A ‘Deep Buyers Market’ In California
Jon Lansner reports from California. “One measure of O.C. home inventory rose significantly this month, says the math of (realtor) Steve Thomas in Aliso Viejo. Thomas calculates how many months it theoretically takes to sell all the inventory in the local MLS for-sale listings at the current pace of pending deals being made.”
“So, by this logic, it would take 7.78 months for buyers to gobble up all homes for sale at the current pace vs. 2.74 months a year ago.”
“Thomas notes that if market time is greater than nine months he considers it a ‘deep buyer’s market’ with pressure on prices. Thus, the latest figures show all homes priced above $750,000 in the county facing ‘deep buyer’s market’ selling pressure.”
“Newport Beach homebuilder William Lyon Homes delivered the latest round of bad news from the new home sector, reporting that its orders fell 40 percent over the summer.”
“The firm’s preliminary statistics, released today, reported that sales fell across all three states in which the developer works: California orders were off 29 percent from the same period a year earlier.”
The Times Herald. “Housing prices in the Vallejo area may be heading into the deepest slump since World War II, according to a new national study. While acknowledging modestly declining home prices in the area, at least two local Realtors doubt the accuracy of the dire predictions.”
“‘I can see the market dropping some, but my feeling and my hope is it won’t drop that far, though I entertain the possibility that it will,’ Realtor Paul Winders said.”
“‘It could mean less buyer confidence,’ Winders said. ‘More home buyers are already walking away from their mortgages if their home is worth less than they owe.’”
“The area is already seeing less real estate speculation, or ‘flipping,’ Winders said. Another change already under way is in home builders’ attitudes. These are becoming more cooperative with the real estate community as the client pool shrinks with buyer confidence, he added.”
“Solano County Association of Realtors President Sandy Vollmer said she’s noticed that, too. ‘People could be waiting to buy until the prices hit the bottom, which I think will be in a matter of weeks or months, not years,’ Winders agreed.”
The Manteca Bulletin. “All three candidates seeking two seats in the Nov. 8 Manteca City Council election spoke before a packed crowd at City Hall. The candidates also discussed the state of the local economy and falling house prices.”
“‘Home prices are falling down,’ Samuel Anderson said. ‘We have to be cautious on how we spend money and how we save it.’”
“John Harris said the housing market is one of many other revolving trends. ‘Everything goes in cycles,’ Harris said. ‘You can’t get antsy, there are going to be down times.’”
“Incumbent councilman Vince Hernandez said the city should shift their focus on commercial development. ‘We do have an imbalance of housing and commercial development,’ Hernandez said.”
The Chicoer.com. “A study released this week by an East Coast economic research group reported housing prices will drop dramatically in Butte County by 2008. A softening in the Chico market isn’t a surprise, according to 2007 Chico Association of Realtors President Kym Campbell.”
“Campbell said she’s seen dropping prices and longer stays on the market. ‘I think there’s more inventory.’ She also suggested that homes have been overpriced because of the heated demand for houses.”
“Campbell called the past couple of years ‘crazy’ and said a softened market may be closer to what’s normal for Chico. She also suggested that there could be a silver lining to any drop. While home sellers might not be making as much profit, it would be a little easier and cheaper to buy a home.”
“Chico City Manager Greg Jones didn’t have any city data regarding future housing prices, but as far as any impacts on the city’s revenue from tax assessment, he felt they would be negligible. ‘I don’t think (dropping prices) is a bad sign. It could reduce speculative investment, which could affect the overall economy.’”
‘The former president of National Consumer Mortgage LLC has settled civil charges that he used investor money to pay off more than $10 million in gambling debts, to fund lavish house parties, and to support community music festivals, the Securities and Exchange Commission said on Tuesday.’
‘Instead, Favata, who lives in Yorba Linda, Calif., used the new money to make payments to existing investors, to pay the operating expenses of the firm’s conventional mortgage business, and to pay off more than $10 million of his gambling debts, the SEC said.’
“Trust has been been an issue between real estate professionals and their clients. But perhaps with good reason. Mortgage crime is the fastest growing white collar crime in America, according to the Federal Bureau of Investigation. An increase in the illegal activity has accompanied the housing market’s upswing. Yet even as the market slows, fraud is as big an issue as ever.’
‘No one was talking about fraud when the market was adding equity at such a rapid pace,’ said Todd Shillington, president of the California Association of Mortgage Brokers’ Central Coast Chapter. It’s a big topic now.’
‘A couple of leaky, flapping red and blue balloons appended to a measly cardboard roadside ‘Open House’ sign won’t cut it these days. Nearly 40,000 homes sit unsold in San Diego County. And more than 10,000 real estate agents compete daily to represent the region’s buyers and sellers.’
‘New bus bench ads spring up, glossy flyers litter doorsteps, newspaper editorials from industry pros extol the virtues of homeownership, even in an uncertain market. But in a state where one in 52 adults is a licensed real estate agent, those Realtors, especially young ones, seek more creative tactics to separate themselves from the pack.’
hey watch me flip.
I just stop being serious about housing news. most news are just funny haha. let me know when the blood starts running in the street. haha.
As I mentioned on a previous topic, LA homesellers are still asking for the sky and some are getting some bites; otherwise, sales will be non-existent. This is sooo far from being a buyer’s market. Wake me up when prices REALLY start falling.
I was thinking the same thing today as I watched a new coworker signing and faxing mortgage docs for her new house. There are still alot of gullible, uninformed fools out there to keep it from being a glood in the street” market washout.
Sad part is even if housing drops 50% in California it’ll still be unaffordable for most.
True, but that kind of a drop would rationalize the rental/purchase comparison. Buying would be a little cheaper than renting, which would appropriately compensate buyers for the risk of continued depreciation.
“Trust has been been an issue between real estate professionals and their clients.”
Put this one down for Understatement of the Year award.
No one was talking about fraud when the market was adding equity at such a rapid pace,
______________________________________________________
We talked about it every day right here! In fact several of us sent emails to the AG’s and NOTHING happened! Oh well.
I just wrote to the FBI and DRE about an apparently fraudulent sale. A Realtor/Flipper “sold” a home at $200,000 over market to a straw buyer in Sacramento. I sent copies of the letter to the broker, the lender and the Realtor. She has FOUR more houses on the same street, and wanted to put her on notice. We will see what happens. Signed, Citizen Crime Dog!
Don’t forgt to copy the Sac Bee, LA Times, Examiner, etc.
ZPZ, I did copy the business editor and assistant business editor to the Sac Bee. We will see if they run with it.
Thomas (below),
I don’t know how the straw buyer works. It is possible he was a super GF, with a big box of stupid. But the lender, Reator and appraiser were in “collusion”, either in business relationships or thru convenient ignorance. I believe the Realtor need the cash out sale funds to support the 3 other homes she owns on the same block (also vacant for 9 months). The buyer took out an 80% 1st, a 20% second and must have promised to occuppy within 30 days. It has bee45 days and the place is sooo vacant. The HELOC 2nd mortgage is probably recourse, and any proven fraud will make the whole deal recourse. He will be the classic GF/FB conversion, 16 months past the peak of the Sacramento market.
