Sellers ‘Chasing The Market Down’ In San Diego
The Union Tribune reports on the Dataquick numbers. “San Diego County’s residential real estate market continued to cool last month, with overall prices down 2.2 percent from August 2005. It was the third straight month of year-over-year price declines, DataQuick reported. It also was the slowest August in terms of sales volume since 1997.”
“August was also the 26th consecutive month in which the total number of homes sold fell on a year-over-year basis. The year-over-year decline in total sales last month was 31.8 percent, the biggest for any month in 11 years.”
“G.U. Krueger, an Irvine-based economist who specializes in housing issues, said buyers seem unwilling to pay asking prices, while sellers are reluctant to lower their expectations. ‘We are in this tug of war between sellers and buyers, which is keeping home prices relatively stable, even though they are declining,’ he said.”
“Skip Wilkinson, who lives in Temecula, knows all about the stalemate. He says the decision not to sell his retired father’s home in Clairemont a year ago, when the market was soaring, is costing him dearly. Few potential buyers have shown an interest since it went on the market in April. The initial asking price was $599,000.”
“‘I reduced it to $550,000 about two months ago. Still, there is no one looking at it. I have had maybe seven people in six months. I expected it to keep going up,’ he said of the housing market. ‘It didn’t.’ On Monday, Wilkinson slashed the price to $499,000.”
“DataQuick reported that resale condominium sales volumes were down almost 39 percent countywide from August 2005. Economists say downtown San Diego’s condominiums are vulnerable to price drops because of the high number of speculators in the market. The number of resale condo sales downtown dropped from 83 in August 2005 to 42 last month.”
“New downtown housing, which consists of condos, dropped from a median of $654,000 to $495,000 during the same period. There were only 31 units sold in August of this year compared with 160 a year earlier
“Kathy Butler, a longtime real estate agent, recently began marketing Skip Wilkinson’s home. She says many sellers are having a hard time accepting declining prices. Like Wilkinson, they are ‘chasing the market down.’ By the time they realize their price is too high, the market has fallen further.”
“David Berson, chief economist for mortgage giant Fannie Mae, said he is having the same problem. He has had to adjust his national projections downward.”
“‘The actual numbers keep coming in weaker than we expected,’ Berson said. ‘The leading indicators of housing activity continue to point downward. Purchase applications from the weekly Mortgage Bankers Association survey continue to edge down. The National Association of Home Builders’ confidence index is at the lowest level since early 1991, when we were going into a recession.’”
“Butler said real estate agents and sellers should brace themselves for the possibility of a long downward trend. California’s home market tends to run in cycles, she said. ‘The cycles last for years, not for months.’ Butler said. ‘We need to realistically figure this will go on for a while.’”
“Gary Kent, an agent who works with Butler, said he tells home buyers that the days of buying and selling properties quickly for fast profits are over for the near future. ‘I am advising my clients not to buy now if you are planning to resell in a year or two, because you probably won’t make any money.’”
The Orange County Register:
‘Some neighborhoods are getting dicier, with increasing risk scores, he said. ‘Those numbers certainly are nothing to panic about, but they are starting to move in the wrong direction,’ Ela said. So where’s the riskiest place in Orange County to buy a home? Dana Point, ZIP code 92624.’
The Contra Costa Times:
‘We knew the housing party would come to an end,’ Snaith said. ‘But the question was whether that would just be one ride ending, or if the whole amusement park would shut down. We see that things are still moving ahead with vigor, especially in the East Bay. These are not the end times that some people had been forecasting.’
Only in California would falling home prices be described as ‘end times.’
Got a new post up!
Do you own your house? ….or does your house OWN you???
SoCalMtgGuy
http://www.housingbubblecasualty.com
Just like people stood back and wondered why they bought ‘whatever.com’ when it was trading at 180 times future earnings, they will again stand back and wonder whey they paid 2-3 times the cost of ‘renting’ to ‘own’ the same property with creative financing.
Very interesting quote from your post SoCalMtgGuy.
As far as building equity is concerned, you have a choice. You can do it in RE, or you can do it in the stock market. I chose the stock market, and I have always rented my entire life.
I have been a stock market investor for over twenty years. And no, I was not suckered into buying whatever.com at 180 times future earnings. If Ihad bought into whatever.com then I would not be an investor; I would be a speculator. And when you buy RE because last year’s appreciation was 20% and this year you are expecting 25% then that too is speculation. People where blindsided and simply where not able to discern the difference between investing and speculating. I do not feel bad at all for the flipper/speculators, but I do feel compasion for the other folks who are now getting squeezed by the consequences.
Yes. So much of what constitutes investment in this country is really just pure speculation. Buying a home isn’t a bad idea unless you can rent it for half the cost, which then means you are speculating on the potential price appreciation. In a similar manner, buying stocks is ok too, as long as you buy companies which are paying a healthy dividend yield. If you aren’t getting one, then again, it’s pure price speculation.
I’d move to Dana Point to surf every day, to heck with making money in real estate.
The surf isn’t that good unless you like beach breaks and the water is soooo cold.
Get a decent wetsuit. It’s always summer on the inside.
And Salt Creek’s just up the road a couple of miles, and it’s a decent break, if you don’t mind sharing it with 4,545,324 other people.
Lots of shrinkage with cold water:)
yeah. either way, it’s a bath.
