase. But financing a $700,000 median-priced single-family house in Orange County with a traditional mortgage requires an income north of $150,000 — which, stereotypes of the OC notwithstanding, the vast majority of people here don’t have, and often never will. (The median household income in Orange County, according to the last census, is $58,820.)
In the long run, property prices increase no faster than the wealth of the local buyers. Demand consists not only of desire for a house, but the financial means to pay for one. After years of unsustainable appreciation, Orange County’s people do not have the financial ability to afford Orange County’s houses. Prices must drop until demand — desire plus ability — again equals supply.
Very truly yours,
Thomas **
Damn good letter - I hope they print it.
What’s so sad (or great, depending on ones POV) is that you could make it a form letter for many, many locations around the country, just chance the , and parameters, and Voila! The same exact message:
Current home prices have no foundation in reality. They are going to drop, and the only unknown is how far and for how long.
Great job, Thomas.
Here is what I have found so amusing…for the last 2 years I have felt like Noah building the ark. Every time the subject of So Cal RE came up I added my 2 cents (essentially this run up is a bubble and eventually the combination of rising rates and lack of affordability would catch up and cause a retraction - case closed). Most of my friends dismissed me as a gloom and doomer who was “afraid of prosperity”. In fact I had some very heated debates with a number of folks doing the IO/Neg AM trick. I would always end the conversation with a friendly good luck and don’t over-extend yourself too much. Well, thankfully my wife was a believer and on board with me and my plan to sell our house (purchased in 95’) and rent. We sold our Orange County home (barely escaped in Feb. 06) and are currently renting a beautiful house within 1/2 mile of the beach. Our cash is safe in the bank and we couldn’t feel better about it!
Here is the interesting thing…I now get to hear all the same folks profess how the housing market has turned or that it may turn and/or come down a bit. They tell me like I don’t know. I have to remind them of why I sold and am renting, that I was the same person who tried to warn them a year ago. Oh well, I guess no one likes an I told you so. But it is so strange. It’s like figuring out that boxers actually can get hurt and then explaining it to a boxer??? Duh.
Not to be a “gloomier” gloom and doomer, but it might make sense to spread out the cash among lots of banks (FDIC has limits–I think $200k for joint accounts). I’m guessing that “cash is safe in the bank” could mean lots of things, including buying Short-Term US Treasuries, but absent that, I’d take comfort in spreading that risk among enough banks to protect all of the principal under FDIC rules.
Aluminum foil hat off.
Also, look for a bank that has DIF insurance.
Rental Watch,
Funny you say to spend risk among various banks. Yesterday I openned an Emigrant Direct savings 5+% APY. Started to deposit $60K in it but my gut said no, use another bank for $30K of it, despite FDIC rule. My thinking if a bank failed you would get you money - but how long could it take.
I unequivocally predict, Sir Mark in San Diego, that 50%, maybe even 60% in the condo market off median, is in the bag in San Diego with 60 months of August 1, 2005. I proffer one six-pack of the golden beverage of your choosing as evidence of my conviction.
Notgary Notwatts.
Is Mr. Thornberg bipolar?
First, he said it would crash. Then, he said it wouldn’t crash bad.
After that, he said prices would ‘level off’.
Then, he changed it to crash again.
Now, he’s back to only 10% off?
I’m not quite sure why Mr. Thornberg waffles so.
Maybe he’s off his meds?
Sorry if this is a double post…
Thornberg’s a regular Dr. Jeckle and Mr. Hyde. Although on CNBC earlier today he definitely appeared as Mr. Hyde as he painted a pretty gloomy forecast for RE for the next couple years. They had some bozo from NAR/CAR rebutting him. You should have seen the look on Thornberg’s face when the guy threw out his appreciation prediction for the year. I thought he was going to bust out laughing. I sure was!
Hey Auction,
Care to give us a little clue as to what’s going to happen in September? Massive resets?
‘Acceptance’ on a Massive Scale is happening in September.
1. Those who haven’t sold their homes in the last six months WILL ACCEPT that they MUST DRASTICALLY cut their price.
2. Those who have spent their HELOCS and see home values drifting downwards will realize that if they DON’T SELL NOW, they’ll be even more underwater in the future.