How does one do that — sell a property at an over-market price to a straw buyer? Does the “straw buyer” even exist in reality, or is it just a made-up name (like the “Dick Tracy” and “Mary Poppins” who voted Democrat in Ohio last time around)? Or is there someone who actually goes along with the scheme and is willing to take the knock to his credit from letting the house go into foreclosure, in exchange for a kickback of the inflated sale price?
If I already had a house, lived in a non-recourse state like California (which I do), had no principles, and was offered a couple hundred grand, I think I could live with impaired credit for a few years. What would I really need credit for? With $200,000 in the bank, I could pay cash for any big purchases I might need.
“I just don’t think we have what it takes to prick the bubble… I don’t think prices are going to fall, and I don’t think they’re even going to be flat. ”
- Diane C. Swonk, chief economist at Mesirow Financial in Chicago, New York Times, Trading Places: Real Estate Instead of Dot-Coms, 3/25/05
Looks like she was wrong big time.
Did they fire her yet?
May be demoting her to assistant chief economist. Let someone
else be chief.
I have seen her before on TV during local news shows “round tables”. She is very fast and loud talker, and hardly lets anybody else in the roundtable say anything. She is basically an “economic repeater”, she repeats everything that all of the economists are saying but with a rapid fire mouth and lots of self-rightousness. She is the economic equivalent of the “fire and brimstone” self-righteous preachers of three centuries ago in Salem, Mass.
Swonk alert!!! Swonk, Swonk, Swonk. We used to watch her on CNBC and laugh because she was so clueless…Constant cheerleader for Stocks, RE, Bonds. Is she related to Kudlow?
Way OT but too funny not to post:
“Lies Well Disguised: The Unparalleled Hyperbole of NYC Real Estate Advertising
“The lies you are about to read are, actually, not at all well-disguised. That’s because there is no disguising the bare-naked bullshit of New York real estate advertising. But, how does one justify charging 1, 2, THREE mil for two small empty rooms? You just have to make pretend you’re selling units of Kubla Khan’s pleasure dome and adjust your use of language accordingly. “Renovated” becomes “luxury.” “Cheap marble” becomes “couture.” And “Jade Jagger” becomes “designer.”
“Please let me take you on a stroll through a Sunday New York Times real estate section. You’ll feel like a kid in a candy store–a kid on a dolly with no arms or legs.
“First up, an ad for 45 Park Ave. tells me if my “dreams had an address,” this would be it. Nooo, if my dreams had an address, Blowjobs & Bacon Boulevard would be it.
“Next, Ian Schrager, former owner of Studio 54 and convicted, jailed tax fraudster, humbly explains his vision for the newish 50 Gramercy Park North thusly: “I wanted to change the way people live…”
“Mission accomplished, Ian. You changed where I drink. The old Gramercy Park Hotel bar you destroyed was one of coolest watering holes in the city.
“Schrager’s other cubic zirconia is the synthetic 40 Bond St. His philosophy for it, in quotes at the website: “It should be the art of living, not the job of living.”
“What a Dick.
“Speaking of “the art of living,” that’s tagline for some Laight St. glass condos. I think you guys had it first. Why not sue that cheat Schrager?
“Others telling me how to live: An East End Ave. building says it is “the new vision in family living”; Some Tribeca condos tell me they’re “Tribeca condos like never before”; two buildings named “Ariel” say they’re “traditional living like never before;” and a 55th St. structure claims to be “the perfect living experience.”
“Finally, condos on West End Ave urge me to “think Paris, circa 1910.”
“Fine. Cut your prices 95%.”
ROTFLMAO!!!!
I think the folks on Madison Ave must be in on this type of advertising. It sounds just like cruise/resort ads.
sheer and unadulterated honesty! I love it! I always thought advertising agents and real estate agents were cut from the same hosebag cloth.
Blowjobs & Bacon Boulevard! I gotta save that, maybe I’ll use it sometime.
“Newport Beach homebuilder William Lyon Homes delivered the latest round of bad news from the new home sector, reporting that its orders fell 40 percent over the summer.”
Shocking, who woulda thunk after all we know sales are down ~40%! Every piece of bad new is gospel here and a surprise elsewhere. I can’t believe by reading this blog we truly have a crystal ball. Just can’t believe it.
JP Morgan rates the stock a “strong buy” This is the most disgusting distoration on reality vs. hype I have ever witnessed.
The stock brokers have no shame.
Nah! This downturn was predictable. The word “demographics” conjures up bubble when you combine it with the phrase “baby boomer,” and then consider ‘birth dearth.” But no one outside blogs such as this observed facts. The boomers who are FBs have to market their second (maybe third) homes to gen-y or gen-z, which is a smaller pool. Dumb, dumb, dumb! Greed got the best of them. BTW, I’m a boomer (age 47) but I took the best from Harry Dent’s books. Dent predicts a major depression in 2010 when boomers slow down consuming. the depression may be early. But for sure, it looks as though it’s starting in the Real Estate industry. Otherwise Dent’s hysterical 30,000 DOW in 2009 is just that…hysterical!
Thanks Bill,
I never considered this until you mention it. I know a number of boomers that are retiring in the next ten years and have invested heavy in real estate. They have had the illusion of a good investment because other boomers were doing the same thing at the same time. But indeed who will be able to buy them a few years hence? Sort of a double bubble: 1) the big honkin global credit-fueled bubble popping presently and 2) this boomer bubble, perhaps imploding further in a few years. If you are right, it looks like housing may indeed be dirt cheap (comparatively) in about ten years. But we may all be out of work anyway,so….
You are welcome. Another thing to consider: Pundits have been promoting health industry stocks because of aging boomers. Well I’m not sure. There is a greater push toward socialized medicine in the U.S. Socialism is just another word for “slavery.” It’s a way of making the few sacrifice for the many. I would not want to be a biochemist entrepreneur in a socialist society. I would head toward freedom. In short, I don’t think health care stocks are going to be a good deal with the trend in store. There will be big raids on companies providing health care unless they are outside in other countries. I would make a bet that “Communist” China, India, some Caribbean nations with fewer stupid regulations, and so on become the experts in longevity and medicine in a generation as America sinks into the irresponsible socialist obscurity.
Boy bill you cannot even maintain logical consistency in the same sentence
You’ll feel like a kid in a candy store–a kid on a dolly with no arms or legs.
“I would make a bet that “Communist” China, India, some Caribbean nations with fewer stupid regulations, and so on become the experts in longevity and medicine in a generation as America sinks into the irresponsible socialist obscurity.”
So if we lean socialist we will lose to the communists? Holy Cognative dissodance batman.
Libertarians = Anarchists with jobs.
http://tinyurl.com/esdjl
Just wait until your insurance company says you have to go to India/China/Poland for your Angioplasty because it is cheaper.
