‘Sellers Are Having To Be Way More Reasonable’: California
Some housing reports from California. “More homes were built in Riverside County than any other county in California last year, adding 29,689 housing units between July 1, 2004, and July 1, 2005. With the housing market leveling off, Borre Winckel, of the Building Industry Association of Southern California, said he doubts Riverside County will make the same ranking next year.”
“Sales office traffic in the county dropped by a third compared to last year, and home sales are down by as much as a quarter, he said. The median sales price in the county is about $425,000 today and he said he expects it will be 10 percent lower in a year.”
“‘The public is waiting, the public is watching what the real estate market is doing,’ Winckel said. For the first time in about five years, builders are offering incentives, he said. But there won’t be a repeat of the speculation-driven housing glut of 1990 and 1991 because builders are more careful and have less inventory, he said.”
The Modesto Bee. “Sales prices have been falling throughout the Northern San Joaquin Valley the past few months. Stanislaus County’s median home price in July was down $20,500 from December’s record high.”
“‘Right now there’s so much inventory to choose from that buyers can get great deals,’ said Daniel Del Real, an agent in Modesto. ‘Sellers are willing to let their homes go for a lot less than their listing price.’”
“Beyond lowering prices, many sellers are offering other incentives to make their homes more affordable, according to Nanci D’Anna Wyatt, an agent in Modesto. Wyatt said some sellers are ‘buying down’ mortgage rates by paying loan fees (called points) for buyers, and others are paying closing costs to help buyers purchase homes for less money up front.”
“‘Sellers are having to be way more reasonable than they were before,’ said Wyatt, noting that many Modesto homes now are selling for $300,000 or less.”
From Reuters. “Father Mark Wiesner has grown accustomed to wishing parishioners bon voyage as they flee the San Francisco area’s high housing costs for California’s Central Valley, where developers are increasingly transforming farms and ranches into a new suburbia.”
“Analysts say the middle-class flight will press on even if coastal home prices sag amid a national housing slowdown. Home prices near the state’s coastline would need to collapse to make buying a home there possible for many households.”
“The interstate linking the San Francisco Bay area to the Central Valley has become one of California’s most congested freeways, said economist Sean Snaith, a consultant to the University of the Pacific.”
“During bouts of insomnia, Snaith has witnessed the cost of the congestion from the window of his home in the Central Valley city of Stockton: ‘It wasn’t unusual to see people lining up at 4 in the morning at the gates of the community where I was living to begin their commute to the Bay area.’”
From MarketWatch. “The latest home-sales figures are in, and they make for some depressing reading. But I could have written this week’s ‘Existing-home sales plunge’ headline months ago.”
“Home and condo sales in the once-hot San Francisco-area housing market fell 31% in July. The morning daily in the trendy Sonoma County wine country revealed that the average home price in July fell for the first time in four years.”
“To say that the housing market here is slow right now is a bit like saying Beirut’s streets need some patching. Ever live in a staged home for five months? It’s about as pleasant as living in your car.”
“‘You’re living in the merchandise now,’ our agent smiled weakly after each round of complaints from us about having to keep our house spotless and perfectly appointed, on the off chance buyers did happen to show up.”
“It’s being called a housing ‘lull,’ or ‘a return to a balanced market.’ There’s more unsold inventory sitting on the market right now, here and in many U.S. housing markets, than you’ll find at a Wal-Mart. Most days it appears ‘For Sale’ signs outnumber mailboxes in our once-overpriced neighborhood.”
“Finally, in desperation, we called one of the three agents we’d interviewed in January about listing our house. He’d given us the lowest price, and that’s probably why we didn’t list with him. But this guy may have seen a train coming. ‘Cut your price,’ he said bluntly — ‘a lot. You’ll get offers.’”
“This after we’d already made several price cuts. And after we’d long ago abandoned the idea of making a tidy sum on the place. So, we cut our price again, this time by $60K (ouch). Miraculously, wary buyers slowly, finally appeared from the brush.”
“The very next day after we finally accepted an offer at our new fire-sale price. But look on the positive side: My wife and I are thrilled. We both agree: Better to live next to a salvage yard than in a staged house during a slow real-estate market.”
Usually, CAR reports on the same day as the NAR. If they happen to release it later today, I’ll update this post. Here is another MarketWatch article:
‘Genius that I am, I could’ve told you existing-home sales were down without looking at a single piece of data. In my tract-home slice of once-blistering-hot San Diego, there has for months been a noticeable drop in weekend open houses. Yep — that’s anecdotal, and I realize the situation might be different where you live. But sometimes the real story is right beneath your nose and the real reason is so obvious it’s easy to miss: Even with housing prices falling, prices are still too high.’
‘While you could argue fewer homes on the market should equal higher prices, there’s a flipside: Speculators are gone, and maybe anybody who wanted to buy has bought. And maybe, just maybe, all but those who need to sell are holding back — not wanting to be first on their block to set a new low selling price in this Southern California mecca that as of the second quarter remained the country’s sixth-least-affordable housing market.’
On what information does Herb Greenberg, a journalist, have that the speculators are gone? I personally doubt it; many probably are twisting in the wind of inventory which is not moving, while others are delaying their exit from the market for the hoped-for return to normal price appreciation which the experts have assured them is just around the corner. It will take a protracted period of negative cash flow for these flipper-optimists to throw in the towel, just as it took months of cash burn for the dot coms to collapse.
I’m renting from a speculator who has already been getting hate mail from their lender. The speculator next door is trying to negotiate a short-sale, the speculator across the street is vacant, and the one next to him is now bank-owned. The speculators are still here, and only the dumbest of them are still trying to buy.
Had a guy moving in to a room I have open in my *rented* house in LA. Says he has 4 houses in Las Vegas, trying to sell one.
He’s very proud of being a young guy who was gotten *rich* off RE.
Please advise him to buy more!!
Yes, please buy more. Or else the terrorists have won!
I’ll give him some numbers to a few real pieces of work I know who will help him draw out every scrap of equity he has in his properties by calling each one his primary residence, allowing him to go No-Doc, Stated-Income, you name it, so he can just go get giddy in an all out real estate feeding frenzy. Why stop now, dude?
As a ‘future buyers’, how can you NOT WAIT to purchase a property, until all this type of information and poor investment decision making has shaken out? I don’t think there is anyone who knows the magnitude of the ‘unnecessary’ properties filling our country. Only time will reveal this monster.
“……So, we cut our price again, this time by $60K (ouch). Miraculously, wary buyers slowly, finally appeared from the brush……”
The “ouch” was from the unknowing & uneducated buyer, bent over your granite counter top signing the ‘I want it now’ contract. Enjoy my friend, hope the dream home came with air bags …….
I think when the term “speculators are gone” is used, it means in the sense they are no longer bidding much in the market. Most certainly they are to be found amongst the 7.3 months and climbing inventory of stressed out sellers however.
And most certainly they will help add to that growing inventory pile until the roof caves in on prices.
Just saw a shill from RE MAX on Bloomberg, Kathleen Kelly, CEO or such. They can’t give it up. Wont admit it’s over and that we are in the ‘denial’ stage. What say you?
You have to remain in denial indefinitely in order to hold down Kathleen Kelly’s job, or David Liareah’s for that matter…
OK, but I have to hand it to Bloomberg for interviewing Peter Schiff today of Euro Pacific Capitol. Many of us here have made references to Schiff’s editorials from time to time because he has the facts right. Antway, he follows up some rah-rah poser making light of the housing numbers and just went to town. He blew apart the soft landing theories with all the ammo we know he holds in his arsenal. He went off! It was great. Again, I was surprised because Bloomberg will usually follow up a bad report like that with a dozen or more “experts” playing it down.