That guy Snaith is a complete clown, even going so far as to say the bay area runup was driven by fundamentals and not specualtion. This is a big part of why I just cancelled my newspaper subscription. They don’t want to investigate and report news, just recite what some “expert” says. Bay area population has gone down since 2000, and the average wage has been stagnant during the same period. Fundamentals my A$$. And that Janet Yellen is not much better. She has to know that the housing bubble has been the main driver of employment the past several years. Everywhere you look there is a mortgage office or granite counter installer. There is no way that she has not connected the dots and seen where it ends. Rather than try to make people feel good, why don’t they start offering some constructive advice? I know this has all been said before, but damnit, I have a good 30 years of work left in me, and don’t want it to be miserable due to the irresponsibility of the govt. and sheeple.
“They don’t want to investigate and report news, just recite what some “expert” says.”
Unfortunately, very true. A recent example: Newsweek magazine enjoys being critical of Dubya’s Middle East Foreign Policy like he and Laura crafted it themselves, but not a peep is ever mentioned about Dr. Paul Wolfowitz or AIPAC.
Does anyone have good statistical information for San Diego as far as real price drops on similar properties? This medium stuff is an ok overall indicator of trends, but I suspect on a house by house basis prices are down much more than 2.2% YOY. For starters, I suspect in a price range only the most pristine homes are selling at all right now, and homes with larger properties, and square footage are selling at the same point smaller ones sold for last year, keeping the medium around the same overall, but forcing each individual property into a much lower bracket.
Perhaps a good indicator are to isolate those properties which were bought between June and September of last year and which also sold in the same time period this year? I know this is still not perfect, since a house would have sold for a higher price in June than September, but you get the point.
GH,
I can provide one specific example. I sold my 1578SQFT house in San Diego (UTC) for $840K, closed mid September 2004. Two homes with exactly the same floor plan are now for sale at $735K and $740K. So I think you are right that while the median slows a slight decline, in reality there are specific cases in which the decline is much much greater. It is the prices that people actually have to sell at which shows how bad the decline is already, not the median.
This is how the industry is trying to fool people today, by using median sales figures. Although median prices are only modestly down, the typical buyer is getting much more house now than he could have last year. Too bad he didn’t wait another year or so.
I wonder if it would be possible to come up with a “similar house” figure to track depreciation and appreciation. Probably not, it would be very easy to fudge the numbers.
Also good to remember that the value of homebuilder incentives are not reflected in their official sales price stats. Since used home sellers have to compete with the price of new homes discounted by the value of new cars or other goodies, the actual market values are considerably below the official published statistics.
The same thing happens with resale homes. In a hot market, a seller might sell their home “as-is” with no repairs or credits to the buyer. Now, in a softer market, the buyer can suddenly get that $4000 carpet allowance, or convince the seller to spend $3000 fixing the leaky roof, etc…
I have noticed alot of examples of houses that sold for 850K to 950K in 2005 going down into the 750K to 780k range in Valencia Ca. Now maybe these people had tons of equity in that range so they could cut to sell .Looking at realtor .com I didn’t see as big of reductions in the mid to lower range . Its seems as if the upper middle,(700k -1.2mil) , for that area are not getting the move up buyers from the mid range ,(450k-650k). Haven’t checked the lower end but the lower end is usually condos in that area .
Deb,
Great point, and worth noting that the effect is to smooth published statistics on the amount of price decline from peak to trough. When the NAR folks point out there has never been a nationwide home price decline since the 1930s, they forget to mention that any piece of crap sold for a premium at the peak of the cycle, while sellers forked out the bucks to bring their homes into pristine condition in addition to negotiating down to sale prices below their wishing prices when the market was falling.
Weeksy,
Where do you live? We might have been neighbors. Your house sounds a lot like mine (rented).
Nevermind. I’m pretty sure we were neighbors. There ARE 2 houses listed in Toscana now at $735K and $740K. So you sold the small model for $840K. Incredible! And good for you, of course.
This is exactly what we are seeing in New England. There are lots of houses on the market, but the really nice ones are at a premium price. But they don’t sell at that price. When the price of a really nice house comes down to where the average houses are, the nice house sells almost immediately. The average houses stay on the market. After all, if you were a buyer and could choose among 12 homes with similar prices, you would buy the cream of the crop.
So, yes, the median statistics are hiding a much deeper problem of illiquidity.
And just as importantly, during the runup, people were buying crap and paying premium prices.
So while the median price does not show the crazy vertical climb and dropoff we expect to see from bubbles… it is there.
dq’s peak median for san diego was 513,000 in november 2005. *recorded* median is already down by 6% from peak. in the real world it is much worse than that.
In the late 1800’s San Diego real estate fell 80% during that K wave downturn.
That would have been the “terrible seventies,” the depression that hit California after (1) the floods and droughts of the 1860s destroyed the Southern California cattle industry and (2) the Fourth Coinage Act clobbering the silver market, which coincided with the peak and decline in production of the Comstock Lode, which was the major economic driver of northern California.
In other words, a genuine wipeout in economic fundamentals, which we aren’t likely to see here on a similar scale. What we are likely to see is a repeat of 1888-1889 — the bust that followed the 1887 real estate boom, triggered by a rate war between the Southern Pacific and the Santa Fe.
I did it on my zip-code, 92107.
You can do the same if you go to:
http://users.ixpres.com/~gtriphan/
and enter the zip code. Beware of really weird numbers and typo’s, I left those out.