Wouldnt want any stupid regulations like sanitary conditions or actual medical training to stand in the way.
You people want your libertarian utopia of no government—all you have to do is move to Darfur…leave the rest of us out of your fantasy land.
Ummm, BIll? That one kinda went off into left (or right, presumably) field. Maybe you should check your meds.
However, the point that boomer mass will may indeed move us closer to socialized healthcare could still support his point about healthcare stocks. Of course, reasonable regulations on the insurance industry would accomplish the same thing as socialized healthcare, but the insurance lobby will resist that with all its might until it’s too late.
Kennybabes wrote “So if we lean socialist we will lose to the communists? Holy Cognative dissodance batman.”
Hey dude. Reread my post (after going back to school for reading comprehension). Did you notice my quotes around the word “Communist.” If you are smart enough, you know what those quotes convey. They convey sarcasm, as in “so-called.” China’s rhetoric is communist. But its practices are capitalist. And the opposite is getting more and more likely in the United States.
I nominate this as Most-Brain-Dead-Statement-of-the-Month:
“‘People could be waiting to buy until the prices hit the bottom, which I think will be in a matter of weeks or months, not years,’ Winders agreed.”
Better get those checkbooks out in “a matter of weeks”, or be priced out forever!
“Deep buyers’ market?” What is that? So tired of the Realtor(tm) double talk here. I don’t like to generalize, but every piece of property here in Cali is at least $100K overpriced. “Deep buyers’ market” today is like saying you made it to the top of Mt. Everest, then walked 50 feet down the other side, so the whole trip is done. LOTS of descending yet to come.
Nice image and right on.
I would only add that your estimate is way too low. Most spots in California are at least 50-100% overvalued. That would mean they are anywhere from $100k to $500k or more above a nonbubble market, depending upon your price range.
How do you figure that?
Uh, how do you not figure that when you look at the disparity of median income to median price and rent to mortgage ratios?
California is overpriced sure, but it’s not 50%-100% overvalued I’m sorry, it’s just not. Some areas might be, like Bakersfield, and I’m sorry that median income to price ratios don’t match up like they do in other states, but for most “desirable” areas in California this has been the case for a while.
I agree there’s a bubble, but don’t get ahead of yourselves for California.
wait a second, you mean 5 years is NORMAL for a 100-150% increase in home value when previously it would have been 3-4% a year?
The Census folks released income figures for the US this week, their conslusion, since 1999 inflation adjusted wages have been stagnant.
So stagnant wages, rents 1/3 the cost of buying, tell me again how California housing is not 50-100% over valued?
Joel B.
What is the gist of your argument? Is it that market fundamentals do not apply in California? I would grant you that some local markets (Cambria, Malibu, Beverly Hills) are disconnected from fundamentals, but the vast majority of Californians are simply not that wealthy. And during the run of the bubble (2001-2006) real wages have declined. So, how can the current valuations have any basis?
Sounds like Joel is saying that housing prices in California have reached a “permanently high plateau” because “it’s different here”!
You’re right, DD. Joel is out to lunch. I am interested in the comment by “Mike in Pacific Beach,” who says rents cost only 1/3 of buying. I have not seen this. I have seen rents maybe 1/2 the cost of buying comps, or maybe a bit more than 1/2. That’s why I said somewhere above that prices need to fall 50%, which would make buying a little cheaper than renting. If Mike in Pac Beach is accurately describing his area, maybe I’ll go rent in Pac Beach when I can’t take any more of autumn in Maine.
My argument is this, in the more desirable areas of the state, such as the Bay Area, and coastal counties in Southern California, a lot of those areas have reached build-out. There’s just not much new supply available in those areas. As you get further out to the far far East Bay and to the central valley, you get much more building, these areas have seen some rapid appreciation, but the further out you go the greater risk you are at. Merced for example is at great risk, Livermore far less so. Median prices to Median incomes have been out of whack for a long time in California, especially, Bay Area counties and Southern Coastal counties.
Market fundamentals do apply, but one big difference is that while they are not running out of land in Las Vegas, only so many people can be within 20 miles of the Bay, or the Ocean and there they are genuinely running out of land to build SFHs.
In many other places in the world (that are more built out) median prices are more commonly 10X median income. Is it that way in Cali? No, but S.F. and O.C. and the surrounding environs (penisula, east bay, south bay, marin) that ?X multiplier of median income isn’t just an easy 2.5-3.
I live in Pacific Beach and I can honestly say that prices to rent are about 1/3 of what it would cost to buy. I pay 1350 (up from 1200, greedy bastards) for a 2 bedroom apartment. 2 blocks from where I live they want 550k to 600k for nearly the same thing. Fortunately prices are starting to come down.
Here’s some examples.
http://pacificbeachbubble.blogspot.com/
South Ocean Beach, 92107:
A house here that would sell for $1.1M (down from $1.2M) rents for $2800 to $3000 here. A quick estimate with 100% financing at 6.3% and 1% prop. tax means it costs the owner $4684 per month (not counting maintenance and insurance, but after tax (30% bracket)).
$4684/$2900 = 1.62x
Have you driven around the bay area recently? Townhouses sprouting like weeds. Hardly built out, IMO. Now Manhattan, that’s mostly built out. Didn’t stop values from dropping by half, inflation adjusted, in the last bust. It will be worse this time.
Agreed. But I think 100% overpriced is closer to the truth than 50%, given that renting is half as much per month as owning an equivalent place.
If this is a ‘Deep Buyers Market,’ Next year’s market will be Extra Secret Double Deep Buyer’s Market.
…with a cherry on top.
And double whipped cream.
or a “Deep-Fryed Seller’s Market”……
I second your nomination.
“‘People could be waiting to buy until the prices hit the bottom, which I think will be in a matter of weeks or months, not years,’ Winders agreed.”
Translation: Good God, if I don’t sell something soon, I’m only gonna last a few weeks, maybe months….. Oh, god What if it’s YEARS!!!!
(sniffle, snifle, sob, snifle…)
“‘People could be waiting to buy until the prices hit the bottom, which I think will be in a matter of weeks or months, not years,’ Winders agreed.”
Translation: Oh God, If I don’t sell something soon were not gonna last more than a matter of weeks, maybe a month……. Oh God what if it’s YEARS!!!!! (sob, sob, snifffle, snifffle, sob, sniffle)
Winders just *has* to believe everything will be OK in a month or so.
Exactly, jump in when the average San Diego $hitbox drops to 600k! In 5 years it’ll be over 1 million easy
fresh from cramer- buy LEN and stocks levered to housing
so?
I realize that there are the usual disclaimers on Cramer’s show and shows like it, but the SEC or some other regulatory agency should step in.
The crap he spews is unreal.
I honestly believe, that by hosting the show, in the manner that he does, that he is engaged in the business of providing investment advice.
I think his show is more for entertainment purposes (for people with a sick sense of entertainment) and for people who need to hear him say that dog stock they bought is still a good place to be.
How anyone can stand that show is beyond me and I used to like him before he did it. Oh how we miss Louis Rukeyser.