Oh, I watched the Remax Betty do her thing. Anyone who couldn’t read through that piece of work deserves an overpriced house financed with a toxic loan. I say let the rest of these idiots fall on their own swords.
Has anyone got any advice regarding Euro Pacific’s fund aiming to profit at the real estate collapse? What are they doing aside from shorting homebuilders?
they’re gone from the buying side of the equation.
Yeah, like me holding JDSU that I bought on the way down. I don’t even look at quotes for it anymore.
5-10% is nothing if we really think about it. Based on how fast this went into the crapper I would like to know what people here think it will be in January 2007- Dead of winter…
Do you all think it will be 20-25%???
I could see 10-20% by ‘08 even if interest rates stay the same.
I just took my crystal ball out of the closet and polished it
My Magic 8-Ball said “Reply hazy. Ask again later.”
Wait - was that David Lereah’s image floating back there?
I think 50% plus!
By January of 2007?!!!!!! :-p
I agree.
Where’s the popcorn?
I think the trifecta will occur by Dec. Alot more new sellers competing with stale listings, then the interest rate hike, and adjustable rates will reset…should be VERY interesting, I imagine there will be a 100k drop at that point (happended that way in Dec 1991)
“5-10% is nothing”..I agree..think about it in $$$ on $500k, $600k, etc., then think of what could be done with those $$$…invest it, cash cushion, smaller mtge.
now imagine, 10%, 15%, etc.
let alone 30%, 40%, 50% - at these levels…fuggetaboutit….
20-25% for sure in some areas by Jan 07′. Hell, I bet if numbers were reported correctly we would see some sales at that number right now! We’ll have em squealing like in the movie Deliverance by X-mas!
I think you are correct. IMO, as I posted days ago, I don’t think this is going to take years to unwind. The final bottom may be years away, but I suspect the BIG part of the drop will be much sooner in many areas.
“5-10% is nothing if we really think about it. Based on how fast this went into the crapper I would like to know what people here think it will be in January 2007- Dead of winter…
Do you all think it will be 20-25%??? ”
Maybe for some of those rediculously overpriced 1-2 million dollar coastal properties in such places as Mahnatten beach, palos Verde, Santa MonicA, hOLLYWOOD HILLS, ect, which after 20=25% drops would be still rdiculously overpriced. Santa Clarita valley and Palmcaster=15-20% : Long beach around 10% sfh’s;15% condos : rest of La County maybe 5-8% average YOY price drops by jan 2007. Just a highly speculative guess.
It’s already 15% on the Central Coast and this thing hasn’t even started to roll. 50% +!!!!
don’t listen to anyone until you see a chop of 30-50% from today prices.
You mean June 2005 prices right? Because that was the peak of the froth. Since then it has been nothing but hysterical ‘dream price’ Parade of Homes ……
That sounds right. My target is 40% off 2005 prices, and barring personal economic disaster, I am planning to start seriously looking in the summer of 2008…
You won’t have to wait that long.
I have to be honest here.
40% down from today’s price and I’m in.
$600k house becomes $360k…a big downpayment, a very small loan, some aggressive prepaying and BAM!..I own the house outright in 5 years or less.
The sad part is (at least for Californians) that those who bought at the current high prices have their property taxes “locked in” at the bubble valuation. the only way to get out of it is to sell and re-buy with all the attendant transaction costs.
Actually, as occurred in the early 90’s, the state will adjust (temporarily) taxes to a new level if housing prices fall significantly. Of course, they’ll raise them once values go up, but even in Prop 13 CA you can still have your taxes adjusted in the event of a drop.
No they can fight with the local tax assessor to get property taxes reduced as long as valuations are lower than their purchase price.
After 5-10-15 years and valuations increase so does their property tax, up to their original purchase price.
Essentially no Prop 13 benefits if you buy CA RE at the top of a bubble.
That is great info, Sunsetbeachguy, as it suggests another big reason to avoid buying in Cali at the top of the market. Those patient enough to buy at the trough get to enjoy Prop 13’s “inflation protection” benefits of no more than 2%/year increase in their taxes, while those foolish enough to buy now will see their assessment yanked up as fast as inflation drives up nominal valuations in the next twenty-five years.
You guys wanting in at 40% on the coasts, go ahead and make your offers and go to auctions…
But be careful what you wish for.
Those bids will get fills soon
I did a rent vs buy calculation and came up with 50% drop using comparable rents before it is actually economically better to buy than to rent.
I’m back in at 125x monthly rents. I’ll be buying rentals at 100x monthly rents, presuming that I can get any sort of leverage at that point.
100X seems incredibly cheap right now, but I think that is the right place, esp. with today’s taxes, insurance, and maintenance. If anything, prices may go a bit below that. Generic duplexes in Fla. NE coastal currently “going for” $350-400K and renting for $900 or so a side seem like they must be a deal at 250-275K, but they aren’t. This stuff has to go down a full 50% to make it really attractive.
RE agents and thier ilk are reaping what they’ve sown for the past 5 years. Telling the gullible public that real estate always goes up and now with sales plummeting realize the vice they are in. The homeowner class, like a spoiled child that has never been disciplined properly crys and screams and refuses to listen thier RE parents. Ultimately both parties will be dragged down all for short term gains based on a lie that property values are linear in growth and not cyclical.
Agree…..
And honestly, I don’t begrudge anyone who jumps in and bails out a FB or old home owner, catching this ‘falling knife’ during the downturn …… as long as it’s not a “too far from the bottom” price. I caught mine in 1990 ….. got a little blood on my hands ….. bought at a 1995 price in 1990, but no consolation in doing this. Many years of unhappiness with this ‘Home Ownership’ dream.
The 2006 owners may reap a short term profit, but IMHO, their buyers will be saddled with a long term gain ……
How do you reconcile this statement,
“More homes were built in Riverside County than any other county in California last year, adding 29,689 housing units between July 1, 2004, and July 1, 2005″
With this one,
“But there won’t be a repeat of the speculation-driven housing glut of 1990 and 1991 because builders are more careful and have less inventory, he said.”
I agree with no repeat of ‘90 and ‘91. That was just a baby fart compared to what’s about to go down in the IE. I do believe, at the very least, it will make the top 5 of most bubblicous meltdowns.
It might very well strip the modifier “Great” from the existing champion.
Like this?
http://www.marketwatch.com/news/story/story.aspx?guid=%7BE18E95AF-DBFF-4EE4-ACF7-530A3CD714D3%7D
nasty, nastier, or nastiest? He really should qualify his statements….
Roubini gives us a 70% chance of recession by end-of-06. If that makes him Eeyore, I’m the Grim Reaper.
We’re in a recession as of Q3 ‘06 if you ask me. Just wait ’til Q2 gets adjusted (downward) and Q3 comes out barely on the plus side. When Q4 is reported Q3 will adjust to recession. I’m betting money on it.
I think the recession beagin during the last half of June. The abyssmal July sales numbers have only confirmed that beleif.
We might already be in a recession. An observant researcher would discover that the National Bureau of Economic Research (the institution responsible for officially dating recessions) usually sets a retrospective beginning date to a point in time when the media offered no indication a recession was underway.
Try Q3 ‘05, per John William’s “Shadow Government Statistics.” By understating the CPI the government overstates the GDP. Real growth has been negative for over a year now.
tj –
Excellent point. If you can cook the inflation numbers, then you can also adjust the business cycle dates to line up right with the election cycle.
at this point in this regimes tenure, i doubt if you will ever see those recession numbers. it will padded/adjusted/manipulated/etc to the next regime.
scary
“This is the biggest housing slump in the last four or five decades: …,” Roubini said.
