‘The Urgency Is Now Gone’ In California
The California realtors have the July numbers. “Home sales decreased 29.9 percent in July in California compared with the same period a year ago, while the median price of an existing home increased 5.1 percent, CAR reported today. ‘Today’s market is slowing as sellers maintain often unrealistic pricing expectations and buyers have more properties to choose from,’ said C.A.R. President Vince Malta.”
“‘In addition, unlike the slowdown we experienced in the 1990s, homeowners today are not under duress to sell due to job losses. The urgency that characterized the market for the last few years is now gone for all but well-priced properties,’ he said. ‘With inventory levels double that of a year ago, annual price appreciation for the state slowed from the double-digit rates we experienced throughout all of last year to single digits this year,’ he said. ‘And in some regions of the state prices are down from a year ago.’”
“‘Many markets in California are mirroring other major metropolitan areas of the nation.—a return to a more sustainable and balanced housing market compared to the frenetic pace of the past several years,’ said C.A.R. Chief Economist Leslie Appleton-Young. ‘We’ve known that double-digit appreciation would eventually change when the underlying fundamentals change, which has been the case with expanded supply and rising interest rates.’”
“In a separate report covering more localized statistics, 72 percent, or 283 out of 393 cities and communities showed an increase in their respective median home prices from a year ago. C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in July 2006 was 7.5 months, compared with 2.9 months (revised) for the same period a year ago.”
From CNN. “As the real estate market slows, sellers seem willing to try anything to close a deal. ‘Incentives are all over the place,’ says Salli Kirkpatrick, founder of a Sacramento area advertising agency that works with home builders. ‘No closing costs, no payments for six months, $10,000 toward a built-in swimming pool. Things have gone berserk.’”
“One big developer will landscape the backyard and upgrade your appliances, if you’re ready to purchase one of their $439,950 homes at Rancho Cordova in California. The Associated Press reported last week that a new San Diego condo development, Atria, was giving away plasma TVs and $5,000 home renovation gift certificates.”
“David Seiders, chief economist for the National Association of Home Builders says 75 percent of the nation’s builders and developers are offering incentives.”
“‘Lenders,’ says Seiders, ‘really frown on putting a new car in the garage or sending the buyer on a trip to Vegas.’ That’s because, with many buyers putting little down and prices in some localities stagnant or even falling, buyers could wind up with very little home equity, which can violate the guidelines or rules some lenders live by.”
The Santa Cruz Sentinel. “Sales in Santa Cruz County in July were half the number of the boom period two years ago. Still, the median sales price for single family homes did not decrease. The July median was $768,750 compared to $760,000 in June.”
“Steve Noren, who has sold real estate for 30 years, speculated that the median was skewed up by people in the million-dollar bracket. ‘Last year, we had such a run on inexpensive property,’ he said.”
“Statistics from the Santa Cruz Association of Realtors show the drop in July home sales, compared to last year, was more severe for properties less than $900,000. The association figures show 104 homes under $900,000 were sold in July, compared to 144 last July. Sales above $900,000 totaled 39, compared to 42 a year ago.”
“‘No wonder the median and mean seem higher in a falling market,’ said Noren after seeing the data.”
“Noren himself is among the buyers waiting on the sidelines. ‘I’m renting a nice house for $2,000 a month,’ he said. ‘It would cost $4,000 a month to buy a house that’s not going to appreciate.’”
‘San Diego apartment sales have slowed for the sixth consecutive quarter, paralleling the slowdown in condo conversions, according to Burnham Real Estate’s latest report. ‘We expect sales to continue to slow as investors wait for prices to reach levels that are more in line with conventional apartment dynamics,’ said George Carlson, apartment specialist with Burnham Real Estate.’
‘Apartment properties have been in demand by investors, he said, particularly those wanting to convert them to condos to meet the need of more affordable housing in San Diego. ‘As a result, following a decade-long run-up in pricing that was matched by record-high sales volumes, investment activity has cooled with potential buyers waiting on the sidelines for prices to adjust,’ said Carlson.’
“‘In addition, unlike the slowdown we experienced in the 1990s, homeowners today are not under duress to sell due to job losses.’”
So true.
Today their under duress due to excessive mortgage payments. It doesn’t matter why one cannot pay the mortgage, only that they cannot.
And maybe they just cancel subscriptions, cut back on eating out, stop buying a new car every three years, etc.
But then that means job losses from the companies they stopped buying from.
And to think this is all just a warm up act until 2Q2007 when a real wave or mortgages resets. Although those who know more than I do are hinting next month will be painfull.
Neil
Technically they’re correct: lots of realtors/brokers are making a lot less money, but they’re still employed. The job losses will come soon enough.