They have data back to 1997. I put it all in a spread-sheet and searched for identical adresses (I only did SFH). It’s a lot of work! I put all the re-sales in a different spread-sheet and calulated the increase each year, with 1997 = 100%.
1997 100.00%
1998 117.50%
1999 154.28%
2000 196.58%
2001 220.42%
2002 247.76%
2003 312.36%
2004 349.30%
2005 431.65%
2006 390.76%
There is not a lot of data from 2006, so that number is a little iffy. When I get the time, I’ll update the numbers and post them, there is a couple of more months available now. I’ll make it more fine grained, probably data for each quarter instead of yearly.
More anecdotal evidence - in my neighborhood (PB), I’ve seen multiple properties within walking distance that have been on the market through long stretches in 2005 and 2006, most dropping more than 20% before either selling or being taken off the market. Ex: in 2005, an SFH, 1,500 sq. ft., asking $1.2 million, then $1.1, then $995k, then $945k. Eventually, a FOR RENT sign went up in place of the languishing FOR SALE sign.
On the same block six months later, a SFH not as modern, but same sq. ft. started at $885k and is now down to $665k with no indication of it being sold or in escrow…
On a personal note, my wife and I started looking at RE in 2005 (we currently own our condo, bought in 2001, but are ready to move up to a SFH). What we saw were prices starting to come down - longer DOM, sellers taking below market offers, etc. That’s when I started doing research online and found this blog and decided it better to wait it out. Personally, I’m predicting a 30%+ decline in median YOY by 2010 at the absolute latest, hopefully a lot sooner (and 40%+ wouldn’t surprise me, either)!
“you probably won’t make any money”
Is that really what it’s come to? 2 years after buying, WHO EXPECTED TO MAKE ANY MONEY?
giggle!
I think that is Realtor doublespeak, which really means “you will probably lose money.” Well, at least this guy is actually advising clients not to buy in some cases.
- they are ‘chasing the market down.’ By the time they realize their price is too high, the market has fallen further.”
- Whoops …. there goes another 100k
Probably? Probably won’t make any money?
Well then I’ll just get my 103% I/O ARM and we’ll see what happens.
After all, it’s a free pull at the slot machine…
My favorite San Diego fb… It has the perfect mix of web 2.0 hype and housing bubble dissapointment. He even has a “buy dan’s house” video up on youtube.
http://www.buydanshouse.com/
Sorry dan, the internet just isn’t going to save you this time :).
What a typical San Diego POMcS. He couldn’t even photograph the house without both neighboring houses overlapping his own house, and the garage completely dominates the front. The whole thing is a testament to the complete lack of aesthetics now seen in the housing in boom markets. This house could be Exhibit A in defining the problem of FBs.
Says Dan is leaving the area to go back to school. Hope he wasn’t planning on starting this fall.
omfg! waterfall front and back!!! That’s six-foot wading pools with rocks and a pump.
Dan,
skip college, go to McDonalds now — you’ll have less of a loan to pay off in the long run.
“David Berson, chief economist for mortgage giant Fannie Mae, said he is having the same problem. He has had to adjust his national projections downward.”
Everyone seems to be adjusting projections downward these days. I keep wondering myself when the homebuilder stock prices will finally reflect a summer’s worth of downward revisions, as they pretty much stayed on a permanently low plateau in response.
I also have to keep wondering whether SD’s home prices will start tanking more quickly now that everyone is getting used to the idea that prices can actually drop here. If I had mentioned this possibility to any of my neighbors last year, I would probably have been labelled a heritic and burned at the stake. Since last year’s buyers were basing their decision on the erroneous assumption that prices would go up by 10%+ forever, one might guess that home prices are roughly 90% overvalued now relative to fundamental demand for a home as a place to live (that is the difference between an annuity that pays 10%/year forever and one that pays 0%/year forever).
“David Berson, chief economist for mortgage giant Fannie Mae”
Are you kidding me. Another economist who got it wrong, and now is trying to cover his a**. Look PHD type’s, when I make an investment decision, I have to take in all variables, and there is no excuse in the internet age, to have access to real time info.
I know it might be humbling to the educated class, but Ben’s Blog has been operating with good info, and links to real time research, for over a year. And it took this economist until Labor Day, 2006 to revise his forecast down. Please don’t quote me another Economist or PHD as a source for investment info.. They all should all have infomercials on late night TV, as good as their projections have been
Do you know which posters on Ben’s blog have PhDs? How did you figure this out?
I have one.
I would take a look at numerous articles and papers by housing bears such as Robert Shiller and Dean Baker, analysis by Calculated Risk, as well as more recent analysis on the housing market by Krugman, Roubini, and many others before wholehandedly dismissing the entire economics profession. Some of the earliest and best analysis of the potential housing market bubble came from professional economists.
It’s true. Krugman is an economist who said our economy consisted of “Americans selling each other their homes.” I remember reading that over a year ago.
Any economist who takes a side (position) and can make a credible argument, regardless of whether they are proven right or wrong, deserves some respect. Why? Because they are putting their reputation and possibly their career on the line by doing so. It’s the on one hand… then on the other hand…. characters who I aren’t worth a damn. The key is that their publicly espoused views are honest and do not stem from some financial or political motive.