I want my financial advice to come from someone with class rather than some yahoo in shirt tails who screams about 50 stocks per show so you know his knowledge of each is about as deep as the length of time he spends on them.
I agree that it is supposed to be for entertainment, but I bet there are many people making investment decisions based on what he is spewing. I’d alos be willing to bet that there are insiders on the show that are front-running his comments.
I watched it once or twice, just out of curiosity.
I think it is scripted/designed to create the Boiler Room atmosphere and to convince viewers to get in on the game (home gamers ring a bell).
The disclaimers during the show are just for those who are not sophisticated investors or too quick to sue. (a little sarcasm there)
It’s easy to make $$$ off that show. Read Realmoney during the day. Whatever he pimps on the site, he’ll pimp on the show. Buy it. Sit there until Island closes in the evening and feed it back to the idiots who buy while he’s talking. You can do this over and over. For awhile there, I was knocking down 10% a day on Cramer pumps.
How much is the stock market down so far this year? It can’t be up, can it?!!
S & P 500 index up about 10% YTD. I’m a big fan of Vanguard 500 Index fund. 12% average annual gain for the last 30 years. Significant.
Other local O.C. news
New Century sees loans drop
Loans totaled $15.8 billion in the third quarter, down 5.4 percent from last year.
New Century Financial Corp., the Irvine real estate investment trust, said today that loan production dropped 5.4 percent in the third quarter compared to its record third quarter last year.
Total loans this year totaled $15.8 billion compared to $16.7 billion in 2005.
Monthly loan production dropped from $5.3 billion in July to $4.7 billion in September. The September results were down 21.7 percent from September 2005.
That doesn’t strike me as bad news at all. Seems like they’re still churning out suckers by the minute.
Loan “production” is such a funny term. As if one were actually producing something. Just now I’m engaged in Liquidity Production, which means, making no new loans and just thanking my lucky stars when any one of my borrowers gets a re-fi from some cheaper outfit.
did anyone realize that we won’t need as much commercial space when the RE bubble takes the jobs away?
exactly : sometime around 2003, mortgage companies started taking up space everywhere in LA.
…around 2007/2008, there should be some vacancies
Think of all the granite countertop and stainless steel appliance stores that will soon be vacated. Also Hummer dealerships and plastic surgeon’s office’s etc.
No, no, nooo. We need those commercial construction jobs!! The commercial segment is taking up where housing left off…I heard it on CNBC…
Huses go up 120 percent. they go down 10 percent and it’s a buyer’s market. I just don’t see this massive crash everyone is talking about
Not yet…it’s coming…resets in 07 and 08…it will be ugly.
Just wondering what people think will drive home prices down more over the next 18-24 months: resetting of ARMs or tightening of lending standards?
Difficult to say because they both feed on each other.
When the property tax bill comes due 10-Dec, that’s when shock and awe comes to California.
Most people have an escrow account to pay the taxes. Many people did not pay 20% down, so they had no choice but to have the escrow account, which is probably a good thing for them unless they have a healthy bank account. Also, remember, California real estate taxes are relatively low thanks to Proposition 13 limits. Tax is about 1% for every 100K assessed value, many states are worse.
Bill, 15% off the high is “in the bag” this year and by this time next year another 30% for sure (I’m trying to be conservative here). This market is toast, as is any fool who bought since 2001. This baby is going down in flames and all your heel clicking and wishing ain’t gonna make one bit of difference. Too many fundamental reasons why, which have been repeated here ad infinitum. Sorry to be the bearer of bad news but you might as well start getting your mind around the reality of things to come.
Well put Auger,
And your restraint from using familiar metaphors is appreciated.
Thanks, I’m trying hard to restrain myself in that regard, although sometimes no other phrase encapsulates my feelings on the matter with such clarity.
or c) psychology and herd mentality.
All of above. The speculator-buyers are gone because of the herd mentality…. and then the ARM resets kick in after the tightening of the lending standards. Talk about the perfect storm.
Speculators apparently aren’t quite gone: “The area is already seeing less real estate speculation, or ‘flipping,’”
While I find it surprising that anyone is still buying, I can somewhat imagine a person exchanging houses or just wanting to quit renting. But I really want to meet the idiots who are still speculating.
I agree completely with dwr. I think that ARM resets and tighter lending standards are just side effects that will accerlerate the decline but it’s the psychology of the bubble imploding that will drive everything lower.
No longer will people close their eyes and sign up for 80% of their income to buy a house because ‘they know’ the price will be higher in 2-3 years. Now everyone will stand back and wait and wait and wait….
Neither - they’ll blame it all on the media for creating a bubble hysteria.
Don’t forget the fall of the Berlin Wall.
“The Real Estate World is Flat”
It was George Soros.
“they go down 10 percent and it’s a buyer’s market”
If you believe what realtwhores say, you deserve to lose money.
There seem to be a lot of vague unsubstantiated FUD (Fear, Uncertainty and Doubt) new posters.
I wonder if the REIC is paying under-employed realt-whores to post on bubble blogs.
Kinda like strike pay at a union where the union pays picketers a wage to walk the picket line.
The A$$clown Larry Nusbaum comes to mind. I think that Ben already nuked him off of this blog.
What happened to Nerd-baum? He came in guns a blazing and then disappeared.
He’s all over the Sacramento blogs.
He’s also been busy writing.
http://www.blogger.com/profile/26836401
And of course the Jackass started a blog.
http://millionairenowbook.blogspot.com/
Nusbaum looks like a piece of work. I wonder how the business of all these “make millions in real estate” hucksters is going these days?
Business can’t be good. He has a “seven steps to wealth” program and I heard someone just came up with a way to get rich with only six steps.
not six! seven! seven is the magic number. seven dwarves, seven eleven, seven little chipmunks sitting on a branch, eating lots of sunflowers on my uncle’s ranch.
You know… that old nursery rhyme… from the sea?
“I heard someone just came up with a way to get rich with only six steps.”
Reminds me of the movie “Something About Mary”: “so what if someone comes up with a *six* minute abs video?”
“Reminds me of the movie “Something About Mary”: “so what if someone comes up with a *six* minute abs video?” ”
Thanks for getting the reference.
“Thanks for getting the reference.”
bruin got it too, high five bruin.
HIgh six. (Doh!)
“Three
That’s the Magic Number
Yes it is
Its the Magic Number”
According to De La Soul, anyway.
What the hell is a huse?
Maybe he meant husie?
A huse is what Groundskeeper Willie lives in.
Chuckle.
“Ach! Me wee huse! It’s droppin’ in preece! I dinna know why!”
They should have included that in the Simpsons episode when Marge became a realtor.
Willie Marketing his “Modest house in a Prime location close to a school”
Too funny.
Then buy up everything in site and you will become wealthy!
How long did they take to go up 120% vs down 10%?