They’re having to sell because the 2d, 3d, or 4th house has lost the renter, the loan adjusted, etc. With upwards of 40% of homes sold recently being 2d homes or vacation properties there is NO margin for error (or vacancy!). Look for vacation spots (big bear, mammoth, palm springs) to show signs of heavier attempted-sales activity. Anyone have a report which specifically measures inventory and tracks prices in vacation spots?
Here’s one a reader posted in the previous thread:
‘ A new report by the California Building Industry Association paints a far gloomier picture than others when it comes to housing affordability in the state. According to the CBIA, 20 of the nation’s 21 least-affordable metropolitan areas are in California, and all of them have less than 10 percent affordability.’
‘The report paints an increasingly gloomy picture for California families trying to buy a home, particularly families trying to buy their first home,’ Layne Marceau, chairman of the CBIA, said in a release. Presently, 57 percent of California families own their own homes, a number 13 percentage points lower than the rest of the nation.’
‘A prediction made several years ago during the great run-up in prices by Metrostudy director Steve Johnson has come true. ‘Homeowners have made a great deal of money in terms of the equity in their houses,’ Johnson said. ‘But they will spend it visiting their children and grandchildren in other states. They have gotten rich, but their children will not own homes in California.’
My, how times have changed. Inventory in my corner of LA (Rancho PV, PVE, Rolling Hills Estates) is up 2.5 times since July ‘05 and volume is way off. Price reductions are the norm now. This week for the first time a house come on the MLS for LESS than it sold in ‘05. That’s big. I have MLS access so I don’t have to rely on the realtor BS to see what’s going on.
I visited 2 open houses this past weekend and the agents at both practically begged me to write an offer. During the entire time I was at both, not one other buyer came in to look. Not a good time to be a seller.
PS - Ben I have been reading this blog for almost 2 years now, have not posted in a long time but am always lurking, you are doing a great job.
I have been taking the pulse of Westlake Village and parts of Malibu and have had the same experience- agents basically begging for an offer.
Labor Day Massacre…with school in session, and investors tapped out, who will be left to buy? I smell CRASH!!!
I work in Manhattan Beach CA and the whole beach area has hit a wall. The builders / realtors that I work with are very quiet about the situation. Very few spec projects are moving forward. Only projects that have an existing homeowner or the remodel have any legs to them. Most of the spec builders are hunkered down.
…it’s the calm before the storm…
“‘Lenders,’ says Seiders, ‘really frown on putting a new car in the garage or sending the buyer on a trip to Vegas.’ That’s because, with many buyers putting little down and prices in some localities stagnant or even falling, buyers could wind up with very little home equity, which can violate the guidelines or rules some lenders live by.”
I cannot believe this shill actually made this comment. At what point during this boom did lenders care about a buyer having equity or violating rules? Surely this was said in jest? There have been NO RULES during this bubble which is a major reason why it has gotten so out of control. This Sediers clown has about as much credibility as Lereah (obviously none). Good Lord when will the madness end?
Ditto, Rules, what stinking rules? Liar loans, lending money to dead people. Come on, these don’t give a happy damn about rules, just dump the “product” on the dumbass and move on to the next sucker.
Ditto, Rules, what stinking rules? Liar loans, lending money to dead people. Come on, they don’t give a happy damn about rules, just dump the “product” on some greedy dumbass and move on to the next sucker.
Notorious D.A.P,
Well I’ve been wondering exactly that. This is a real can of worms. My friend came up from LV and he said he was too afraid to take their “bag money” for a number of reasons. Firstly, if we take back 50K from the seller after the close haven’t we just defrauded the lender? Hmm? Supposing we DO take the money, what is our actual cost basis in the property when we go to sell? Is it 450K or is it 400K? If we claim it’s 450K (when we actually paid 400K) did we not just defraud the government? How will we be taxed on the 50K bag money we already accepted? Or is that just more “under the table” dealings?
Don’t RESPA or any other guidelines prohibit this kind of tomfoolery?
Good point, I was thinking the same thing.
More madness - No charges filed against Fannie!!!!!
Yea Melody-I saw that posted on Yahoo. Could not believe they folded. I guess Raines walks with 50 million. First, a NYSE and SEC deal not to delist, and second, Justice DEPT. will not press charges on accounting. Kind of sucks if you ask me.
I haven’t read the ruling. The corporations off the hook, but are individual officers?
Just another day in Amerika. Zero accountability for those who are rich, powerful and well connected enough. They give us a few well publicized “perp walks”, but most of the really powerful behind-the-scenes playas walk away scott-free.
Didn’t Frank Quattrone, ex-tout for Worldcom, just get off scot-free and is now due a $120 million payout?
One of the most disgusting of the bunch.
You couldn’t get a jury to understand the terms of their own mortgages, let alone the nonsense that went on at Fannie Mae.