David Cee, LOL. No fooling. Amazing that institutions are willing to pay all these “doctors” big salaries for what wind up being worthless projections 9 times out of 10. I’ve been reading this blog for well over one year now, and thus far the predictions voiced here have been pretty much dead on target. If you have even a basic knowledge of econ and finance, mixed with some common sense, you know this run-up will lead to a hard correction. This David Berson guy should be doing infomercials for the ab-lounger. When you consider the size of Fannie Mae’s portfolio, it is frightening to consider it is being ran by people like him.
i think one of the biggest advantage we have in this blog is the raw data we get and how those are analyzed/debated/etc by mutiple smart heads. my impression of the disadvantages with all these big name economists is that the data they get had to be solid (and unfortunately outdated for this fast moving issue) and then it takes them a while to sort out. moreover, there the politics that they have to put up with. by the time, it gets published, they simply look like lying dorks to us. but for those lazy readers of the msm, their word is gospel.
This is not about common sense , it’s about who pays your salary. People will do and say dumb things for money or job security. I was a military Officer and saw this everyday by the brass.
“It is difficult to get a man to understand something when his salary depends upon his NOT understanding it.”
–Upton Sinclair
Some HB stock prices will fall further and harder than you expect b/c they will run out of cash. Some HBs have been buying back their own shares, artificially inflating their earnings per share (EPS) and stock prices.
Seasoned professionals, however, understand the best thing to do in a declining sales market is save cash for the day when you can’t convert receivables as quickly as you want, easy credit dries up, and you can’t generate enough cash at lowered sales levels to meet your payables.
In addition, seasoned professionals understand that as your competitors retreat into BK protection you’re able to flex your muscle and gain additional market share with said cash.
In other words, there are appropriate strategies at different points in any market’s cycle; burning all or most of your cash at the begining of an extended downturn is overwhelmingly short-sighted.
WCI can buy all the shares back they want but they are still going to be booking a loss in the third quarter IMO. Idiots!
1) You a the officer of a public company.
2) You wish to sell options you have been granted.
3) You realize the fundamentals for your company are falling apart.
4) Your company has cash/credit available.
Idiots? These guys are frickin’ genuises. All nice and legal like.
Hence, the reference to short-sightedness.
I think in WCI’s case the announcement is to put some sort of floor under their stock in the short run–maybe to help support loan covenants. They don’t have much cash to fool around with at this stage of the game and should be (probably not) under the eye of their largest creditors.
Yes, and no,
holding lots of cash invites hostile takeovers. Not always productive to you shareholders either.
Indeed, what I suggest is arguable. However, unless the captains collude via the NAHB, I suspect the industry is on the eve of a messy pricing-war. Usually the ones with the deepest pockets survive such events
Sorry for the repeat post: Please help my close friend! He is a medical doctor and does well financially, but he cannot afford to simply throw away hundreds of thousands of dollars. He is considering buying a home in Laguna Beach, CA that is listing for a little under 1 million dollars, 770 sq ft, 1 bed 1 bath MLS # L20047 . I am trying to warn him to hold off for a while, but he insists the high-end market will be immune from the suspected downturn. Any comments or suggestions about the “high-end” market being immune?
Shoot me an e-mail…
I would be glad to try and talk to him. I have spoken with several doctors regarding this same thing. It is tough actually making the money to ‘afford’ these homes….and then seeing what you get for your money. Almost a million for 700 sqft??
Give it some time…you will save tens of thousands of dollars.
SoCalMtgGuy
socalmtgguy@gmail.com
http://www.housingbubblecasualty.com
I’m from Newport Beach. Tell your friend that home prices in LB went down in the mid-late 90’s. If it happened then, it will happen again. Tell him to just wait and rent there. He may want to keep in mind that LB is like one big HOA - control by the Planning Commission (architecture) is everywhere. He may wind up preferring Emerald Bay or Newport Coast.
Doctors (and lawyers) are notoriously bad businessmen who overspend based on their anticipated income. Capitated insurance payments and HMOs have severly truncated their incomes. Student loan debt typically cripple them. Show him a spread sheet along with the reduced fees he’ll get versus billed v. paid from MediCal and MediCare and he’ll back off the million dollar home. My $.02.
Just tell him that under $1 million is not “high end”. The real high end where there aren’t any no-money-down option arm buyers starts at around 1.5 million. A lot of the “high end” market is payed for in cash because the mortgage interest tax deduction only goes up to $1 million and consumer financing is non-existant. If he does go for a super-high-end property make sure that it’s really a $1.5 million dollar house and not some flipper trying to shoot the moon.
Not to sound mean, but it may actually be in his best interest to buy the property and possibly be underwater on it for 5-10 years. It will be a learning experience. As a doctor, he would probably be able to make the payments…he just won’t be able to go out to dinner or on expensive vacations as much. Don’t risk your friendship being a doom and gloomer, let him know that you think it’s a bad idea, explain why, point him to this blog, then leave it at that.
I agree with you arroyogrande. Garret you have already done enough for your doctor friend. You need to step aside and let the economic lesson begin.
I used to volunteer fiduciary advice to friends and relatives. I do not do this anymore because I have figured out that people do not at all appreciate having me telling me what to do, especially when nobody asked me for any advice to begin with.
So now I hesitate to offer any advice to anybody even when they ask me. What is the point? They ask for advice, I give it, they never take or act on my advice, they screw themselves, and then they hate and envy me for having better financial judgement.