3. All of this creates an ENORMOUS SECOND WAVE of LISTINGS.
Or, as I like to call it…A Tsunami.
You had a few of us wondering. Thanks for clearing that up. I agree 100%… the next few months oughta be pretty interesting!
Nah, just as a SWAG, I’d say the “enormous second wave of listings” will be more likely in the start of 2007.
Denial is a strong thing and for many that are buried deep in interest only and option ARMS are going to deny until it is undeniable.
Sorry if this is a double post…
isn’t Thornberg the same guy that a few months ago was quoted as saying there would be something like a forty % drop in home prices?
No for the last several months he has been a soft lander.
Although since you are fishing, Barron’s wrote in an article today that US RE is 30-50% overvalued and due for a correction of that size that will hurt the stock market. Read this weekend’s posts.
Got it. Thanks. You are awesome!
A correction of 50% in US real estate prices will hurt the stock market? Let me write that down on my list, after “wash hands after wiping ass.”
He knows what’s up. He needs a backbone is all. He could have been a great and wise prophet of the Greater Depression, but instead chose to be a footnote in some eclectic future textbook of economics.
Then, he changed it to crash again.
Now, he’s back to only 10% off?
I’m not quite sure why Mr. Thornberg waffles so.
Maybe he’s off his meds?
It depends on his timeframe.
For example, I will predict, right now, without a shadow of a doubt that prices in San Diego WILL DOUBLE. Absolutely.
At some point in the next century.
So given inflation and a time period of ten years, a 10% drop is quite reasonable.
Let’s get the full story before sending Billy off for the lynchin’ rope.
I don’t want to lynch him, I just want him back on his meds.
I guess maybe since I see where this is going, so clearly, it just looks odd to me when someone waffles.
I really like Mr. Thornberg, I just think he needs to grow some balls, that’s all.
“Give me a one-armed economist.”
- Harry Truman -
ABC 7 in SoCal has this news today:
Rent on the Rise in the L.A. Area
By Ric Romero
The answer to why rents are going up is simple, supply and demand. Southern California has a housing shortage. whether you’re looking for a house, a condo, a duplex or an apartment, expect to pay more for rent in most of the LA area.
and
while supply is down now it may not be for long.
There’s plenty of new construction that will likely hit the market at the same time soon.
They showed new apartments being built but didn’t factor in all those fipper/flopper homes turning into rentals!
ok..here goes…I am not trolling….
I am seeing some re-sale listings 25 miles from Boston in the low 600Ks. Commute to downtown Boston is around 75 minutes riding the train (this is door to door, includes drive to train and walk to office buildings).
These are well built 4 bedroom, 2 1/2 bath, 2 car garage center entrance colonials (built within the last 8 years or so). Hardwood floors, ceramic tile, fireplace, etc. (Not spec homes and local builders, not national builders). They are generally around 2600 sq ft. and sit on about an acre of land. The towns are a bit rural, but by no means in the boondocks. The schools are decent. Shopping/dining is near by, good highway access, etc.
I figure an acre of good, clean buildable land should be worth $200K - minimum. The houses would probably cost $125/sg ft to build today {retail, not builder’s cost} ($325k). I figure another $25k for a septic system and another $25k for the driveway, walkway and other landscaping, etc. That totals up to be $575k.
Questions:
Does anyone think my estimates are way too high?
Is it really possible that houses like this could drop by 10%, 15%, 20%?
I am not arguing against a bubble, I just can’t see these dropping to the mid $300ks or even the mid $400ks.
Any thoughts?
Thanks.
$200K an acre? Well, I should hook you up with a guy in Livermore, CA that has been trying to sell 20acres for nearly 5 years starting at about $55K/acre. I believe they started with an asking price of $1.1M in 2002, then has ratcheted it up to $1.35M now, while changing their marketing. It was originally a convenience store angle, now it’s a vineyard estate. You can probably get a great deal at $250K off asking (i.e. original price).
just out of curiosity..what is Livermore, CA like?