Good God! Why didn’t this man’s own tongue dislodge itself from his mouth and strangle him when he said that? Where is the karmically just lightning strike when you need it?
The shameless bull$hit is being piled on so high and deep from these clowns, it’s a wonder we’re not all buried in it.
Good point. I thought the same thing.
More madness - No charges filed against Fannie!!!!!!!!!
“unlike the slowdown we experienced in the 1990s, homeowners today are not under duress to sell due to job losses”
Really? The Los Angeles Business Journal reports this week that the number of whore-agents doubled in the last five years to over 500,000, and that brokerages are “consolidating” offices. Further, the NAR drone they interviewed said that any time the average number of sales per agent per year goes below 6, a reduction in the number of agents follows. The average is currently 5. I’d say a quarter million whore-agents will soon be out of work. Do you think any own homes and will have an urgency to sell?
Also, wasn’t the aerospace meltdown the trigger for SoCal’s last debacle? Hmm, how is that C-17 production going for Boeing?
Exactly, thank you.
I’m sick of hearing this argument all time - or the one about how LA’s economy is so diverse.
DECONSTRUCTING LOS ANGELES-THE FAKE FACADE OF A SO-CALLED BOOMINg ECONOMY, BT PETER M
The LA economy is 80- 90% low=working class or service jobs or jobs in small-mid sized sweatshops/ factories/warehouses employing large numbers of non-unionized recent immigrants. What type of jobs are these:
1 warehouse:forkfifters,packagers,drivers loaders,assemblers.
2factory/assembly jobs-metals fabricating, printing,garment stiching,low-level electronic assembly,food processing,machining,ect.
3tranportation-cabbies, box drivers,bus drivers, couriers,rig drivers,post office, class B,C delivery ect
4 restaurant-fast foot employees, hotel, tourism,ect
5 janotors, gardeners,street maintenace,
6 unskilled semi-skilled construction laborers(ditch-diggers for instance)
8 small fry owners of mom and pop type shops,eateries,vendors,donut shops, all other assorted small business owners/independent contractors, including realtors, brokers, escrow offices, insurance offices ect.
9 sales and small-time managers/assistant mgrs of franchise chains.
10 grocery workers, retail workers’
11 automoblie repair,sales and service industry.
This is only a partial list but these type of jobs comprise 80-90% of all jobs in LA county/Scal and are the foundation for the $500,000-550,000 median LA homes prices.
The average annual wages/salaries for all these jobs is between 15,000 and 40,000. Quite a few of these jobs are performed by recent hispanic immigrants, mostly green card (eligible to work in US) or sometimes illegal(fake green card/fake SS.
This is what they mean when they talk about the “diversified LA economy”.
Diversity is highly overrated.
Unfortunately, liberal California is slowly turning into a 3rd world barrio/ghetto in its larger population centers; the major corporations are likely winding down their exposure there to avoid the inevitable social tax burden.
Actually a large portion of La county fits that description. you can drive for 20 miles right thru scentral and hear not a word of english spoken.
The 710 long beach freeway corridor cities(also called the alameda rail corridor) of compton,southgate, lynwood, bell Gardens, bell, maywood, huntingtin Park, Vernon, commerce,east LA are absolutely swamped by immigrants: these cities have some of the oldest, aging industral infrastructures in Los Angeles, and are where a lot of immigrant-employing sweatshop factories/warehouses are located.
I was going to say that, but I’ve been in Fresno for a while.
It must have been the 5 years of that leftist Grey Davis that opened liberal California to the illegal immigration invasion. It couldn’t have been 8 years of Dukemejian, followed by 8 years of Wilson, or the 12 years of Reagan-Bush. Thank God we have the Terminator there to send them back. It’s so refreshing to have a Governor who really tells it like Lou Dobbs… oh dammit, he just called us a bunch of racscists… never mind.
Here’s something I just wrote on another blog about this same story:
http://sacrealstats.blogspot.com/2006/08/car-sales-stats-released-for-july.html
Here is the link to the CAR/Dataquick detailed data for cities in California.
How can the OC show .6 % appreciation in their press release and 7%in this detialed chart? Also this chart shows the Westside median down 11% YOY. NOICE! NOICE!
Certainly, I appreciate the Y-O-Y stats but I would also like to the the previous months’s data as well. It one thing to state that Y-O-Y prices are increases but what I really want to know is, how does this month compare to last.
My sloppy, quick figuring says that Santa Cruz change in home price sales distribution amounts to an 8.1% rise in median sales price, as opposed to the 1.01% from CAR. Sounds about right. That’s a real drop of 7%, when it finally shows up in YOY figures.
Please can you explain how you calculated this. Thanks.