I don’t see any crash either, I just see home prices continuing to drop for awhile.
posted “Houses go up 120 percent. they go down 10 percent and it’s a buyer’s market. I just don’t see this massive crash everyone is talking about”
This very true! But even if it were to end today all the toxic loan folks would still be in trouble if they wanted to sell. 10% down plus 6% listing fee plus 1% closing plus any prepayment fee’s? What’s the truth today? close to 20% down?
“Huses go up 120 percent. they go down 10 percent and it’s a buyer’s market. I just don’t see this massive crash everyone is talking about ”
Prices went up 120% in 5 years but in the sixth year they’re up 98%. In the seventh year will they be up 60%?
I’ve said it before…It’s not a buyer’s market until prices come back to normal (historic means).
10% off a house inflated buy 300% doesn’t make it a buyer’s market, no matter how much the Realtors want it to be.
Houses are not “inflated” by 300% or anything close to that. I doubt prices will drop much more than 25% from last years highs.
You’re right, my own house in Oceanside went up over 400% from the time I bought it in ‘98 until sold in ‘06. That 300% is BS!
If the market for it was indeed 400% higher in that 8 year span, then that was it’s value when you sold it. Inflation had nothing to do with it. If it sells for less now, that is also it’s present market value, not a result of deflation.
you have a narrow definition of inflation.
I can vouch for Huggybear. We also bought a house in O’side in 1998 and sold in 2004 (a bit early). At peak price (2005), it was up over 300% (about 4X orig purchase price) from 1998 prices. No way they are only going to lose 25%. As a matter of fact, homes are already back to 2004 prices and they are sitting for months (as opposed to selling in hours/days). They are already down by 10-15%, and we’ve barely begun. I anticipate they will eventually sell for 50% off peak prices. That would still be a hefty increase from 1998, and incomes haven’t gone up to *truly* substantiate much of an increase, anyway.
Then as soon as prices go down 25%, you should buy with both hands. Let us know how you do.
Am i really going have to re-post about the reo i bought in l.a.’s westside in 1996 for 41% off it’s 1991 sale price? no multiple offers, it was for sale for over 2 months and nobody from the aerospace industry lived anywhere near me. our market crushed under it’s own weight…contrary to what today’s chump real estate gurus would have you believe.
agentjmf,
You are 100% correct, IMO. The aerospace/defense layoffs only magnified the RE downturn that was already happening in LA (and many other cities/states/countries at the same time).
Homes in our neighborhood (good area, nice house) were down anywhere from 30-40%. It took about 11 years to break even on a 1989 purchase.
BTW, we checked out a number of homes in Malibu during the downturn. Plenty of distressed sales and depreciation there as well. No area is immune. Yes, some will fare better than others (drop 35% instead of 75%), but I’d wager all areas will drop.
“Newport Beach homebuilder William Lyon Homes delivered the latest round of bad news from the new home sector, reporting that its orders fell 40 percent over the summer.”
Given recent reports of new-home sale cancelation rates running over 40%, Lyon et. al. are just not selling many homes. It’s possible that their actual YOY numbers are as much as 60% down.
“I can see the market dropping some, but my feeling and my hope is it won’t drop that far, though I entertain the possibility that it will,” Realtor Paul Winders said.
Ah, yes: feelings and hopes. The two “fundamentals” the bubble was built on.
Good stuff. I thought the realtwhores were going to actually have something substantive to say when I read this prelude:
“While acknowledging modestly declining home prices in the area, at least two local Realtors doubt the accuracy of the dire predictions.”
The two fundamentals ‘our whole country’ has been relying on for the past 5 years.
We are ‘faith-based’ now … reality is a thing of the past.
…or is it?
In 2000-2001 some morons said “I can see NASDAQ dropping some, but my feeling and my hope is it won’t drop that far, though I entertain the possibility that it will,”
and they held on to their assets….
this time it’s no difference
“‘It could mean less buyer confidence,’ Winders said. ‘More home buyers are already walking away from their mortgages if their home is worth less than they owe.’”
But… Suzzane did the numbers and we could do it!
Replying also to JWM above, the resets with people walking away will make for interesting times. NH, wait until 2Q2007 before doubting prices will drop… a lot!
I just had two senior managers today encourage me to relocate out of state as I’ll have no hope of buying in Southern California. I talked with them for 20 minutes on why I believe home prices will drop. They cannot believe that home prices will drop more than 10%. If they’re right… I will locate out of state. If I’m right, “and I’m always right”
, I’ll buy in state. We’ll wait and see.
When affordability drops to single digits… price crashes always follow. Too many markets are there. Will affordability in NYC, LA, the bay area, etc. ever break 60%? No. Too many people want to live there. But it usually spikes up to 45% to 55% in a home bust.
Sales in the two zip codes I want to buy are down to 41 homes/month. To maintain 90% of today’s prices requires a sales rate of about 70/month. Slow (normal) appreciation happens at 100 homes/month. This bubble held abouve 120 homes/month for years and peaked at 174 homes/month.
I’m going to do an article on my blog, but I have more research to do.
Neil
“When affordability drops to single digits… price crashes always follow.”
Sure would be nice to know what the affordability numbers would currently look like for Cali using the old CAR formula.
Got a precise calculator
(it’s a decimal)
Wells Fargo still publishes something close to the old CAR affordability numbers.
In OC it is in the low single digits, last time I checked. It may be negative by now though.
When both were being published, the CAR number was about 12-14% and the Wells Fargo number was already something like 4% (for LA). I’m sure the Wells Fargo # is more accurate, but it would be nice to see how low the CAR #s would be now. I believe in the last bubble the CAR # for LA dropped down to about 16%- I bet right now it would be well under 10%.
Before they changed the formula, CAR for LA was 1.9%. But that isn’t a problem as long as each person in that 1.9% owns about 1500 houses.
1.9%? Not even close. December 2005 was the last month they put out the numbers based on the old formula. I couldn’t find those but here are the numbers for November 2005:
Los Angeles 11%
http://216.52.172.179/DispArticle.cfm?ARTICLE_ID=12793
From Wells Fargo:
The California economy is starting to show the strains from a housing slowdown that is shaping up to be at least twice as bad as the nations. Central California will see the largest percentage deceleration in growth, followed by Southern California. The economic impact on the Bay Area should be smaller as a natural lack of housing supply in the Bay Area provides a buffer against substantial home price declines. This will lead to slower California job growth in 2007, especially for construction, realtors, and mortgage lenders.
https://www.wellsfargo.com/com/research/economics/california/
Just made my bookmarks…
Click on Southern California, they predict a small drop in home prices… hmmm…
Home sales have plunged (Its in the PDF!)
Does anyone have a link to the Wells Fargo affordability results? I wasn’t able to find them.
Neil
“Does anyone have a link to the Wells Fargo affordability results? I wasn’t able to find them.”
NAHB-Wells Fargo Housing Opportunity Index (HOI)
http://www.nahb.org/page.aspx/category/sectionID=135
More economic data from the NAHB:
http://www.nahb.org/page.aspx/category/sectionID=113
folks in chico do not have to worry about a crash,everyone wants to live there,’cause it’s where they make velveeta.