Not to argue, but I am betting that the $55k an acre didn’t include, engineering, excavation, infrastructure (pavement, drainage, utilities, etc.), legal fees, permitting, development bonds, insurance, labor, etc.
At some point, even if the land is virtually free, there are development costs to turn it into building lots.
Livermore: 45 miles from SF, 45 miles from San Jose. Largest employers are 2 national labs, SNL and LLNL, totalling something like 10K above-average paying jobs. Livermore fancies itself as a wine country with easier access to the South Bay. It is the Bay Area’s equivalent rural setting.
45 miles out of Boston would be New Hampshire to the North and Rhode Island to the south. 45 miles west is Worcester, which is another story all together.
Remember the 400mi^2 bay is in the middle of the mix. As a crude correction, you can assume Livermore is 10 miles closer to SF if you account for the bay, and ignore its area.
why do you think some developer didn’t pick up that parcel?
What does raw acreage sell for in the area?
I’m not jumping on your case, but one more thing… I am familiar with the process of selling land. Provided, it is not in MA, so maybe it’s different there, but bare land can be extremely difficult to unload. If you do decide to build on some bare land, don’t worry about offending the seller. They probably bought cheap, and the carrying costs are low. Also, they know what most people don’t: there’s a lot of land in this world, and a lot of it is for sale. You’d be surprised just how much is out there, even in seemingly built-up areas.
“why do you think some developer didn’t pick up that parcel?”
Development costs. It’s outside the UGB, and therefore they’ll need to “acquire” political support. The retail option is probably not that impossible with the zoning, but the locals can nickel-and-dime a project like that to death. If they could get it zoned for homes (possible for a small parcel), they also need to set aside 1 conservation acre of vineyards for every developed acre, or something like that.
Do the numbers on the income you expect to generate from dirt, and you’ll find that few things are as lucrative as McMansions. Starting a mini-mart $2M in the hole is a rough proposition, even on a commute corridor.
I don’t think that you are jumping on my case and I have enjoyed the dialog with you.
I agree that dealing with bare land can be tough and that there is a great deal of it out there. I am not looking at acquiring any raw land. I would however jump on a permitted and released lot if the price was right (e.g. developer in trouble looking to raise cash or FB looking to get out).
One thing about land though and I am not defending developers/builders, but the average person really has no clue as to what it takes to get the land from raw to permitted. I bet the “dirt” is the cheapest part of it, especially if the will of people is anti-development, as is here.
We absolutely agree on that one. Dirt is cheap compared to everything else. I am finally getting your drift that you included this “everything else” in the value estimate for the lot. Permits are just the tip of the iceberg, with utilities and inspection delays adding big time costs in the average person’s project. A well planned project limits these costs to probably less than 1/3 of what they are on an average project. That’s how professional builders keep their families fed.
I just happened to drive by the above-mentioned (still unsold) 20ac lot today and had admired their new “vineyard estate” angle, along with the new asking price, so it was fresh in my head. Truthfully, I am pretty surprised that it wasn’t snatched up by Google money or some other lottery winner.
I put the land value at 200K, because the sub-divisions here tend to be small (10 - 20 houses or so, on acre+ lots mostly). This causes the developers to incure very high permitting, excavation, etc. costs when carving the land up into lots. They have to recoup those costs over 10, 15, 20 houses, rather than over a much greater number than if they were doing 5k, 8k or even 10k sq ft lots. Most lots are now easily running 400k, I cut that in half, thinking 50% haircut.
Imagine building 10 or 15 homes on 25 - 30 acres, where each lot has to have 250 feet of frontage and a fifty foot wide street with sidewalks (yes, sidewalks are required).
Don’t forget how far you have to go to bring utilities to the property. Gas, sewer, water, and electricity must be provided to have a workable commercial site. If your nearest sewer line that has an appropriate depth to service your property is 1/4 mile away, it can be very expensive to bring it to your property. And if you have to bore under a Cal-Trans administrated road to get it there, expect a one-year delay to get the permits and a huge boring expense to install the line.