Umm, excuse me but ummm “four or five decades” puts us back to the Great Depression for the last downturn of this size. It is about time we started having a little panic toget peoples attention.
Better check your history book….great depression was seven decades ago. Four or five implies post war.
Well duh. When you subract 40-50 years from 2006 you go back to 1966-1956 and as we all know from our history books post WW-II was a massive housing boom so the next previous slump was… the Great Depression. YMMV but I interpreted the statement to mean Roubini expects this to be the largest post war decline to date.
Lies, damned lies, and statistics.
There was so much inventory scooped up by speculators which was allowed by the ‘creative’ financing. That those should be considered in part of the outstanding, but hidden, inventory.
You can easily double that figure for riverside county homes built since july 1, 2005. Maybe even 50,000 additional units put up. Saw one mega housing complex of at least 600-1000 units being built in beaumont alone, of which maybe 25% are completed.
SanBernardino would also have had to double the no of units from the 19,000+ built from july 1, 2004 to july 1 2005. That would be at mininum 100,000 new housing units completed last two years for both IE counties. The homes in the pipeline to be completed up to mid-2007 would be probably another 50,000-100,000, based up all the new ongoing projects out in the IE.
That is a lot of new housing stock(possible 200,000 minimun) thta will have been added to the IE total housing supply from mid-2004 thru mid 2007, even if the HB’s slow down or halt new construction.
Look for drastic price declines in new home sales prices next several years( min 20% but possibly as much as 50%).
Too much supply in a declining RE market bubble collapse and/or a recessionary market will gurarantee drastic price drops. The trigger for these price cuts will be a slowing IE econmomy exacerbated by a dramatic decline in construction spending and a consequent rise in IE unemployment. Additional factor is that a lot of folks will move back into LA/OC as more apts/condos/lower SFH homes prices become available nearer the coast.
peter m
- Riverside and San Bernadino are toast. The only hope for them is our weak border to the south. Only illegals coming in can save the housing market in the IE.
From all the reports and observations of the IE RE market it appears that a great trans-migration of illegals/recent immigrants.section 8′ters,gang bangers has occurred from out of LA innor city to the IE Burgs. I actually notice that compton/watts/scentral LA seem more quieter and laid back than back in the bad old days of the 80’s 90’s. Such gangs as the rolling 60’s, crips, vineland boys, 155 st, have staked out new turf out in the IE boonie and desert scrub. This is no joke:the LA times had a writeup recently about the increase in gang criminal activity inthe IE and desert regions, and the drop in criminal activity in the old inner city areas.
Does drug cartel money typically prove sufficient to afford a 20% downpayment on a San Bernardino McMansion?
Do you mean a McCrib?
Bought my first SFR in 1997 in Riverside, brand new house, builder went Bankrupt. Paid 137K they were goin for 225K in 1991. Home actually sat vacant without carpeting and appliances for 6 years. Everyone said me and the Mrs. were crazy to buy cause houseing is a bad investment. in 2010 we may be hearing the same thing.
I am hopeing they break ground on the homes at the end of Santa Ana Canyon @ Weir Canyon in Anahei hills by the Toll Road. I am afraid they won’t, it’s mostly level’s and cleared, but the bean counters at the Irvine Company are better than most. Oh well, used is OK I just don’t like the Granite.
The homes on Glassel in Orange are a joke they are by Lennar Homes, it’s built on a dump, truly, a DUMP! It was a landfill only 2 months ago, the develpoment is called “Olivegrove @ Riverbend” price is listed as anticipated in the 800K’s.
The builder is previewing with only 6 between framing and finished with tons of sights with no slabs…..this FB stands for F@cked Builder…..p
OCBear
“The homes on Glassel in Orange are a joke they are by Lennar Homes, it’s built on a dump, truly, a DUMP! It was a landfill only 2 months ago, the develpoment is called “Olivegrove @ Riverbend” price is listed as anticipated in the 800K’s.”
BWAHAHAHAHA! Building dumps on dumps seems to be standard operating procedure for Lennar. Seriously, back during the 1980s/early 90s, Lennar built a huge development south of Miami called Lakes by the Bay, which had a great view of what we called “Mount Trashmore”, the South Florida/Miami landfill. Also had a nice stench to go with it, depending upon how the wind was blowing. And all those seagulls wheeling and diving for garbage. Ugh! But wait, that’s not all. They also built a development over an old landfill west of Ft. Lauderdale, I think it was in Miramar. This was not, of course, disclosed to the buyers. Some of the houses started sinking and then a bunch of trash started popping up out of the ground in the common area around which the homes were built, like old mattresses and bedsteads and springs and stuff like that. It was all over the news for weeks, the homeowners were really screwed and went to court and I don’t recall what the upshot was. And as a final note, Lennar must really like that “Riverbend” name. They have a development not far from me called “Riverbend”. The locals call it “Riverbendover”. At least it wasn’t built on a dump, but they sure destroyed a nice piece of agricultural land along a lovely little river. The development looks like crap. It doesn’t look to me like all that many people are living there, but I see a lot of ads for people trying to rent out homes there. Must be a bunch of FBs and/or specuvestors. They and Lennar deserve each other. A real match made in heaven.
It is lennar that is putting up all those mega-sized
monster developments out in the IE, the standard cookee-cutter brown-toned assembly-line stamped SHF
Mcstucco’s. which are often built on hastily-graded suspect turf. Saw one of these out in beaumont in process of going up. A large flat area just north of the 10 fwy was being leveled and graded: no slopes or hills, just a flat level area in which a large mass of tract homes could be sprung up very quickly.
Bet 100 % that these hastily-built tracts will soon turn into section 8 rentals and deteriorate into slum projects.
I have been trying to figure out what the hell is wrong with people that they would even buy these homes. I’m almost just as angry with the buyers as I am with the builders. These developments are nothing more than glorified projects. They ought to advertise “You, too, can own a nice little slice of slum”. However, about six years ago I read an article in the Atlantic Monthly or one of those highbrow journals about what happened to building and zoning codes after WW2 and how it was all about the automobile, which was considered the engine of the American economy. So building and zoning codes were jiggered to accomodate automobiles, which encouraged suburban separation, strip malls, tract housing, etc. As in Levittown. This model still carries on today. All about the car, and oil and gas.
“But there won’t be a repeat of the speculation-driven housing glut of 1990 and 1991 because builders are more careful and have less inventory, he said.”
Greed has no memory.
Nor does pain.
actually, it’s been said (by ravi batra, among others), that greed, pain and all the other great-depression associated torments have a full two generations of memory, but no more — which is why we’re overdue for another great depression, given that generations have been living a bit longer lately.
That sounds plausible. My parents grew up in the Depression, and my wife’s and my grandparents were adults who had to personally deal with its consequences. My wife’s and my perspectives have benefited from first-hand observation of the obsessive frugality of our grandparents, and I have personally read enough about the Roaring Twenties to comprehend the similarity of the Roaring Nineties (Stiglitz) thereto, and to wonder whether our enlightened government economic policy makers can indefinitely postpone the inevitable resolution.
Gen-Xers do not appear to have a clue about the risk of a protracted downturn, such as the one which recently struck Japan, and are touted in the media as being wiser than the older generation in matters of leveraging themselves into owning unaffordable homes. Never mind those suicide mortgages they cannot possibly hope to ever pay off, and which will leave them in a negative net worth position if prices ever happen to turn against them. (Don’t look now, but a front page graph in today’s WSJ suggests that prices have recently been falling at a 5% annual rate…)
Gen-Xers are too busy playing online games, fooling with MySpace/Facebook, and sending text msgs to be worrying about real life. Something like half of the 24 yr old college grads went back home to live with mom and dad (don’t quote me on this, but it’s in the ballpark). Now that mom and dad are also in trouble, neither generation can bail out the other.