So the BEST thing for your doctor friend is to learn from his own mistakes. And also, if he is a good friend of yours and you want to keep his friendship, NEVER (in the future) tell him “I told you so.”
I can’t cry for doctors who learn tough lessons on finance. They get paid extremely well, and the unemployment rate for doctors is about zero. With the money they earn, they can pay for good advice.
Hey AG, how are the prices there ? I am in Santa Maria. Prices not down very far, but nothing is selling either. Pretty much a pissing contest between buyers and sellers.
Price per square foot seems to be coming down all but the most desirable properties. Inventory seems to be up about 50% from Feb., and sales are definitely down. There are a lot of “price reduced” tags on signs and listings. It’s early on, but in the pissing contest, buyers (or fence sitters) seem to be winning. I can imagine it only getting worse during the fall and winter “not selling season”.
Don’t you guys have a lot more new construction in SMaria? That added inventory should help keep prices down, shouldn’t it?
Yes, we have about 500 new homes being built now and the big project is 800 homes in the Orcutt hills due to be completed about this time next year. The only thing that keeps prices fairly firm here is we have a lot of people that buy here and work in Santa Barbara/Goleta area. There are a lot of for sale signs, but many sellers are just testing the waters here and just let the contract expire if they don’t get their price. The really serious sellers drop the price 10% and usually sell if it is a nice property.
The other thing that keeps the prices up a bit here is we have a large number of multi-family buyers, for better or worse I guess.
I guess the wild card for a lot of sellers is, if they sell and wait for prices to drop to buy thier dream home, what will the interest rate be a year or so from now ? I think besides greed, they want to bet as much out as possible to put down on something else down the road.
Ask him… arent you a doctor? You mean to tell me that you are accomplished in one of the hardest professions there is … and cant see that 700sf for a million dollars is insanity plus its not only that.. he will pay the same amount in interest, he is much better off renting a cheap place, piling up money, and then buy cash, even if it is that same place… if he buys it cash he will be instantly he same amount he paid richer…. show him zillow… 2000 year prices…
Doctors are some of the biggest investment suckers out there. Bucket shop brokers and scam artists love them. Great combination of high net worth and low common sense (in some cases!)
I agree. I’m in the investment business and I have met many doctors whose opinion seems to be: I’m a doctor. I’m smarter than you. Because I’m a doctor, I see better investment “deals”. This makes them very likely to make mistakes with their money.
I recall seeing some research recently demonstrating that doctors often overestimate their professional ability, with even bad doctors giving themselves very high proficiency scores in areas where they were in fact rated very poorly by their peers in the profession.
Anecdotally — I’m the only member of my family not in the medical profession — they tell me that most doctors have incredibly overinflated opinions of themselves, especially the stupid ones. No offense to any doctors on the board, as there are many exceptions and I hope that those doctors I am related to can be included in that group as well.
The old joke use to be, ‘Every Realtor should have a doctor.’ hehehehehehehe
AMEN!
at least he can prescribe himself some good stuff to counter the anxiety/depression that will follow.
Just a guess, but this guy’s carrying, what, $100k of student debt? IMO, one is remiss to buy a house (especially such an overpriced one) if they are currently in debt. Get out of debt first, buy a house second.
That is not high end! Also, let him buy - He will learn some valuable lessons not taught in medical school. No sense in being the messenger at this stage in the bubble, if he does not know what is going on by now its too late to convince him!
He’s a doctor? Deserves whatever he gets.
$1,500 per square foot?
Even Imelda Marcos doe not deserve that!
I have family in Orange County. The homes they live in are “worth” 1 million and more. They are not high end. My home in Bakersfield is nicer than theirs, however, I am 2 hours from fresh air!??!
Couldn’t agree more. If he’s so arrogant as to refuse advice when it directly affects his financial health, then I can only imagine where his arrogance leads him when it’s the health of somebody else.
I’m new at this, but my advice would be to get on realtor.com and show him similar 770 sq ft houses in other cities like Indianapolis, Columbia SC, heck even semi-bubbles like Oregon or Maryland. Show him what a 770 sq ft house goes for in those places (anywhere from 50 - 400K?), and then ask him how much of that 1 Million is house and much of it is hooey. High-end my butt.
May be wasted effort. Not sure anyone builds houses that small outside CA. Around here, 1100 sq ft is about the smallest sfh you will find (and they can be had for $100k). Local building codes set a minimum, I believe (don’t hold me to that statement).
“770 sq ft, 1 bed 1 bath…”
My 1bdr apartment is 780 square feet. And, at 1140/month, it would take you 73+ years to break even on the rent vs. buy numbers - assuming no rent adjustments (up or down) and ignoring all the wonderful financial costs of owning (taxes, INTEREST, insurance, broken microwave ovens/water heaters/plumbing etc.).
“which is keeping home prices relatively stable, even though they are declining”
Do these people ever LISTEN to what they’re saying??
I think what he really means is this -
The median will remain stable because that represents the median amount of money an idiot will pay for a house. Until lending standards change I expect to see that stay pretty stable - people pay the same amount (the max the bank will give them) - they just buy a bigger house.
Meanwhile in the real world house prices are cratering - sellers can tell you this.
he’s right, right now there is a tug of war between stubborn sellers and people who don’t realize the market has turned. it’s relatively stable. however, we are only a little bit aways from the buyers truely starting to acquire the upper hand when sellers are panicking.