Each piece of dirt that can be developed on has its own particular problems. In developed areas, much of the land that is remaining as unimproved lots can have significant problems, such as utility easements, gas transmission lines, power transmission lines, lack of services, or the worst of all, an open drainage channel running through it. Just try to get an Army Corps of Engineers permit to mess with the natural drainage flows of even a dry wash. Takes a biological study, a year for the permit process, and you have to mitigate the impact by building equivalent wetland areas.
The more of these types of problems that exist on a piece of land, the less the value of that land. Trying to make an equivalancy between NE housing tract land and SF area commercial land is very difficult without knowing the underlying details of the property entitlements.
A good description of Livermore is that it is 1/3 of the way to Stockton
I look at SF as being 1/50th the way to Hawaii
RE: $575k…
So where are the incomes to support this number?
2.5 x gross income is the rough measurement of affordability…
Not too many of my acquaintances are makin’ $200k+.
Equity owners are bailing out of New England at a rate of 250k per year. So they’re not players.
MAZZ is a bad deal no matter which way you look at it.
The cost of the comin’ pensions pay-outs to a bazillion boomer government workers will more than sink the ship.
Maybe the gov will form some sort of subsidy purchase program for all the immigrants pourin’ into the vacuum-LMAO.
Your points are well made and I appreciate your approach.
The median price here is somewhere in the high 300s/low 400s. The median single income is somewhere in the low 50s (I believe).
I do pretty well. Almost all of my friends, family, co-workers, etc. have a household income of 150K+, which makes it hard for me to see the other side of things. Many of them make much more than that. (This is probably not the norm, but it does influence (cloud) my thinking.)
I am not arguing against the notion of a bubble. Mostly, I am trying to keep an open mind about it and look at it from all perspectives.
As far as the outflight of Massholes…that is certainly happening, but I don’t see us becoming a ghosttown in the near term (5 - 10 years). The natives here tend to lay down roots. I do think that the natives’ kids will be long gone……
I am NOT saying it is different here, but I don’t think people are quite as mobile as they are in other places.
As far those filling the void, you are right on the money..they are already talking about it. For those of us that don’t get to feed at the trough, it will be a greater struggle. I have learned to sort of ignore the “element” and concentrate on maximizing my income, etc.
i’d say it depends on the entire market and the amount of suicide loans/flippers in boston
if things go bad and there is tons of inventory every house on the market is the same in the crowd. impossible to tell. my theory is still that NYC won’t be hit too bad because co-ops are such a huge part of the market here and there are tons of immigrants with cash businesses who hide their cash from the IRS and put it into real estate
I think the flippers and specuvestors went for the condos and townhomes here, but you never know.
Also, a big new subdivision here might be 20 - 30 homes and there aren’t many of these. The ones that we do have tend to be in the high end $900s and up with very large houses. We do have a fairly small number of small (5, 6,
home subdivisions that pop-up here and there. I just don’t see there being that much inventory for the flippers and specuvestors to go after.
But on the condo side of things..forget about it…everywhere you look there are new developments, conversions of apartment buildings, conversions of 2 or 3 family homes. I think this is were the flippers and specuvestors are.
i was reading some news about the NYC suburb market of Long Island and Westchester a little while ago and found that the costs involved in building here combined with the lack of land to build large developments result in new homes costing close to $1 million and this means you need to build homes larger than average
Just look at Toll Brothers pricing for similar homes across the country
Further up in the post, I mentioned the following to another poster: “Not to argue, but I am betting that the $55k an acre didn’t include, engineering, excavation, infrastructure (pavement, drainage, utilities, etc.), legal fees, permitting, development bonds, insurance, labor, etc.
At some point, even if the land is virtually free, there are development costs to turn it into building lots.”
Single family builder’s here in MA, don’t go any smaller than 2600 sq ft., which isn’t even the norm. The norm is more like 3,000 - 5,000. Building lots within commuting distance to Boston start pretty much in the high 300k’s and go up to 600k. The builder ends up building a big house and before you know it the house/land costs 800k and up. Many, many towns have a one - two acre miminum and only issue so many building permits per year to each builder.