Chico has a lot going for it- the reigning #1 party school in America, they brew Sierra Nevada pale ale there. What more could one ask for?
well, if it’s Cheez Whiz as well as Velveeta that they make, I’m there…cause you know you know a Philly steak is NOTHIN’ without the whiz…
aww yeah
Provolone or white American would be my preference.
Anything required by law to append ‘food’ to its name should not be eaten.
Chico not even making the top 10 any more. So disappointing!
We do generally make the top ten for student deaths related to hazing though. I guess you’ve got to take what notoriety you can get.
Sierra Nevada IS here ….. not just a brew house, this is it’s Graceland.
IMO - Sierra Nevada pale ale is a GREAT American Beer!
American beers are light (my favorite) …..try SN ‘Blond Ale’….
And thanks for getin’ me started C&C. No more posting tonight without spell check…..
Butte County aggresively attracts welfare recipients so that they have a low income workforce to support the services Cal State Chico needs. So why home prices there have increased is due to people moving to Chico to retire. Retirees like to be in small college towns. This however will end and Chico home prices will drop. Sierra Nevada Brew House is nice.
Yes, it is a buyers market, but not a good time to buy if you can wait. In some areas of coastal Los Angeles, the inventory is at least one year, maybe as high as 2 years. The foreclosures have not even started yet. If they do, as I expect they will next year, the exceleration in prices downward will really start.
weee!!!!!!!!!!!!!!
down we go.
It’s so obvious now - this market is dead!
Right, people are just going to have a half-off sale. Dream on.
No, the banks are going to have a half-off sale, once the current “owners” default.
If they do, speculators with CASH will buy them before the public ever gets a shot at them. Insiders always get the good deals.
When house prices drop 50%,it’s the folks on this blog who will be ready to buy, many of whom have plenty of cash and are continuing to accumulate more as they rent and watch the FBs sweat it out in their overpriced, unsellable mortgage traps.
If they do, speculators with CASH will buy them before the public ever gets a shot at them.
… thereby dropping the comps for everyone.
Coming soon: Labor price 50% off, materials 50% off, land 50% off (or more)…
If current sellers don’t chop the price 50%, people will just build their own houses.
a builder in MA just released lots at 3/4 (w/o builder tie-in) of prior asking price that had the tie-in still in place..
I bet his lender is looking for some payments.
Is there a website that tracks historical asking prices for new developments? That would be pretty interesting to watch.
Bill,
I suspect there are some long-term owners who could suffer a 50% haircut and walk out in the black. And some will.
With respect to your 300% commet. I will give but one example. My own house (1000 sf post-WWII 2 br box) in Ashland, OR sold for $105k in the late 1990s and zillows for $336k now. I may never pull that much in a sale, but the house across the street sold for $315k. And many places (Reno, Vegas, Sacramento, Phoenix) are much worse than Ashland. So, 300% is no fabrication and a 50% haircut would be quite realistic after such an obscene runup.
Nope. 10% is all you’re getting. Bill said so.
I am sure what you say is a fact, but I was speaking of California real estate. Most homes here will sell if you drop the price 15% or so off the high. I don’t consider a condo a home, but if you look at those, probably a 30-40% cut could happen. I guess my question for some folks here is, exactly when is this big fire sale going to actually happen ? When will we see homes go for 1/2 price ? Spring ? 2007 ? 2008 ? 2009 ? how much rent will you pay between now and then ? what will the interest rate be when it happens ? I remember when a fixed 30yr was 17%. Is it really worth the gamble waiting too long ?
“….how much rent will you pay between now and then ? what will the interest rate be when it happens ? I remember when a fixed 30yr was 17%. Is it really worth the gamble waiting too long ?….”
Bill …. I was pretty much in agreement with a lot of what you’ve said, until the “ it’s never a better time to buy” logic. Everyone…EVERYONE, can agree homes are overvalued today. Everywhere. At the pinnacle of low interest rates, foreclosure loans, NAR hype and parental help, housing is still unaffordable to the vast majority ….. left available to buy. I’m not even counting posters here; they’re vultures waiting to buy (including me!).
Where does it go from here? home renting is the savvy position to be in right now. Albeit, not as comfortable as owning. But even I am saving 1K a month renting the house I’m in, vs. buying it. This is not counting the maintenance, etc.
How much rent will I pay between now and then?
Well, at $1000 x “that long” for a depreciating asset, says - I don’t really care. The longer the better according to my accountant.
“what will the interest rate be when it happens? I remember when a fixed 30yr was 17%…”
I do too. I’m on my knees begging for 17% interest rates, because that means the 1.5M house I have my eye on is going to be about 650K – right in my price range with cash! No disconnect between the interest rate and housing prices … you know, just like when everything went up …..
“Is it really worth the gamble waiting too long ?….”
Waiting is the gamble?!?? Common Bill……is this GS again?
lefantome- I understand your take on things because you are in a unique position that many would love to be in.
As far as renting goes,it is quite possible renting will be the best way to go for many years even with price drops.
I bought a new home 4 years ago for about half of what it would sell quickly today for. I owned my old house free and clear, which I rent out. The rent from that house covers the payment on this one and the taxes on both homes, so I really don’t have a dog in this fight.
But I see so many people who are sick of renting, sick of moving and just want to own their own place with a yard and dog for the kids. Those are the folks I think should not wait until the very bottom because things can turn on a dime, price and interest rate wise.
A 10k cut in price won’t change your payment much if rates go up 1%. If you see a nice place at a decent price in the next few months and rates are still this low, I say grab it. Peace of mind is worth something too.
I have bought 7 homes in my lifetime and I don’t think I ever was smart enough to buy at the very bottom or sell at the very top, but I got close enough and did ok, I think.
I agree Bill, but I encourage all to wait this mess out, as I don’t see an upside to the low interest rates “grab it now” logic. The time will come soon when catching that falling knife does not have much velocity left, and that is when the pain of buying will be acceptable.
If your house value falls lower, you’re still in a better financial position than most (been there in 1990’s). Waiting for a sustained acceleration of all indicators before you buy ….. priceless.
Bill,
I couldn’t disagree with you more. Once a young couple or who ever signs on to borrowing 1/2 million or 3/4 of a million dollars, that’s it. They owe that money. Anyone that does not think that’s a lot of money should think about what they make and think how long it would take to save that amount. Wages and housing prices are at a disconnect.
10,000 off? Bullshit. I grew up in Los Angeles, it’s my life long home. I’ve seen three booms and busts. In 1991 I bought a home. by ‘93 it was worth 30% less. After the earthquake, knock off another 10 to 12%. It didn’t come back to break even for 9 years.
There has been little noticeable “smoke” in LA thus far. But the “fuse has already been “lit” in Phoenix and Las Vegas, where a number of my acquaintances have “investments”. When the funny money loans really start resetting next year, I think the powder is gonna burn all the way back here.