Ozarkian, I think you are confusing Gen-Xers with Millenials.
I agree, Gen-xers are 40!
“Something like half of the 24 yr old college grads went back home to live with mom and dad (don’t quote me on this, but it’s in the ballpark). ”
Okay, so I’m kind of quoting you.
Anyway, can you blame them? The combination of weak job growth (plus the fact that most available jobs are for those with experience - something lost on a new grad), high housing and fuel costs, etc. has priced more young folks out of ANY market than you might think. This is a prime reason why so many 20 somethings that actually HAVE a job to go in on a mortgage, or rent, with friends. Having an education no longer guarantees you a job. Unless you go to India.
Exactly…Gen Xers are ~28-38 (40 not so sure about..) born 1968-1978. I am 34 and read the book “Generation X” in my college soc class. I proudly rent and am waiting for the crash. I do play video games though…what do you expect when you were 7-8 when Pong/Atari hit the scene? I have never touched MySpace and I hate text messaging, takes too long to type.
Just a smitten off-topic but what the hell happened to the summer comeback for home sales? With sales tumbling approx 20-30% in July, where does that leave the seller. Today, aren’t we exactly one month away from the first day of autumn?
How’s it Auction ‘07 put it about all hell breaking loose when?
Come on - it was right there after the post-Super Bowl rally and the Spring pick up in demand.
You mean you didn’t see them either?
huh.
The Labor day massacre is my favorite borrowed from another poster here.
It has a better ring, than all hell breaks loose.
Comment by SunsetBeachGuy
2006-08-23 15:51:30
The Labor day massacre is my favorite borrowed from another poster here.
“I am licking my chops”
http://www.marketwatch.com/News/Story/Story.aspx?dist=newsfinder&siteid=mktw&guid=%7BE18E95AF%2DDBFF%2D4EE4%2DACF7%2D530A3CD714D3%7D&link=&keyword=roubini
yup… the crap is hitting the fan.
Jesus!
You mean Saint Joseph!
Where’s my Saint Joseph statue and shovel !!!!!!!
I need one too for protection….oh my gosh, these will make great Christmas gifts - stocking stuffer anyone?
I saw Roubini on Kudlow and company yesterday. Kudlow gave him 20 seconds and then the music was playing that signaled a commercial and that was it. It was really funny. Kudlow only gave him 20 seconds. Why bother showing up for 20 seconds?
i sometimes wonder if kudlow made a deal with the PTB never to trash the economy as a get-out-of-jail card for his early 90s drug addiction/recovery — just like ted kennedy tacitly agreed (after he drowned mary jo) to never run for president….
today was the most overwhelmingly bearish msm coverage of the housing market i’ve heard to date.
agreed. On fatwallet.com where the bubble was being debated, its all “run and hide” for the bulls today. Even MSN has an article on the decline of real estate nationally. Even though the real estate market has been tanking for 6 mo’s in San Diego, its not until today I’ve seen lots of MSM coverage.
thanks for confirming my antennae on the zeitgeist!
It makes me feel all tingly and warm…in a good way.
Cool, I have always wanted toknow how to use that word in a sentence.
Very sweet to see this all finally coming to pass.
Today is the first time I have ever herd CNBC, and Wall street use as the excuse dejure for a down market; Real Estate. Today marks the inflection point of a serious downturn in the market.
It’s typical of MSM. They are a lagging indicator. They needed a piece of really bad news to hang their hats on. The housing numbers gave them that hook. They need some sob story to give ‘human interest.’ There are plenty of those to go around.
Too bad they are 9 months behind; they won’t help anyone.
Likewise for the WSJ. They waited until prices were clearly already falling hard before they put up a big front page story about some poor dingbat who had to drop her list price by over 50% below what she believed her home to be worth in order to find a buyer. Now if they could only come out with an expose of how the PPT props up homebuilder share prices, despite 39 / 39 economic forecasters missing the drop in used home sales by a over a mile to the optimistic side…
The WSJ is too well connected. Only after all the insiders have dumped the HB stocks, will they be reporting on the manipulation.
Attention all. Several AM radio stations actually reported the housing bubble on their newsflashes. Incredible, but AM 790 kabc had a newsflash at 2 pm that housing sales declined drastically fron july ‘05 to july 06′ as reported by NAR. So did AM 1070 KNX about an hr later.
SCal AM radio gets a lot of their programming paid for by the Scal RE Lending industry, especially AM 640, 790 and 870. So that any news reporting of negative RE trends would probably make their paymasters( the SCal RE Mortgage industry) shudder.
Several bloggers on this site have already posted the NAR report which was picked up by REuters , and upon which the AM Stations based their newsflashes. That 2 pm radio newflash will reverberate widely throughout The US, as KABC radio 790 AM is widely syndicated.
Also KNX 1070. Constant barrage of adverts from suicide lenders and home remodeling “experts”. On the “Business Hour” today, a NAR shill was interviewed, and was in full-on sheep-calming mode. It was some guy with an oriental accent - not Lereah.
I think the NAR got a heads-up that the WSJ piece was coming out today - their new line seems to be that prices will level off for six months, then resume their rise. I wonder how many local radio stations they had to service today? Must have been a bad day at NAR HQ.
I wonder if that same newsflash was repeated during the peak afternoon commute hrs from 3 to 6.(The AM stations do repeat the same newsflash headlines). if so, then millions of SCal commuters just got a major shock. This is because 80%-90% of sCal residents are either completely ignorant about the bubble, or are in denial, or take their news from the tabloid cable/TV nightly news, which never tells you S*it. Neither does the LA times, which always buries negative RE news somewhere deep in the Business section or RE section om page 7.
I remeber KNX 1070…… more bad RE loan ads than I could beleive on that station. Some jerk saying that a 30 yr mortgage was a gamble and only losers would consider keeping a 30 yr fixed- all should refinance adjustable. another “bigest no brainer in history of mankind”. That Radio station sure went down hill about the time they got rid of the Drama hour. Some total LA jerk must have taken over managment and decided all kinds of bad advertisments were just fine. “Questions” “answers”
No answers on that radio station. lots of questions that need answering though.
yep, I miss that drama hour…
And, as Larenter pointed out, David L. will be blowing Bernanke to ease rates.
YUK!! I didn’t need that vision in my head.
I think they make a good couple! Don’t you think?
Nothing but “frothy”… move along… Only *some* areas are experiencing a little “froth”. Just a regional phenomena. Greenspan was great at spinning his words wasn’t he?
I wonder how he would term inoperable pancriatic cancer? Your husband is only experiencing a little stomach flu…
I was just reading a book.. “my term at the fed” and there was a quote from Greenspan about what would define a “bubble” and he said that it would be a 40% drop from the highs… anything less than that I would assume he means will be “froth” and I hate to say I agree with his assessment.. there may be some markets dropping more than 40%, but it will not be on a national level….
Here is his direct quote:
“It’s pretty clear that it’s an unsustainable underlying pattern,” Greenspan said in response to a question after a speech on energy to the Economic Club of New York. “People are reaching to be able to pay the prices to be able to move into a home.”
“There are a few things that suggest, at a minimum, there’s a little froth in this market,” Greenspan said. While “we don’t perceive that there is a national bubble,” he said that “it’s hard not to see that there are a lot of local bubbles.”
With the housing market leveling off, Borre Winckel, of the Building Industry Association of Southern California, said he doubts Riverside County will make the same ranking next year.”
WTF!
- builders are offering incentives, he said.
- BUT there won’t be a repeat of the speculation-driven housing glut of 1990 and 1991 because builders are more careful and have less inventory.