I am not justifying the bubble, but the building process here is so f’n brutal. The sad part is, there really is plenty of land here. Unfortunately the state is so f’d up because of the NIMBYs and BANANAs, not to mention the do-nothing people in the State House.
NIMBY is part of it, but there is no infrastructure for more people. NY, NJ and Conn have a lot of people that work in NYC. roads are clogged and trains are packed.
yes there is land, but people don’t want to put up with anymore traffic and other headaches that come with more population
yes there is land, but people don’t want to put up with anymore traffic and other headaches that come with more population
Sorry, but then they will have to deal with the middle class leaving, and the poor staying. Especially with the open-border situation we have now.
NYC Co-ops are TOAST - Pataki signed a law into effect last month that authorizes the county registers to publish the sales price of co-op apartments on ACRIS website, just like all other RE instruments that have to pay transfer taxes. Free sales info for anyone with an internet connection. This was the last bastion of prior sale secrecy for the NYC RE market. Don’t think the Realtwhores didn’t fight it like hell. TOAST.
i’ve been looking at the prices online, some are up and some are the same compared to last year. the values are determined by the building quality than disclosure in a public database
NYC co-ops are TOAST - Pataki just signed into law that county registers publish co-op sales prices, retro to 2004 - already implemented on ACRIS website. No more hiding - TOAST.
Sorry for double post - bad connection - just thought people should know. Surprised Pataki did it - lame duck must’ve been paid by someone.
I’d say figure out the maximum you could possibly get a bank to loan you. Then take all of it, plus your savings, and buy as much property as you can in that area. How can you miss? Just rent it out to cover your loan payments on those I/O loans until your income/asset appreciation covers it. It’s worked for everyone else for the last 5 years, no point in stopping now. Good luck.
PS — Anyone with money in the bank thinking it is safe, where do you think Pen is going to get the money? It is yours, and the bank is working off of a zero reserve requirement.
Was that an attack/sarcasm? I hope it wasn’t, because I was being sincere and was truly curious what other folks might think.
Also, I was just trying to look at it from a different angle.
Pen,
My honest opinion is that you should look at what happened in the last excessive run-up in the region. Probably that county and the closest compareable. It is by no means a apples to apples comparison. But I think it allows a healthier line of thoughtwhen looking at areas that have had previous excess and retraction. “Reversion to the Mean” can be very Mean unfortunately.
OCBear
The last burst here was 88 - 91 and it took until 99 - 01 for people to return to even. That pop was caused by a very nasty recession with job losses, etc. Everything got it..many, many foreclosures, etc. The auction pages of the Boston Globe were pretty thick back then, but they are pretty thin now. I suspect, now, that the ads are on web-sites. According to the MSM, which I don’t trust at all, the home prices only slid something like 15% (I think). I seem to remember it being more like 30% - 40%, but that was many beers ago.
I know there must be some catalyst out there shaped like a big ol’ pin, but I can’t see it. Maybe the bubble is in the way. It could very well be the I/Os, ARMs, etc., though.
I seem to recall not only a ‘nasty recession’ in NE at that time, but a preceding big bubble, where prices were climbing beyond anything related to income levels, as well. And a big increase in condo-building, conversions, etc. No?
From a pure real estate perspective, a $10k decrease in home prices means that the land should sell for ~$9k less. The land is where the value is. Factor that into your thinking. If you think that homes could come down in price, the land value will be hit first, and hardest.
In other words, there is no “minimum” land value, it is all depending on the home price and cost of construction. Given materials costs today, I buy into the fact that there is a “minimum” cost of construction, and given inventories, I would buy into a “maximum” value of the newly constructed home. This is not a good combination if you want to assume that there is a “minimum” land value, especially when you prospectively put that value as high as $200k/acre.
I put the land value at 200K, because the sub-divisions here tend to be small (10 - 20 houses or so, on acre+ lots mostly). This causes the developers to incure very high permitting, excavation, etc. costs when carving the land up into lots. They have to recoup those costs over 10, 15, 20 houses, rather than over a much greater number than if they were doing 5k, 8k or even 10k sq ft lots. Most lots are now easily running 400k, I cut that in half, thinking 50% haircut.