I don’t know much about cali, but it’s a buyers market at about 5X income or lower?
k
May I suggest a new abbreviation for this blog: SS. It would stand for both Stupid Seller, one who is chasing the market down or who turned down a reasonable offer, and Screwed Seller, one who knows they should have sold last year when they could and/or one who has to bring a check to settlement. The context it is used in would make it apparent which abbreviation is applicable.
Here’s the first example. We know a SS who just listed their house in a community in SE Florida less than two weeks ago. FSBO, mind you, with an asking price well above the current minimum for their community. A realtor knocked on the door, asked for a one-time showing for only 2.5% co-op. Looker’s offer was just 3% below asking price with no contingencies except the usual home inspection. Settlement would be within 30 days. He also wanted sellers to pay for a home warranty. What’s the cost, maybe $500? Sellers crossed off that provision, and now haven’t heard back from the realtor. Uh-oh. That $500 was less than one additional mortgage payment!
I hereby nominate these people as the “SS of the Month” for September.
I prefer WS.
Wishing Seller, Hat tip to Robert Cote. He has been MIA recently.
Indefinitely I’m not posting anymore after the abuse I took in #1400. Didn’t you get the memo?
Robert:
I don’t know what #1400 is all about, but personally
I think your many posts over the years have been spot on.
I hope you continue your post. Your insights and
extensive knowledge are much appreciated.
Look at your browser’s address bar and you will see =1439; type 1400 and you will find the exchange.
Ok, I read it and I want to know is what the hell is a JBR.
I’m thinking Jack Booted something but I don’t think it’s Republican.
JBR, Jealous Bitter Renter. Used equally in description and jest.
Thanks Robert. And since you were kind enough to respond I’ll tell you my take on Prop 13:
Prop 13 is only fair under the following assumptions:
1) Taxes rise faster than inflation.
AND/OR
2) Seniors are not expected to save/plan for inflation.
Since #1 is almost certainly true and #2 is quite commonly held even though I wouldn’t agree with it, we’re stuck with Prop 13.
End of story.
) “Seniors are not expected to save/plan for inflation.”
Inflation is one thing, but how does anyone plan for something like this last housing boom ? Without prop 13 a lot of long time home owners would be in trouble because of the flippers and the “creative” financing that enabled marginal renters to buy Mcmansions they cannot afford.
Robert,
I do not know about #1400 either; was overseas for a month. The one thing I noticed within first 2 days was your absence.
Well, we enjoyed your presence, hope u liked being around, and I hope #1400 or #XXXX to come will not change your way of life.
Like If we are scared; the terrorists win…in that sense ( as opposed to we being cautious and proactive..)
I do not know about #1400….if no law was violated by any……can the response be posted right here and life can go on as before!
Wow! Is that all it takes for you to pick up your marbles and go home, someone questioning your position? The only way you participate in group discussions consists of complete adherence to and adoration of the church of Robert Cote? Without a little friction, real discussions don’t happen.
Robert, I don’t know you from cheese. But whatever that 1400 issue is, I’ve been stomped, and when I really feel the strongest is when I learn the most about myself.
I hope you participate, take risks and share whatever you learn.
And laughter helps. Here..I found this today: http://www.stopabductions.com/
Robert:
I went to #1400 and there was only 1 post by you, it was pretty harmless.
Unless Ben expunged the record…. Hmmmm.
Oops I found it.
Hey Robert that was pretty tame for Prop 13 discussion.
How many times have we beaten that dead horse here?
I have lost count but probably close to a dozen times.
On the most productive discussions, the general (reasonable person) consensus was plug the buying and selling the LLC (rather than the deed) loophole and Prop 13 is good and should stay.
Having a best hits of Ben’s blog or (FAQ’s) would avoid these tiresome rehashes.
If that’s Robert’s idea of abuse, good riddance to him. There’s some venom in that thread, but all of it is from him.
Hey Robert,
Being and Oregon liberal, I disagree pretty strongly with many of your opinions, and I find you style imperious to the point of comedy at times, but I have enjoyed your sharp mind and droll sense of humor. They are missed.
Vis a vis #1400.
My dad taught in the central valley of California for 35 years. After Prop. 13 class sizes in the largely hispanic town where he worked (Porterville) were often 30-35,even 40 students in a class. Schools were squeezed by that tax cap, and the poorer kids had no private alternatives. There is much more to it than that, of course, but a bit of passion on the Prop. 13 topic seems entirely appropriate. It gets right down to you alternate visions of a just society planning for and financing its future.
I hope we can be ok with disagreeing on things now and again on the blog. Otherwise good riddance, Dr. Cote.
I find you style imperious to the point of comedy at times,
As those elements are intended. You didn’t really think all that boot polish and swagger stick wasn’t actually theatre?
but I have enjoyed your sharp mind and droll sense of humor. They are missed.
That’s the point. The droll is oft overlooked, I’m used to that, but when people start slinging “ludicrious” and worse there’s a strong impetus for me to take my act elsewhere. I love being opposed. I don’t even care much for being attacked but I do not suffer fools. The operative parables; #1 Never wrestle with a pig. Eventually observers cannot tell you apart and besides the pig likes it. #2 Don’t try to teach a pig to sing. It wastes your time and and annoys the pig.
When people think a reasoned position developed of a span of decades can be marginalized by being reduced to “I got mine.” it is time to walk away. Enough, I’ll check in eventually.