BUILDERS ARE MORE CAREFUL?? This guy is a moron.
Yeah, builders were being more careful on the way to the cliff this time.
As in dumping their stock before the news got out.
I want to pay off my house before the Big D. What is the best stuff to sell off to get decent cash - fast?
Do I need to start garage sales or bake sales?
New definition……….
Housing-bubble bust = housing-bubble shopocalypse
Ah, another fan of Reverend Billy! The Church of Stop Shopping is one of my favorite religious venues.
http://www.revbilly.com/
Fire sale, literally a fire sale.
I’ve been a reader of this blog for the longest time but this is my first post. My thanks to Ben for the hard work, as well as the great group that post on this blog. I’ve been tracking my area (Arcadia, CA) for signs of the down turn and I see more and more signs of it: “price reduced,” “please offer,” houses relisted, “for sale” signs lining the street etc… My fiancee and I are saving up for our down payment when the price dropped by say 40% or so and we’re very hopeful. I’ve also done my duty talking my sister and her husband out of purchasing a second house for rental purpose. So, it’s great and thank you all for the information. Keep it coming…
“Home prices near the state’s coastline would need to collapse to make buying a home there possible for many households.”
…which is exactly why they will.
dwr, I thought the same thing when I read that.
From this blogs lips to Gods ears…
It seems house prices in certain parts of the Bay Area are coming down quite a bit - places like Dublin and Santa Clara. However has anyone seen evidence of declines in the Berkeley, Rockridge, Oakland, Piedmont areas?? It seems as if prices are still sky high there and that those markets are different (not as many condo conversions, new homes, etc). But I am not sure. Any info on this?
The ‘best’ Bay Area towns will not see declines until later in the cycle. When Berkeley and Palo Alto see significant price declines, then you know it’s really bad.
I’m in Lafayette. My neighbor just sold their house for $1.7m (2400 sq ft 4/2.5) to trade up to a slightly larger house (5/3) for $2.4m. Both homes were on the market for less than a month. No slowdown here yet.
I’m a berkeley resident (owner)bought my first house in 91 - and lucked into a bigger place at a good price(motivated sellers needing to move de to job relocation) in 96. We’ve observed that there are far fewer specululators in berkeley, north oakland than out in the burbs and the valley. Lots of folks that have been around long enough to have reasonable mtg pmts. On my block out of 22 houses 10 of are long paid off and most of the others have been owned for 6+years by stable employed people What happened last time (early 90’s) the stratospheric rise abruptly stopped abated and most folks who could afford to wait pulled their place off the market and changed their retirement plans rather than drop the price
Berkeley resident also. Am seeing houses staying on the market much longer + many (albiet modest) reduced asking prices. Also the old take it off the market then put it back on later at a lower price. For instance I drive by this house most everyday.
http://tinyurl.com/kjm59
It was on the market earlier this year for 800K or so, can’t recall exactly. Then it was taken off for a while now at 749K (bought in late ‘04 for 650K according to zillow.
Been watching Piedmont closely for a couple of years. Homes are still moving, and some crazy people are paying crazy prices. Homes are moving more slowly, though. I have not seen significant price increases in the past year; the prices have been stagnant.
Watching a home in my old neighborhood in Oakland. 1920 sq. ft. Bought in ‘97 for $340k. Put on the market in May at $725k. Reduced 2 times. Now at $675k, and still not sold. We sold at the end of ‘04 with 2 weeks of showings and multiple offers 2 days after bids were accepted.
Things have indeed changed.
I agree that the better neighborhoods will
I’ve been watching prices in Santa Clara, and I don’t see prices coming down at all. Don’t confuse the “make a wish” prices people are listing for with what they’re actually selling at. Sales prices are flat.
One day soon, they’ll start down, and I’ll be the first to trumpet it.
Sorry OT, but the WSJ has a plethora of articles this week which almost seem intended to help pop the bubble. (My comments are added in parentheses).
Some in the Personal Journal section worth a look (sorry, I have no electronic access):
———————————————————————-
Getting Going
8/23/06
Buying a big house as a retirement investment will leave you with a surprisingly small nest egg. (Unless real values climb by 20% YOY forever!)
—————————————————————————
Housing-Affordability Index Drops to Record Low
8/22/06
Home builders’ housing-affordability index fell to a record low in the second quarter, with only about 40% of new and existing homes sold considered to be affordable. (Unless you are willing to utilize Russian roulette financing strategies.)
———————————————————————————
Home Prices May Become More Volatile
8/23/06
Housing prices could become more volatile in coming years, according to a new paper written by Federal Reserve economists. (The end of the conundrum will be marked in part by a return to normal price volatility, especially of risky assets like houses.)
“…WSJ has a plethora of articles this week which almost seem intended to help pop the bubble…”
Yup, I noticed that too. The concluding paragraph of Jonathan Clements’ “Getting Going” column is dead on:
“There is, however, an upside to buying the bigger home. For the next 30 years, you would live in a grander place. But that just highlights what this is all about. Buying a bigger house isn’t an investment. Rather, it is a lifestyle choice — and it comes with a brutally large price tag.”
The price tag of owner-occupying a McMansion gets a whole lot higher when 20% YOY gains give way to 5% YOY nominal losses, before who-knows-what actual inflation is reflected. Keep your eyes pealed on the OC, because that is one part of the world where many believe real 20% YOY gains forever are not only possible, but highly likely. After all, Gary Watts told them real estate prices will go up this year, and so they must.
I noticed lately that when there is a slowdown in any sector, housing almost always comes up as the main culprit.
Unless you are working in the RE industry, in which case a housing slowdown can only be an effect of a downturn in some other sector, and never a cause.
2005 prices should work nicely in 2020, unadjusted for inflation, after the bust overshoots then resumes the trendline….
(i don’t take credit for this forecast. see itulip.com)
The evidence keeps building.
http://finance.myway.com/jsp/nw/nwdt_rt.jsp?section=news&feed=bus&src=202&news_id=bus-n23381752&date=20060823
Panic when the October winds start to blow. Feelin’ fallish already here in Beantownland.
“The interstate linking the San Francisco Bay area to the Central Valley has become one of California’s most congested freeways, said economist Sean Snaith, a consultant to the University of the Pacific.”
I just got back from a 3500 mile round trip around the Western US. Came back home through Reno and saw a sign stating that the I-80 to Frisco was closed (this was near Stockton off the I-5) and it looked like a complete mess. Speaking of Stockton, saw many spec developments right off the I-5…maybe they are located there for the easier commute to the Bay Area? LOL.
The I-205 to I-580 commute into the Bay Area is an incredible mess. Massive choke points everywhere, and huge and increasing traffic flows. Could be (?) the worst commute in this country. If anything is worse, just pull over and shoot yourself.
The 91 Freeway from Riverside county to Orange and LA counties has been a parking lot for years…
You’ll find my body at the side of the 405 in the Sepulveda Pass
I hear you
I travel all over the state of CA.
I have been in traffic in all of those locations.
I gotta go with SM Landlord. Sepulveda Pass is the worst! 5-10 MPH for 40-50 miles.
5-10 MPH at midnight on a Saturday night.
The list goes on and on.
I have never sat in traffic like that in my entire 45 years of life. The most I was ever delayed was maybe an hour, a couple of times on I-95. I always moved to within a 20 minute drive to work. My lifestyle does not permit such delays in traffic.
I have to say that the 91 fry eastbound on a friday afternoon from lakeview ave to corona is the worst. The 5 frway southbound in mornings from los Feliz blvd tp dwtn LA is also bad. 110 northbound from the 105 into dwtn can get nasty(though easy to skirt). 710 fwy southbound fridays from the 60 fwy all way to 105 fwy is a killer(a natural bottleneck, no way around it).