I could imagine houses like that falling to $400K or less quite easily. I would imagine there is nearly an infinite supply of acre lots potential at a radius of 25 miles out from Boston.
What is around it? Schools? How many more houses can be built? If supply isn’t constrained and no compelling reason for demand, then they could go down quite a lot!
The further out you went in Austin TX during the 1980s bust, the worse it got. Especially in situations where supply could be built with no constraint.
Oh, there is plenty of land at the 25 mile mark (a lot less so within the 15 mile mark, but I was talking the 25 mile mark). You have to go that far to get away from the traffic, crowds, etc.
Plenty of schools, shopping, etc. AND PLENTY OF LAND, which is only constrained by man-made zoning laws. The stroke a pen can change that pretty easily (very possible, but not sure how probable that is, though).
A couple of thoughts:
1) In the stock market, companies routinely trade hands for substantial dicounts to the replacement cost of their assets. There is no difference with a house. While computing asset value is an excellent start, prices can disconnect from this fundamental. In the medium term, liquidity is more important.
2) As has been discussed here in depth, the value of land is the most volatile part of the equasion. If construction costs are 80% of the value of the home and the value goes down by 10%, the value of the land just went down 50%.
3) Construction costs (both material and labor) are going down fast as the boom winds down.
4) Depopulation is a major problem–look at housing prices in Pittsburgh. Mass is next.
1 -very true - this is when the sharehold’s really get boned, because this is usually preceded by a bankruptcy, CEO parachute, etc.
2 - the ratio is about 50/50 here, which makes things really ugly
3 - I have heard that elsewhere as well.
4 - This is also very true. Although, you wouldn’t know it to see the traffic on the roads, crowds in stores/mall/restaurants, crowded public transportation, etc. It would be interesting to see if the outflow is natives or those that were already transients.
Thanks for the thoughts.
In Thornberg’s defense, it is the reporter who decides what to “quote” in the article. Anybody who has ever been interviewed and seen the results in print knows that subtleties are lost and the reporter’s agenda can be made with selective memory.
The RE industry has some deep pockets, and if you’re talking to enough reporters, you’re bound to run into one whose interests are aligned with a wealthy patron. Not saying that’s what happened here, but there have been some examples of astoundingly poor journalism in the media. It could be run-of-the-mill incompetence.
TOL information in the morning. This will be big news if they revise downward AGAIN.
Yeah — I expect their stock price to go up by 2% or more if they revise downward AGAIN.
Thought you all may be interested in seeing the following interview of Jim Gillepsie, who runs Coldwell Banker. He is talking about how our generation own more homes then our parents and trying to show how that supports a continue strong housing market. Also repeating the same garbage about how strong this market is. Can’t believe they believe this garbage. They just don’t want to believe there is an affordability issue. Sorry not sure how to shrink the link
http://video.msn.com/v/us/v.htm?g=24c83156-f490-454c-9d46-795b7a862e7d&f=rssmoney&fg=rss&f=15/64rssmoney
which generation is “our” generation?
Yeah, is he talking about you Baby-Boomers, or us Nose-Pickers?
http://www.latimes.com/classified/realestate/printedition/la-re-bargains20aug20,1,1442065.story
small house, a fixer-upper or a home on the outskirts. You can also find the occasional overlooked gem.
By Diane Wedner, Times Staff Writer
August 20, 2006
Along Foothill Boulevard — the old Route 66 — east of Upland into the city of San Bernardino, there are neighborhoods established 75 years ago that have remained largely unchanged in the last couple of decades. That means no Starbucks or Gap stores, but these pockets promise future home appreciation as new families buy the old homes and improve the neighborhoods, which would encourage more upscale shops and eateries to move in.