Any body familiar with the Henry George model of property taxation?
Was partly the basis of the Oregon structure. Thats why Oregon continued to have wise land use and development up until the recent prop 37 disaster. Hope more will explore. Oh, and the other effect of the Georgists was to spread good beer around the world a la, Tsin Tao, dos Equis and that other vaunted Oregon tradition MICRO BREW! VIVA CIVILIZATION! MAY IT SURVIVE THE BURSTING BUBBLE!
Well said Robert. I sure hope that pig enjoyed it.
Stever, I don’t know squat about Henry George and taxed, but hope to learn more from someone. I do know from carefully repeated, double-blind controlled experiments that good microbrews are not one of Oregon’s faults. But what is with the resurgence of Pabst BR?
I have a “Son of Georgist” topic:
http://exurbannation.blogspot.com/2006/04/son-of-george.html
Check out the Wikipedia entry for George. Also title=”this website ”
The Pabst thing is all nostalgia. And the beer connection is somewhere in that website. Something to do with economic experiments. The guy just missed changing history.
Robert, I just wanted to add that I have always appreciated your insights and humor, and I hope that you’ll continue to post. I’ve learned a lot from your comments and I look forward to learning more.
Being a newbie here and past lurker.. ditto!
Let’s all get along.
Cote said, among many hateful, aggressive things:
“You are willfully ignorant and obstinately unwilling to change in addtion to a blatant liar. Yes, blatant liar. Doesn’t matter that you arer making up things like taxes not going down. You’ve won. Yes, absolutely won. Singular victory. No questions, no appeal possible. I’ve no patience for you and am not going to participate. I leave it to others to judge if thehousingbubbleblog is better for your triumph. Goodbye.”
Y’all need to quit stroking his “manhood” and let him leave. The website (and the world?) would be better off without such folk. Knowledgeable? Likely. Insightful? Absolutely. BUT, the guy just cannot, CANNOT, take an opposing opinion without absolutely going berserk. There are entire fields of psychology dedicated to his personal issues. Go back and check the records on this blog. Just about every time someone disagrees in the slightest, he gets all twisted out of shape. This happens very often in 9th & 10th graders.
There are a few things of which I know quite a bit, and many, many things of which I have very little understanding. This dude seems to be SURE that he knows EVERYTHING - and if YOU ain’t on the boat, the hell with you.
Now, let’s see if he’s really gone - or…
here here…
What about those sellers be alternately be termed PS in this blog.
PS fits their thoughts and acitions pretty as well.
PS> Prentending Seller> He is pretending to be trying to sell, however his terms or not what need be , he has no clue of the market and he does not care either. He is giving away a stairway to heaven for some measly $$.
He pretends he is a “seller” when in reality he knows he is actually doing the buyer a greatest favor .
Most PS’s live in POS’s.
How about $$$ for silly stupid sucky seller who only sees the property as an ever-increasing investment.
Much talk about ‘reductions’ ..these are not any significant reductions because they dont bring prices to an affortable level, not even ’stretch’ affortable (meaning that all your money goes for the bills, and then some food) reductions are year 2000 prices, thats what Im holding for because that’s what I can stretch afford.
But just as the Nasdaq overshot and then undershot its optimum, so will housing.
The question is, where will the bottom be? Its too far away to be in sight. I predict a 30% to 60% drop for Southern California.
We’ll see…
Neil
Apologies if someone has already posted this in another thread. CNN Money article on the surge of foreclosures in August.
http://tinyurl.com/f4wg4
“Some of the bellwether real estate market states are among the leading foreclosure markets. Florida, had more than 16,533 properties in foreclosure in August. That led all states and was 50 percent higher than in July and 62 percent higher than in August 2005.”
Woo-Hoo!! We’re #1! We’re #1!
Yeah! High five! Get back Cali! We’re No. 1!
In that link, there’s another, to a giant mass forclosure sale in Michigan - 250 properties, all at once.
I agree with Sharga, a lot of FBs and their lenders need to workout their shared predicament.
I am lucky enough to live in Dana Point. I rent a six bedroom (yes, six) for $2,900 per month. I am two blocks from PCH. I made all my money in 2005, and friends thought I was crazy not to buy. Now I am looking pretty smart. The house I am renting zillows for $1,100,000. I’ll buy in the same neighborhood four years from now for $400,000 to $450,000 (just what the prices were four years ago).
in 2000 the california median was $200,000. think about that.
Hard to fathom that, actually. But I am not sure how that is relevant to Dana Point prices (on the coast)?
“New downtown housing, which consists of condos, dropped from a median of $654,000 to $495,000 during the same period. There were only 31 units sold in August of this year compared with 160 a year earlier”
————————————————————————
so who’s gonna buy all those new condos in the towers that are half built? Petco Park where the Padres play is surrounded by them. Condo ads are all over TV, I don’t remember them having to actually advertise before 2006. I hope Bosa Development is doing major squirm. They had a SD Tribune writeup a few months back about how “visionary” they are. I think they are also overexposed in Vancouver and other places?
I’m starting to hear some real sleezy radio ads in Jacksonville - one has two obviously single young ladies talking about a development where you “better hurry,” where condos that sold for 80K a few years ago are now worth 250K, and throwing around phrases like getting to live in your investment, building wealth, you are so right (about the appreciation), etc. It’s really hard sell, time-is-of-the-essence stuff, none of this easygoing Dan Marino “get on over to Maroone Ford.”