60 fwy eastbound from 605 to diamond bar in afternoon is extremely nasty(have used valley blvd to skirt it),
57 fwy from 91 all way to past diamond bar northbound in afternoons another bottleneck.
The 5 freway going thru santa fe springs /norwalk/commerce can get tied up either direction with frequent accidents.
Hollywood frway from melrose all way to dwtn extremely bad( can skirt by exiting at vermont, connecting to beverly/temple ave and following temple all way into dwtn. Bad area to go thru but easy route into dwtn LA.
gotta love the Pasadena Fwy where you are at a stop sign and have to gun your engine to merge on….
A visitor from a Third World country recently commented that California was turning into a Third World state with its power cuts, traffic congestion etc
A large portion of LA county(from the 405 east all way to the 605 and from the 10 fwy south all way to the 91 fwy is 90% third-world, spanish being the primary language.
Why pay $300/night for a tiny room with worn out carpets, when you can own it for 90 days/year (no more than 25 days in any 50 day period) at a cost of $3M?
http://news.yahoo.com/s/kgtv/20060823/lo_kgtv/9724085
Another sign of the absurdity of this bubble.
What wealthy nation wants to provide the buyer for Pebble Beach this time?
Given the 50 year loans being marketed pretty regularly now, who doubts the possiblity of the “Japan scenario” happening here?
“But there won’t be a repeat of the speculation-driven housing glut of 1990 and 1991 because builders are more careful and have less inventory, he said.”
Oh yeah, I love this comment. I swear, these “experts” read something on MSN.com and then repeat it to the public. Another well-thought out, never been said before statement. Uh huh right.
Here’s another anecdotal story from Riverside County in the community of Bermuda Dunes. My buddy was checking out new developments in this area (near Indio, La Qunita). He stumbled upon this gated, 26 home just finished community. Of course, he had to drive through a “low income” neighborhood to get to it. Him and his wife walk into the sales office…it stinks of desperation. They are shown a 3900 sq ft home on a 30,000 sq ft lot. Nice size for the area. Original price was $959k (in Bermuda Dunes WTF?). Anyway, salesperson tells them they can have it for $819k plus they builder will buy down the 30 yr fixed rate 1.5%. He did not know what rate they were makring down though. I told him he better beware of the “low income neighborhood” issue. More importantly, he owns a new house in La Quinta. I told him he better sell his house before he even thinks of making an offer. The market out there is in big trouble. Then I said you shouldn’t be in any rush ’cause prices are dropping quick. In 3 mos you can probably buy the house at $700k.
But it’s different in the Coachella Valley because of: snow birds, retirees, casinos, not building any more desert, lots of jobs (my favorite of course), blah blah blah. CV has always been boom/bust and soon will see a bust like no other. Foreclosure central baby…
The Coachella Valley is a great place to live when you’re making $1000+ a week on the value of your house. Commuting 4 hours a day doesn’t seem so bad - downright pleasant in fact! - when owning your house is like having a second job.
Reverse the situation - now every day is $3.30/gallon gas, your home is costing you thousands a week in vanishing equity, all of a sudden you realize you live in an unspeakable hellhole in what has always been an uninhabitable part of the desert, all your neighbors are a bunch of the most despicable low-lifes who you would never, ever have thought you would be associating with, . . . honey, where’s that article about how to mix Liquid Plumber and that other toilet cleaner and inhale the fumes?
“It’s being called a housing ‘lull,’
I find it ironic that the word “lull” is used now (one of the never ending euphemisms) because we all know of “the lull before the storm”.
I am sure the spinmeisters don’t realize that they shot themselves in the foot…
Having been in Huntington Beach during the last (89-95) “crash” (35% drop in prices) I am 100% sure that this one will be MUCH worse.
Calm. Calm is the correct answer. It’s ‘calm’ before the storm.
Not universally apparently, but mostly.
All in fun.
The housing cooldown was even covered on the front of the DrudgeReport. That is a big deal because it means many Joe Sixpack will begin to take notice and start to feel fear. The only thing missing from the Drudge article was the flashing siren. Oh how I would love to see that with some salacious buzzline like:
“SHOCK: Home prices fall in Orange County by 50%”
Give it three years or so…
Three years? You’ve got to be kidding. 90% of the fall in prices will take place in the next 8 months. Think of an inverted S, or the part of the roller coaster where the clicking noise stops. The recovery off the bottom may not be quick, but getting there won’t take long.
Sounds like exponential decay to me…
“Three years? You’ve got to be kidding. 90% of the fall in prices will take place in the next 8 months. ”
Nah! I give it 5 years for O.C. prices to fall 50%. This is going to be much worse than the 90s crash, but I think many people will take their houses off the market in a few months and try again in a few years.
Bill, you could be right, but I stick with my forecast as I think it’s the very fact that this is going to be worse that will lead to a much more rapid price plunge. Sellers’ hands are going to be forced! OK - 80% - if OC is going to go down 50% peak to trough you will be able to buy homes in the late Spring (8 mos.) for 60% of peak prices.
Problem here is that for the next several weeks, clueless folk…some innocent, some just plain ignorant, are going to be talking about housing and the nonsense on the news and I’m gonna have to hear it. Daily. How does an admittedly impatient person learn to say, “Uh..yeah, sure..whatever you say…and walk away?” Fortitude. I’m buying St. Joseph and taping him to the copier at work. Then I can just point to HIM and walk away.
I need one of those statues too. I’ll put it up high where I can see it every day. hahaha. Got a few for sale signs on my street. I don’t think the staute will help much though!
Wow!! Watching the NBC Nightly News.
Home Sales were the first story in the broadcast.
Never seen so much MSM coverage on CNBC as well.
Will watch more for reaction to tommorrow’s New Home
Sales Number.
Could this be the last kick that pushes housing off the cliff?
ABC Nightly News ran the housing story as their lead too.
Maybe it’s time for the MSM to really bag on the housing situation, since there is no longer a “summer season” to disrupt. Heck, even the NAR is in favor of lower prices now. Go figure.
Yes indeed. The MSM is beginning to tear into this because they have no choice anymore…Joe sixpack can no longer hide his head in the sand.
Maybe it is sinking in to the NAR that if nobody can afford to buy a home, then agent commissions will dry up. Trouble is, if David Larea gets his hoped-for price reductions, nobody with an ounce of sense will want to try to catch a falling knife. And eventually, lenders will lose interest in making loans to buyers with less than an ounce of sense in their heads.
So all will be fine for the realtors then. It’s pretty clear that most FB’s *don’t* have an ounce of sense. :p
cBS too!
No ‘publicized’ price drop yet in Seattle, except for a couple of extra-frothy downtown condo areas. I may have to hold my breath longer than the rest of you and turn bluer before things get pragmatic here. The repeated explanation here is strong job growth. However, I notice that job growth in the Boston and N. Virginia area is still considered healthy, and that’s not stopping the price downtrend in those areas. So what gives?
“No ‘publicized’ price drop yet in Seattle, except for a couple of extra-frothy downtown condo areas. I may have to hold my breath longer than the rest of you and turn bluer before things get pragmatic here.”
Unfortunately the SF Peninsula, which I am tracking, is the same way. The zombie buyers came out in the spring to give the comps one last bump so any price reductions around here are down from an artificially artificial high. And I’m not very good at holding my breath!
I’m with you up here in the Seattle area, and I am seeing nothing but reduced price signs. It seems to me that most of the stuff that is selling anymore is the least expensive. Anything over say $400k is taking much longer to sell. Inventories are ever increasing. I think we will catch up to the other markets in no time. When this thing gains momentum, I think it is really going to start accelerating.