“Tania and Luis Induni recently bought their two-bedroom, one-bath home in San Bernardino for $268,000, sparing Tania a move to Keller, Texas, where her truck-driver husband saw equivalent properties for $150,000, she said. With her extended family ensconced near her new home, the 32-year-old stay-at-home mother was relieved to find something they could afford”
The foothill route east from upland(actually east of Rancho cucamonga, or east of the 15 frwy)goes thru some unincorporated districts, then thru Rialto?VFontana before going into SAn Bernardino. Lots of old dilapiilated properties interspersed with brand-new tract homes and lots of vacant weedy lots. There are sprawling constuction/lumber yards, truck yards intermixed with the old decrepit properties and the newly-sprung tract homes. No clearly delineation bewteen residential, commercial zones. It’s all an ugly mishmash stew, what you wouldcall urban unplanned uncontrolled sprawl. Fontana region just north and south of the 10 fwy is especaiily bad. Truckers like to buy homes in these areas because they can park their rigs right on their front yards without any ordinance violations.
SWEET!
““Tania and Luis Induni recently bought their two-bedroom, one-bath home in San Bernardino for $268,000, sparing Tania a move to Keller, Texas, where her truck-driver husband saw equivalent properties for $150,000, she said.”
LOL! Didn’t someone try to convince me last week that Keller was some sort of superior place to live and buy your shitbox? And now we have low rent truckers who park their rigs in front of the house preferring to stay in San Bernadino rather than live in Keller? I agree with the Cali vs. Texas thing but that’s really taking it to extremes!
Keller has averaged 7.1% annual SFH appreciation YOY for 2000-2006. Average SFH in July, 2006 was $237k. Keller website
And just try selling something there now, Cowboy. The “appreciation” was due to out of state equity locusts.
Just think of Appalachian crackers living in dlipapilated rural cracker-shacks strewn with rusted junk. There are large areas strewn over the inland empire which have these properties(Fontana, Mira loma, Roubidoux,colton, unincororated San Bernardino areas, ect.)
The process of Eminent Domaining and /or buyng up these rural shanties and replacing then with slapped -on new housing tracts or commercial bldgs has almost comletely wiped out the former rural pasture acreage and groves of the IE. Too bad. the IE used to have large expanses of Orange/lemon groves draped all across it’s landscape and imparting a pleasant rural-green ambience to the countryside. Now, you behold endless vista of stuccoed dull brown housing tracts, ripped out 1- acre rural ranchettes, endless shopping centers, commercial sites/ consruction/truck yards sprawled all over the IE landscape.
Someone needs to write a book entitled “the Rape of the Inland empire”
isn’t Thornberg the same guy that a few months ago was quoted as saying there would be something like a forty % drop in home prices?
“He expects sales to retreat to the level of 1993 or 1994 and price declines totaling 10 percent or more.” This is what he said. 10 percent or more is wide open.
Thank you for the thoughtful reply. But actually I was refering to quotes from Thornberg months ago (which were often featured on this site). I guess I am a little frightened that someone could so thoroughly change their “tune”.
oops, never mind. someone addressed this issue farther up the post…thanks again…
I lived in Fontana for 10 years before selling, banking the cash, and renting in the OC. Anyone who thinks they will hit the jackpot in the coming years are in for a surprise. All those homes that just sold for 400K will never go for 600K in the next decade, let alone the next two decades. On top of that, it is hotter than Hades in the summer and it is light years away from LA where most of these people work. Add in all the meth lab homes and you can see what this ‘hood is all about. A lot of white trailer trash as well.
What about the smog? People moving East from L.A. don’t realize that the L.A. air quality is actually decent, because the sea breeze pushes that up against the mountains, which are barely visible from Fontana. That’s a major bummer, especially if you have kids. Smog is pretty tough on young lungs.
That is very true. I was down in LA once visiting my sister, and the first night there was a massive wind system that came in and blew out the whole area. When we woke up in the morning, my sister saw mountains/hills that she had never seen before (although she had only been there less than 1 year). However nice it was to see those winds come in, the reality is that the rest of the year you are breathing in all of that stuff. My sister’s car would accumulate a thin film of gunk all over it from a week or two of driving around. It was quite disgusting. It really makes me thankful that I grew up a little ways into the country around a major metro area. People should really be more concerned about their kid’s health relative to where they live.
“A $400,000 budget buys . . .
A small house, a fixer-upper or a home on the outskirts. You can also find the occasional overlooked gem.