EVERYONE that I know of that bought in the last 4 years used a dangerous loan instrument. Between 10 and 15 percent will be in financial trouble when their reset occurs. I already know 2 families that are “borderline”
“A 10k cut in price won’t change your payment much if rates go up 1%. If you see a nice place at a decent price in the next few months and rates are still this low, I say grab it. Peace of mind is worth something too.”
Spoken like a true Realtor(tm) You’ve got to be a paid shill right? How about a $500K haircut, does that make a difference? What is a “decent” price in your mind anyway? Given the choice between high prices or high interest rates, I’ll take high interest rates any day of the week. Having personally seen houses in El Dorado County (yes, Bill, that’s in Ca) skyrocket in price by %400 over 5 years, I’m ready for that $800K house to be $250K again. Since incomes didn’t rise at all during this period, why should housing?
It’s disgusting and dishonest for you to be shilling like this - encouraging people to catch a falling knife and to be the next wave of landed poor. It’s no different than the “buy-the-dips” crowd on CNBC circa April 2000.
Right. Hey Bill, will you assure us you are not now and have never been a member of the Realtors Party? As a lender, I am of course one of the assholes who produced the high-price mess, and in support of the various commentators on this site I will say I guarantee you I am not now making new loans to anyone but national govts. (i.e., sovereign debt of the United States and mostly of other countries) Nor do I own any Fannie Mae trash etc
It’s all over but the crying.
Oh, Bill. Where do we start?
Firstly, you must know that MONTHLY PAYMENTS went up as well as prices. Monthly payments are at all-time highs in many areas. That is because people were buying an ATM/gold mine — they were not thinking in terms of housing EXPENSE. Once the belief goes away that your house can make more money than the owners do, people will drastically reduce the amount they are willing to allocate to monthly HOUSING EXPENSES. Doesn’t matter what interest rates do. Matter of fact, with rising rates, that just shrinks the pool of buyers even more, putting increased downward pressure on prices.
As to your thinly veiled “throwing your money away on rent” comment, as long as rents are less than interest, tax and maintenance costs (and depreciation), renting is the clear winner, hands-down!
Sorry, buy the Realtor rhetoric didn’t fool those of us on this blog when prices were going up, you certainly aren’t going to fool us when prices are going down.
Bill the Shill…
How does one ‘build equity’ in a declining asset? What the hell is the point of that? Just rent baby…
“”There’s still a huge pool of first-time home buyers who will come here because we still have something to sell - we still have great weather, we’re still on the water. I don’t buy the predictions of doom.”
… because Solano County is ‘different’!
Yeah, well, I was a first-time wannabe homeowner… Vallejo? Way too expensive in *1994* - much less today. I moved north. It’s a nice place to visit - or live, if you’re a senior executive. But to raise a family? Fugeddahboudit!
Yeah, well, I was a first-time wannabe homeowner… Vallejo? Way too expensive in *1994* - much less today. I moved north. It’s a nice place to visit - or live, if you’re a senior executive. But to raise a family? Fugeddahboudit!
Vallejo, CA is a huge section-8 ghetto, and it is prime repo hunting ground for the 1st-payment default gangsta. The “space-saver” spare tire is the only new tires you’ll see in that part of the world. I’d never consider raising a family there.
“”There’s still a huge pool of first-time home buyers who will come here because we still have something to sell - we still have great weather, we’re still on the water.
23 American states are on the water, and that doesn’t even count the Great Lakes. Some even have great weather AND low taxes and regulation.
I don’t like having to *drive* through Vallejo, although its not so bad since they finally finished the upgrades to Highway 37. I couldn’t imagine living there, much less spending a ton of money for a crappy house in the armpit of civilization.
In watching the gold market, I have heard a lot of talk about the FED lowering the rate some time around May and the effect that will have on gold.
But what about the effect it will have on the housing market? Won’t this give life to all the FBs whose loans are about to reset and prolong the deflation of this thing even more? And could the timing be worse? Just in time for realtors to tote “a return to the summer of ‘04″ just before the summer of ‘07.
Seems sad to me. Sure tightened lending standards will keep new people out of the market, but if Helicopter Ben and his crew do start lowering rates again, they will bail out many a FB. Am I wrong? Thoughts?
That would be assuming they will get high enough appraisals on their houses. Refi only works if your house is worth more than what you owe. People in these situations have often gone into ARMS and I/O’s in the past 2-3 years, and with prices tumbling downwards, it will be difficult to get an appraisal as high as that purchase price.
It won’t save the “Option ARM achievers”. They are doomed unless the bubble can be reblown before their mortgages reset. Which is pretty unlikely, to say the least.
Even if the appraised values came in ok, there is still the issue of the ratios.
I suspect that the ultra-low “teaser” rates that many FBs “qualified” at aren’t coming back.
Futhermore, if they take it as an opportunity to sell, then the excess inventory issue gets worse.
one last thought…and please people, correct me if I am wrong, but if the FED cuts rates, I suspect that the bond market will not like that and long term rates would spike…
Interest rates are made up of a “real” and an inflation component. Both are based on expectations. When the Fed cuts the fed funds or the discount rate, it tends to lower the real rate. With short maturities, such as under one year, the increase in inflation expectations (for the period in question) is minimal. With longer maturities, it is more significant, and the longer the more significant.
Complicating matters is that investment banks and trading houses who hold large positions in longer-dated treasuries have a sudden windfall in that their financing costs (the repo rate) roughly track the fed funds rate, so that there is an immediate decrease in the cost of holding long paper, thus making it more attractive.
In the long run, however, long rates will rise if there is the expectation that the Fed cutting rates will lead to an increase in the money supply, which is the normal result. However, under certain circumstances, such as in an economy under the strain of bad “animal spirits” (i.e. recession trending toward depression and consumer and business confidence extremely low), the Fed adding liquidity by cutting short rates may actually not lead to an increase in the money supply.
Hey priced out,
keep an eye on average incomes. If they go up 100% in May, while interest rates fall, then yeah, the bubble will reinflate. But if they go up at an annual rate of 2% in May while interest rates fall, houses are STILL way overpriced. The people on the sidelines who recently got into T-bills now see what a good thing T-bills are! 3 month T bills auctioned today with a 4.85% yield. Not bad when you consider not taxable at the state level. Then you also think 4.85% is better than your wage increase. Seems that people will think to throw more money to investments such as T-bills, rather than houses, especially when the cat is out of the bag - many boomers are counting on real estate to finance their retirements. And in a few years there will be a big dump of the boomers’ second homes. You think prices have fallen enough now? Wait until the boomers cash in their retirement villas to pay for their medicine! LOL!
I’m betting it’s too late for a rate cut to have much effect. Once scared buyers have seen prices getting shaky, as they are now, the myth of prices only going up begins to lose its foothold. It will take a very long time in house buyer years (2 or 3 earth years soaring prices without a falter) for a momentum of blind confidence to rebuild.
Things would have to be utterly perfect for prices to start climbing quickly. But just as Loma Prieta signaled the peak of the last boom and bust cycle, so will any big noteworthy event push the house prices right down the hill and into the Bay.