So what gives?
Obviously Seattle is different!
I know we here on the blog hate the “median price” stats, but here goes anyway..
The MSM reported that the median price is somewhere aroung $220K.
Wouldn’t ya’ll love to know where this “house” exists? I sure know that I would.
Movin’ to Montana sooonn…
Gonna be a dental floss tychoon…
The real question is, where are the houses *below* the median? Cuz they have to exist someplace, but where?
Pueblo Co. has houses below 200k . I don’t know anything about the area ,I just was looking around on Realtor.com . Maybe someone out there knows about Pueblo Co. (They even had older houses around 100K ).
Pueblo… Drove through there. Think Fontana, maybe Colton.
Pueblo is not so bad. It’s a working class town, yeah, but it’s clean, nice, and mostly crime-free. I would live there.
Pueblo is a 30 minute drive from Beulah, Co. One of the most beutiful mountain valley communities around.
Doesn’t Pueblo have the Target distribution center? Hmmm, wonder what will happen to those jobs when retail spending dries up. Of course, I’d short Starbuck’s first.
There are a lot of speculators around here as well. They are building a lot of houses out in Pueblo West for about $500K, where the average income for this area is about $40k (combined). The only way to get those houses is with suicide loans or come from either coast.
I have been tracking quite a few houses around here, where the for sale signs have been there for months on end.
It takes an average of about 70 days to complete a transaction around here, and now they are approaching about 180 days.
You are right, this is a working class town and the real estate scene here was more or less normal until 2004, when speculation exploded thru out this region.
Bought my house north of Fort Collins CO in Jan 04 for 189000. Built in 1999, 3 BR 2.5 bath, 2 car garage, 6k sf lot, 1800 sf. Nice house, not spectacular. (of course probably worth 169000 now, grin and bear it)
But there are lots of houses for under 220k here. I work in Cheyenne WY, same thing.
Danville, IL $59,000
Single family residence in Vermilion County
Property ID 8397685
Type Single family residence (RSFR)
Beds 4
Baths 2
Square Feet 1800
No. Floors 2
Memphis - 4 bd/2bt, 1.7 acres, 2300 sqft, - 96K
Texas has plenty of those below median. We used to rent [for few months] in Austin (TX) a very nice area which was on sale a year ago for $140K [2200 sq feet home with creek running green belt behind the backyard]. I read that things are hotter in price this year but I doubt if it has changed all that much…
My apologies if this Lereah Presentation “Real Estate Reality Check” to an NAR Leadership Summit has been discussed. This is huge.
http://tinyurl.com/jwbj2
Talk about talking out of both sides, it features some amazing admissions that would never be made within earshot of buyers:
1. Polar bear on cover page.
2. “Boom ended August 2005″ page 3.
3. “Home prices beginning to soften.” page 4.
4. Price “Declines” page 8.
5. “Condo- Price Depreciation” page 15.
6. “Condo- Significant Price Depreciation in West and South” page 16. -WOW
7. “Correction necessary” page 18.
8. “Unsustainable growth” page 18.
9. LA home prices “unsustainable” page 20.
10. “Way above historical” page 26.
11. “Prices expected to fall for remainder of year” page 28. WOW (WHY SHOULD ANYONE BUY NOW!!!) How can a realtor counsel buying with leadership admittting this?
12. “Prices Do Decline” page 35.
13. “Probability of Popping” page 56. Popping = Bubble he has admitted a bubble without using the word.
I was perusing the prudent bear, and they have some stunning charts, anyway I printed them and went around my office (financial firm in Toronto) the guys couldn’t believe the debt, leverage, over extended and how desperately unbalanced the US consumer is (Cdn’s. are in just as bad shape), it is striking how in two generations we N. American’s have decided that cash is for losers and credit is where it’s at. I’ve enjoyed the above string, and all I can say is WTF!!! are people losing their marbles. The one thing that I wonder about is how desperate will the recession be, is the US rich enough to weather a Housing correction and bounce right back or will this be a real early ’80s grinder. Time will tell, however what I want to see is a sene of balance restored.
BALANCE is:
that folks actually need to have savings,
that the house isn’t an ATM,
that houses aren’t stocks,
that houses don’t rise much above inflation,
that cheap money sloshing around the globe isn’t a good thing,
that we don’t need a whole damn channel dedicated to self-serving reno shows or to the greater glory of the flipper,
that nothing is free in this world and you can’t make something outta nuthin…..
Croesus would be proud…..how did we ever get here???
http://www.prudentbear.com/bc_chart_library.html
Some interesting thoughts on why Americans are spending all the money: Americans’ Debt: Worse Than You Think?,
“Maybe I’m paranoid. But I’m not alone. As one reader e-mailed me, “Whether we like it or not, our government has ultimate control over our financial future. In the coming years, the government will be grasping at any source of cash that they can get their hands on…. I think people sense this, consciously or subconsciously, and figure that they might as well spend now. I do worry that all my hard work and effort in being frugal will be confiscated by the government, which would make me feel foolish for not adopting a ’spend until you drop’ attitude all along.”
I hope the reader is wrong. Kasriel offers some consolation, suggesting savers will be the ones buying cheap foreclosures when the storm hits. “It’s a marathon, not a sprint,” he says, “and the people who are saving are going to be happier toward the end of the race than the ones who are spending and borrowing.”
I missed a wonderful opportunity in yesterday’s “Money for Nothing” post to take a well-deserved shot at the over-leveraged home-moaners in today’s market, so I’ll take it now:
They are McMillionaires.
You saw it here first, I think. Someone correct me if I’m wrong
sm, you should always Google before laying claim to any “new” term: http://www.google.com/search?hl=en&q=McMillionaire
(I think it’s part of the whole “cosmic unconsciousness” thing.)
Sorry, pal, I brought up the subject of McMillionaires living in their McMansions, Faux Chateaus, and Garage Mahals many months ago…
> The one thing that I wonder about is how desperate will the recession be, is the US rich enough to weather a Housing correction and bounce right back or will this be a real early ’80s grinder.
The 30s seem to be a more natural reference than the 80s. Will it be a recession or a DEPRESSION, with ALL economic activity dragged down by the credit crunch? If it’s the latter, the next question would be: Will the US weather a storm and stay on top of the world or will the US be replaced by a multitude of players, including the US but also China, Japan, EU, etc.?
“The one thing that I wonder about is how desperate will the recession be, is the US rich enough to weather a Housing correction and bounce right back or will this be a real early ’80s grinder”
Have no doubt, this will be AT LEAST an “80s grinder”….its “in the bag!”
Thus my saying: “Some people on these economic doom-blogs are concerned about the possibility of a decade of 80s style stagflation. The rest of us call that a soft landing.”
CBS News Video-
http://www.cbsnews.com/sections/i_video/main500251.shtml?clip=/media/2006/08/23/video1931582&sid=3420&title=Housing@Market@Cools
There more and more mention about the California housing market.
The bottom is definitely very loose. Inventory is extremely high and realtors are still cautious whenever asked about a possible housing crash. I predict the price will have to drop at least 25% or more before buyers will start to consider purchasing. It’s a buyer’s market and they’re wise to how much sellers’ home have appreciated but will still push for lower pricing. Sellers need not worry, they will come out with a profit, but not as much as they would like.
OK, thought I wasn’t going to do this today, but then there was Schiller’s comment about the “big shoe”.
accompaniment
Left a good house in the city,
Working on the plan every night and day,
And I never lost one minute of sleeping,
Worrying ’bout the way things might have been.
Big shoe drops on earnings,
Proud Flipper keep on churning,
Rolling, rolling, rolling on the reset.