By Diane Wedner, Times Staff Writer
August 20, 2006 ”
“Finally, for those who prefer ocean breezes and a more exciting cultural ambience, Long Beach could be the answer. Some neighborhoods still have not fulfilled their appreciation promise, but be prepared to jam into small living spaces, said Main Street Realtors agent Geoff McIntosh.
Long Beach’s downtown has seen a recent renaissance and higherL prices, attracting younger, wealthier professionals. But the downtown also has a family-oriented neighborhood in the northern section. This higher-density quarter, which includes attached housing, has two-bedroom, two-bath homes in 700 square feet for sale for $390,000, McIntosh said.”
The area that this author refers to, the “family -oriented hood” in the northern section of dwtn, is pretty run down. If you trace the biundaries as east of the 710 fwy all way to los alamitos blvd, and from approx 7th st all way north to about willow ave, then you are talking about slummy apt sections interpersed with small 60-80 yr old matchbox homes. There are a few quiet peaceful streets here and there but essentially the entire area is degenerating, and has been for several decades. Here and there developers have put up new condos and apt units, but they will not alter the makeup of this area. Just take a drive along pacific coast hwway from west of the 710 fwy going east all way to termino, or better yet take anahein st and behold the scenery, including the Ladies plying their trade.
“Long Beach’s downtown has seen a recent renaissance and higherL prices, attracting younger, wealthier professionals”
Can definietly argue about Dwtb Condos going for highr prices. Have noticed too-many banners hanging up on a score of dwtb comlexes begging for buyers.renters. There is a Condo glut in Dwtn LB and more coming online. The 133 promenade complex, an ambitious hih-end loft/condo project going up along the LB Promenade walk between ist and broadway, and slated for completon early next year, will add to supply.
If thr dwtn LB comdos are priced cheap relative to other hi-end coastal condo Markets, this may bring in more upscale buyers, but this is a big if. There are negative factors living in dntn LB, such as the aforementioned slum areas intruding so close to dwtn, as well as 710 fwy gridlock problems, port and beach pollution, ect. Bt the Way, Dwtn LB does not have that great of an exciting cultural ambience, at least not like Venice.
Cultural ambience? Long Beach? Maybe if you really, really, really like looking at fish swim. And those rainbow lorikeets, which I swear are trained to crap in people’s hair.
Hey, it’s got “Beach” in its name, it must be nice! Oh, here’s a lovely place named “Hawaiian Gardens”…
“Head into the San Gabriel Valley, and the best bargains are in Azusa, said Marty Rodriguez, a veteran agent in Glendora. There, buyers still can find tiny homes for $365,000 to $405,000. ‘If you like flat-roof houses and some wild colors, you can find an old fixer in 700 square feet,’ Rodriguez said.”
Who the hell wants to pay $400,000 to live in SEVEN HUNDRED SQUARE FEET in Azusa??? The area ain’t that great, the house is a little bigger than a closet, the schools are slower due to a lack of basic English skills by the majority of the students, and the smog burns your eyes.
If that is the best SoCal has to offer, why live here at all? This is why I’m renting near the beach now and looking elsewhere to move my family. The ultimate price those who inflated this bubble will now pay, is the destruction of an entire area.
You guys gotta watch this video, it’s hillarious. People burrying a Saint statue in their yard to help them sell their house……….LMAO
http://cbs2.com/video/?id=23811@kcbs.dayport.com&cid=71
We have another prediction again! Was there another prediction that price will never drop in SoCal? How can it be that home price maintain at this level where only 2-5% of the population could afford to own home now in SoCal? Are we expecting that married coupl making $150K will no longer be afford to own home? And the only way to own a home nowaday is to get into a dangerous interest only, adjustable rate loan so that you know it will eventually lead to foreclosure if your salary does not increase to $250K by the time your interest rate adjust to 8-9%.
Does any of this make any sense at all to expect only the people making $250k/year to own home in SoCal?
Ah yes, now you understand our frustration for the past 2 -3 years and why a lot of us here are known as JBR’s (jealous bitter renters).