I really like the example / explanation provided by Mr. Noren for the increasing median / mean prices during a falling market. It’s the first I’ve read of a Realtor saying anything like that. The “median price” statistic can be a misleading and I believe most real estate people use that statistic inappropriately to convince potential buyers that overall market values really are still appreciating.
Let’s hear it for Steve Noren, one of the only realtors quoted in a paper that is actually making sense. He acknowledges that the median is skewed, prices are actually falling, and he is renting at half the cost of buying.
Of course, I’m sure that his 30 years in the business has something to do with his understanding that RE can and does go down, that median prices don’t always give a true picture of what is happening in the marketplace, and sometimes (like now) it is much better to rent than to buy.
We are constantly bombarded by ignorant, asshat RE shills that make no sense and have no understanding of economics. I applaud this guy for actually having some common sense and not being afraid to both act on it and tell it to a reporter. Of course, I’m sure the NAR and CAR aren’t too happy about it.
I’m buying at half the cost of renting since I :1) Have NOT HELOC’d( 2) Got a fixed 30 yr @ 5 3/8% in 2004. If you don’t understand 2, go to 1.
“‘In addition, unlike the slowdown we experienced in the 1990s, homeowners today are not under duress to sell due to job losses. The urgency that characterized the market for the last few years is now gone for all but well-priced properties,….”
I agree with him. We will not see significant price drops until people are forced to sell. They will be forced only they start losing their home boom related job, or they can no longer rely on interest only loans.
Those job loses won’t take place for another year or so and the interest only loans will take a while longer to fizzle out. This will be a soft landing my friends. Next year prices will be down about 5-10% compare d to this year. It will take a good three years to see prices really come down about 30%. But even if they do, most have seen their homes appreciate over 200% in the last 7 years. This bubble has a great deal of air in it and it will take a long time to deflate.
Soft landing huh? So the staggering number of homes for sale is no indication of people needing to, or being “forced” in your words, to sell? Do you think they are all just fishing? Forgive me if I am wrong but it looks as if you assume that everyone who purchased their home could afford it, and that everyone bought with the intention of living/holding long term, and the spike in demand was normal. Hah! I suggest you read more of the stories posted on this blog of people caught in ARM’s which adjusted up and are “forcing” them to sell even though they are still employed and earning just as much as when they took on the loan. And the countless stories of the flippers in trouble getting eaten alive by their multiple mortgages. I think you have some rose colored glasses on my friend.
Exactly!!! No soft landing here my friends. Hard landing/crash is more like it. It’s gonna get ugly.
i don’t see how a 30% price drop, even if spread over several years, could be considered a soft landing.
You aren’t my friend.
You are entitled to an opinion which is what your post amounts to.
If you want to have a discussion bring some 3rd party referencable facts.
Actually, people have 2 incomes - the one from their job, and the one from their increasing home equity. The second just vanished. It’s the equivalent of a job loss to each family.
Generally speaking, around half of Californias 2005 home price appreciation occurred in Oct and Nov. Even if median prices don’t change,(I think they will go lower) by Nov most cities will face at least 6% price erosion.
For the first time in the last couple of weeks I am seeing the msm using the “B” word in a serious context.
So called financial experts are finally changing their tune.
I don’t know how these brainiacs get these cush tv jobs, the bubble has been ridiculous since 2003 and they’re just acknowledging the problem now. Never take advice from those clowns. You rock Ben! Thanks for helping me keep the faith
Question,
Unsold Homes
“The inventory of unsold homes in July rose to a record high of 3.86 million. That represents 7.3 months supply of homes. That is the longest period to exhaust the supply of home since the spring of 1993.”
New Homes
“The seasonally adjusted estimate of new houses for sale at the end of July rose to the highest-ever number of 568,000 from 566,000 at the end of June..up 55% from a year earlier and the highest months’ supply since 1995.
Not sure what the new homes months supply is but if you combine both Unsold and new homes, what do you get in terms of overall monthly supply.
Thanks,
Dead cat bounce?
http://tinyurl.com/zmftn
From that article:
“(Hitwise) predicted that a 42 percent increase in search volume for the term “homes for sale” this month will correspond to a jump in actual sales.”
Hitwise, you are geniuses. Let’s not forget some of those searches are people simply tracking the market.
More for sale signs around here (Venice Beach), but price declines remain minimal. My realtor friend in the SFV, on the other hand, reports definite price declines in Panorama City, aka Mexico. Only time will tell if it spreads here. However, there is currently no awareness around here whatsoever of any RE decline, be it in sales or prices.
I would guess that more for sale signs means at least some drop off in sales.
I’ve notice as much in my silver lake/los feliz area. Houses sitting forever, but it’s hard to gauge whether real price cutting is going on or just lowering of insane asking prices.