(so who’s gonna buy all those new condos in the towers that are half built?)
Perhaps at $300,000 per unit all those teachers, cops, firefighters and small storeowners priced out of coastal California will buy them, creating a nice neighborhood at the expense of the lenders and flippers. If the economy doesn’t absolutely tank desireable places can be sold for affordable prices.
Here’s how it will play out: because all the pensions are bankrupt, the city will crank up taxes on these condo towers until they end up owning said condos, then hand them over to all those who were expecting a government paycheck in retirement. Problem solved, sort of.
Anyone know if this is true:
Some of the bellwether real estate market states are among the leading foreclosure markets. Florida, had more than 16,533 properties in foreclosure in August. That led all states and was 50 percent higher than in July and 62 percent higher than in August 2005
“He says the decision not to sell his retired father’s home in Clairemont a year ago, when the market was soaring, is costing him dearly. Few potential buyers have shown an interest since it went on the market in April. The initial asking price was $599,000.”
————————————————————-
No, the people that it is “costing dearly” are the ones who paid the $599K for similar houses with a neg-am.
Does anyone know why the IE (San Bernardino & Riverside area) is in better shape than the SD market? We have the worst air quality, traffic is horrendous, and the home prices have still stayed the same over the past few months. I just looked at an 800 sq ft home 2bd 1bth and they wanted 375K and it still needed TLC!!!!!
Just further back on the time line. SD pretty much leads the pack (w/ Sacramento close) so give the IE another 6 months or so.
Does anyone know why the IE (San Bernardino & Riverside area) is
It is the armpit of the Earth. Take the 210 and drive South/East untill it dead-end’s God put there to make “Plamcaster” look good.
in every decade homes for sale = 100 to 120 times rent
so by 08 or 09
same deal
in every decade homes for sale = 100 to 120 times rent
Interesting, what is your source?
The ratio of median house price/median rent/multiple back to 1940. Source Census Bureau:
1940 2938/27/109
1950 7354/42/175
1960 11900/71/168
1970 17000/108/157
1980 47200/243/194
1990 79100/447/177
2000 119600/602/199
Thinks he means at some point in a decade. Your data misses the low points ala Shannon’s sampling theorem
I understand that at some point in the decade it is possible the figures quoted may fall within the range of probaility but that is not what flatffpan said.
in order to make such a definitive statement you must have evidence from a reliable source, which I still haven’t seen yet.
Correction, I haven’t seen it since 1940.
The number of resale condo sales downtown dropped from 83 in August 2005 to 42 last month.”
What I can not understand is why there would even be 42 sales in this environment. Who is buying these things?
I’ve been asking that for the last 5 years when the market was shooting to the moon. Who can afford these? The answer is the same, no one. No one ever could, but they got some creative financing got them in the door, and it will be the same financing that will put them back on the street only with less money and terrible credit to boot.
The current SD price declines (about 2.2% YOY August @ 482K) coupled to the max price in November 2005 (518K) says for a static line drop we’re looking at 14% declines YOY for the November 2006 stats. Am I wrong here?
It depends on your preferred model for projecting price changes. I prefer straightforward exponential exptrapolation for short-term (1-year) projections:
[(482/518)^(12/9)-1] X 100% = 9% decline.
I prefer this approach because it is conservative; given that price decreases are likely to snowball, your estimate may turn out to be closer to the truth.
“Bay area population has gone down since 2000, and the average wage has been stagnant during the same period”
I agree with this quote. So how does that explain outrageous price run-up over the last 6 yrs, except for greed, insanity, and aid from the real estate/mortgage industry. I am one of many average families that have left that area for a more family friendly, affordable area.
I have an MBA. This blog is more accurate than these paid idiot shrills with PhDs because everyone here is reading/posting by our own choice and just giving our own observations. No monetary incentive, other than avoiding being a FB (or SS). Ciao folks. Where is the crazy clown Bubbles. Need a new laugh.
Housing prices are expected to continue to have a limited fall throughout 2006
“Limited fall”
O RLY?
And what will be the limit? And who will do the limiting?
Woops wrong thread!
What a difference a year makes!
Last year’s typical San Diego real estate listing:
“Seller will entertain offers between $1.2 and $1.5 million …”
Fast forward to the new era:
“Short sale!!! Short sale!!! Short sale!!!! Lender approval required to purchase property. Great deal (just check the comps). Bring your offers asap before you miss this great deal.”
its great to hear that guy in temucla is going to lose up to 200k for not selling last year….he should have been reading this blog,our had his head out of the sand…..its great too watch the bubble burst….i have yet to see prices go down in san luis obispo or the pismo beach area,just more inventory…its seem that way in all of los angeles thats the last piece……..
i have a very good san diego price decline example. i sold my condo at the end of ‘03 (too early) for $310K (at a “tidy profit” - yes, i hate that phrase), which i thought was an insane price - it would have rented for $1250; you do the math. in summer of ‘05 two units sold for around $410K. four units in the same complex (exact same size) then sat on the market for almost a year and the nicest one recently sold for $345K. the other three are for sale at listed prices of between $299K and $340K. they’ll probably clear in the low-$300s. that’s a big decline, friends and neighbors. and i’ll be shocked if prices stop there. they’re still nutso.