Flipped a lot of shit in Vegas,
Pumped a lot of dumps down in San Berdoo,
But I never saw the bad side of the market,
‘Till I caught a flip in the Creek of the Queen.
Big shoe drops on earnings,
Proud Flipper keep on churning,
Rolling, rolling, rolling on the reset.
~~~
If you come down to the market,
Bet you gonna find some losses and pain.
You don’t have to worry ’cause you have no money,
Bankers on the reset are happy to give.
Big shoe drops on earnings,
Proud Flipper keep on churning,
Rolling, rolling, rolling on the reset.
Rolling, rolling, rolling on the reset.
Rolling, rolling, rolling on the reset.
Rolling, rolling, rolling on the reset.
Arrrrgh.
Would someone else like to have a crack at “Bad Moon Rising”
I’ll show my age, but I’ve been trying to come up with words for “condo” to the tune of “convoy” but I’ve never gotten further than the chorus
We’ve got a great big con-do, ain’t she a beautiful sight,
We’re gonna (build/flip/repo)* these muckin’ condos crosss the USA.
*depending on the preceding verse, one each from the builders, buyers, lenders.
Credence Clearwater Revival. Used to listen to them a lot back in the 70’s. Classic Rock at it’s best.
Bag Holder Open House Speciale this Sunday in Willow Glen area of San Jose!! There’s still time to make a spectacularly bad decision in the Northern CA housing market.
http://agent.interorealestate.com/splash.aspx?ID=1029
Asking Price $2,100,000 (imo overpriced by $1,000,000 - translation the Bubble froth price increases over the past 4 years)
This lot was bought by DeMattei Construction (the developer) just under a year ago for $1,250,000 (was granma’s 2000 or so sq.ft. home on a 15,000 sq. ft. lot
He’s throwing up 2 McMansions (each 3300 - 3700 sq. ft.),really glorified townhomes and asking $2 million or so for each one, sweet huh?
Do the Math :
land cost and scrape away old POS - $1,300,000
build 2 McMansions - $1,200,000 or so.
Total cost = $2,400,000
Sell both for $4.3 million to Clueless Bag Holders…
Gross Profit = $1.9 million - Priceless!
This is ultimate test - who will be the bag holder at that insane price??
Let’s say you have a million down (50%), you’re thinking sweet huh? You’re walking around the WG thumping your chest with pride. Think again dude.
You’ve got to finance $1.05 million :
30 year fixed payment is - $6500
Prop Taxes - $2000 a month
Insurance/Utilities - $700
Total = $9200 a month
Some details - there is almost NO backyard and no view. Coolidge is a sorta sucky street even though it is close to downtown WG. San Jose Unified local schools are a disaster so you’re sending your demon spawn to private school (figure $7-$10k per spawn per year…)
ps. if you could afford to pay all cash why the WG? You can do better in Los Altos/Saratoga, Los Gatos, Cupertino, etc….
FLIP OR FLOP??
http://bakersfieldbubble.blogspot.com/
MSM is definitely been in attack dog mode lately. I’m curious if this was a collective realization, or if they received their marching orders and from who. MSM doesn’t publish anything unless it serves their agenda in some way.
The realization that there’s a whole lot of air in the bubble between the top and reality and the fact that building is still proceeding like gangbusters all over the country leads me to an old thesis - we never, EVER had a supply problem. One doesn’t have to own. We had a mania, treating houses like beanie babies trying to screw each other over for a buck when we should have been eschewing debt. All these facts lead me to believe Sir John Templeton may be proven correct - we will see 90% off, at least in some areas. Consequently one should not buy back in when prices revert to the long term trend line, as this crash will surely overcorrect.
I’m also wondering if the recent push to raise the minimum wage here in Cali is an effort to produce wage inflation. The fed can always statistically ignore it, they’re well practiced. Could be a plan by TPTB to cushion the blow and inflate the govt’s way out of some of its massive debt.
Think about all the industry insiders that read this blog. Appraisers, brokers, RE agents, regualr buyers and sellers. Surely there is a significant number of reporters too. As Ben links more and more credible news sources, they are feeling left out. Tugging their editor’s sleeve… Psst… we shouldn’t get left out of reporting this…
Nice post amoney,
Two thoughts.
One, the media does seem to move like a collective flock of sheep, trying to flog the same story to death at the same time, ignoring many others.
Second, if you are right about this drop going below the long-term trend line, then poetic justice may ensue. I all the poor bastards who own no real estate will be in better shape to buy at fire sales that anyone who bought in the last five years. This would reverse to awful age-related screw job that this has had on the younger first time home buyers. A good thing in my opinion.
Did anyone else catch this at CNN Money? (Maybe I just missed seeing it.)
Home sales slump deepens
Let’s just say the information cascade regarding the hard landing is quickly morphing into a massive debris flow, of the sort which buries canyon-side LA homes every few years …
http://blogcritics.org/archives/2004/11/27/202539.php
I think this is starting to reach critical mass in the MSM finally. How many stories per day is Ben posting? At least 4 or 5 and they are increasingly negative.
Does anyone know how to track the number of expired listings in the Northern VA Area? Inventories went way up, and pulled back a little bit.
Funny how the MSM is just now catching up (and not very well at that). They are still soft-peddling this. Flagstaff, AZ is a perfect example. Sales are down 44% in July YoY!! That’s way above average. The local RE “pros” are spinning it that somehow Flagstaff is immune, “soft landing”, blah-blah. Well, Sunday’s story in the AZ Daily Sun online edition lasted until Monday–then POOOOF!–down the memory hole. Gotta pay $5 if you wanna see it now. Wouldn’t want to get peeps panicky or bite the hand that feeds as they say.
So glad I split the biz in 2003, but to all my realtor pals, just remember: IN AN EMPTY OPEN HOUSE NO ONE CAN HEAR YOU SCREAM . . . . AH-HA-HA-HA-HA-HA-HAAAAAAAAAAA
From the above article:
“All regions of the country outside of the South saw a year-over-year decline in median home prices in July, and the South posted only a 3.2 percent year-over-year rise in median home price.”
This would seem to me to be a VERY BIG THING.
How long can the south catapult nationwide YOY appreciation in the black?
“I’m also wondering if the recent push to raise the minimum wage here in Cali is an effort to produce wage inflation.”
Of course it is. What the hell is the different to those whose wages would be raised anyway? It’s not as though getting an extra couple of bucks an hour suddenly makes you go, “gee, I suppose I can afford that $500,000 house now, but it’ll be a lot harder since a Big Mac doubled”. But still, wage inflation creates more of an IMAGE of greater wealth than actual money in pocket when taken in terms of minimum wage workers. Plus, it puts pressure on the next rung of workers (why would I do data entry and get carpel tunnel when I can flip burgers for the same money, and so on), by which, at some point, all workers need to make more, putting pressure on employers to lay off, or raise prices. it is merely an acceleration of inflation, although usually a lagging one. Or should i say an admittance of inflation? Higher labor costs comes at the price of the bottom line, therefore, hurting stock prices, bla, bla, bla. Get the direction I’m going?
Sorry so OT
I should have been more exact in my words. I’m wondering if this raise in minimum wage was initiated by the fed - a Bernanke dropping money out of helicopters move as it were. I have been looking for signs of this for the past year or so, with no real evidence. This could be one such data point. Closing the borders would be another. I get your point about feeding layoffs, but I think TPTB figure there’s enough crappy jobs out there to keep people busy, and that’s what they really want, to keep people busy. That’s all any govt wants at this point.
Does anyone know about the lending standards changes coming up starting the first of Sept? How will this affect the qualifications of the buyers? Does this shring the pool of buyers who qualify?