“One measure of O.C. home inventory rose significantly this month, says the math of (realtor) Steve Thomas in Aliso Viejo. Thomas calculates how many months it theoretically takes to sell all the inventory in the local MLS for-sale listings at the current pace of pending deals being made.”
“So, by this logic, it would take 7.78 months for buyers to gobble up all homes for sale at the current pace vs. 2.74 months a year ago.”
Hate to be the fly in the ointment, but since somewhere between 1/3 and 1/2 of “buyers” are walking away from signed contracts, shouldn’t the real metric be deals that actually transpire, rather than “pending deals”? Removing cold-feet non-buyers from the equation would add significantly to the backlog waiting to be sold.
Never thought I’d see Chico make Ben’s …..
We bought our first home in Chico (2001) from Kym Campbell’s husband Bill. Really nice people. They broke off on their own about 1 year ago.
Good to see Kym tellin’ it like it is here, but the prices will be the LAST thing to come down in this kind of secondary markets (IMO), because they were fairly cheep to buy in 2000-2003. Now the flippers who bought, have their homes languishing on the market, little movement ….. 2 sell out of 50 …… but there they all stay at the ‘wishing price’ month after month. If they want, they could rent them out at a positive cash flow even now, so probably not much motivation to lower price. Remember, these flippers were Bay Area & SoCal buyers, who tip this much at a nice dinner. The upper end is hysterical though (800K +), NOTHING SELLING!
But price drops? Nope. And any reduced price advertised, is reduced from their 8/06 wishing price, which is 10% above the 2005 peak. I’ll wait for 2008 and hope these market forces do finally work.
Lefantome,
I think they will work. Good comments on Chico,BTW, one of my favorite towns. Chico has few jobs that pay for anything more than ~$200k houses. Sure BA retirees are insulated from that, particularly if they bought early, but Chico had plenty of late-coming flippers (how else to get rich there?), so I suspect inventory will balloon there as is it doing here (Ashland, OR). The question is how big an effect the investors meltdown will have. I think it will be substantial and start getting traction in 2007.
Your right, at about 30K incomes, 200K house is about it. I refer to Chico as the minimum wage, welfare, unemployment “Land of Opportunity”. The inventory has ballooned to 4x normal (150 to 600), and I have expected any day the panic to set in. Really no money here, so this run-up in prices has been all outside influence. I thought when the market began to turn sour (late 2005), the slaughter would begin here even before Florida! No more quick money, no more sales ….. but transaction continue to happen.
The house we rent is now for sale. We don’t want to move, and the owner does not want to lose us if he doesn’t sell (50 yr old ‘soon to be retirees’ in a college town … we’re a hot item!). 4 showings, but one I thought was the most amazing. The owner called after he showed the house, and said, “This could work out for both of us” ….. the ‘shopper’ was from Texas, and was looking for a house for themselves, so as to be closer to her mom in Chico.
I thought, 500K for 1800sf in Chico? If I was from Texas, mom would be the one moving.
Oh, and ps. – Mrs. lefantome nearly had us buying a bed & breakfast in Ashland last year, but I convinced her (I think…) it was more work than we want to be tied to. She would be good at this, but at 1M for the place, it would have to work or we’d be a FB!
Hi lefantome,
Used to live in Ashland years ago. Lived on High street. My grandparents lived there for a number of years. They were the managers of the Corp Ranch outside of Ashland, near Emigrant Lake.
Hi Lefantome,
If you ever move to Ashland, for Chr@#$! sake don’t to the B&B! Ashland is a hazy dream for California boomers and we are crawling with revolving B&Bs. Soon the dream fades, winters wear you down, and you realize it would be hard to earn the money back here. Then again you could become a realtor!
$500k for an 1800 sf in Chico!? My brother in law bought a nice little historic 1000 sf 2 br for $80 k in about 2001. Folks down at Duffy’s Pub must be getting a good chuckle over their pints on all these greater fools.
Enjoy that lovely town, now that the yearly broil is over!
Hi Mr. Fester,
Used to live in Ashland years ago. Lived on High street. My grandparents lived there for a number of years. They were the managers of the Corp Ranch outside of Ashland, near Emigrant Lake.
Do you live in Ashland or outside of Ashland?
I live in Ashland in a tiny house with some nice trees near the University and Hunter Park. My family and I hike around Emigrant Lake all the time. It is still a lovely town, though greying rapidly due to the BA retiree onslaught. Two schools (Briscoe and Lincoln) have closed for want of housing for families, and I worry about my employees being able to live in town (all have lost hope in the near term, but things are improving).
Hi lefantome,
Oops. Should have had my comments nested below Mr. Fester.
My apologies
Chico’s a nice town. My MSCS is from California State University, Chico. A non-Ivy MS degree from an ordinary state university certainly didn’t hinder my success (earning well into the 6 figures annual income these days).
I can’t complain either. I met my wife-to-be in Chico when passing through in the 1990s.
There are over 300 homes under construction in Chico right now. These will hit the market hard in the next six months. Already the inventory in Chico sits at 810 (The highest it has ever been) at least for that past 5 years that I have been looking ) In Jan there was 460. Their are still flippers. I know of a Bay Area buyer who is closing on a brand new $800,000 triplex next week. It is unliekly that they will be able to rent out the units for more than $3,600 meaning they will have neg cash flow from the start. Another couple just bought a new house last week and for $329,000 and are now renting it out for $1,300 (Negitive Cash flow). But in the past few days we have seen media reports warning of 12% declines in home values. This may be the psychological straw that breaks the Camel’s back. Our local RE/Builders have done a good job at spinning things. But the bigger the bubble, the bigger the burst. Chico will crash big time. Now that the banks are tighting up, and all of the developers are getting ready to dump their newly build homes, the . I don’t think the condo market or the low end will be effected as much but it is going to get ugly.
There’s a CONDO market in CHICO?
Hi Bob, or is that Slob?
Great handle. Sounds like a Chico bar band.
Your description of the Chico market sounds like Ashland. A question. Was a lot of that construction aimed a “luxury homes and condos”?
That is what really frosted me here in Ashland. We have no affordable housing left within the urban growth boundary, a vocal anti-growth community, and what little land is open to construction has been covered with McMansions “by the best Bay Area Designers” meant to lure more equity locust. How fares Chico?
“Housing prices in the Vallejo area may be heading into the deepest slump since World War II, according to a new national study. While acknowledging modestly declining home prices in the area, at least two local Realtors doubt the accuracy of the dire predictions.”
“‘I can see the market dropping some, but my feeling and my hope is it won’t drop that far, though I entertain the possibility that it will,’ Realtor Paul Winders said.”
If prices in Vallejo are around $600-750K … then i would say you would need a biblical miracle… Vallejo is so awful and far way from any employers it pitiful..
7-8 months; that’s nothing. PB County has ~36 months on the market right now. Beat that CA! We are the biggest idiots in this whole country, I challange you to prove any different!!
36 months is pretty sick.
OC homes over $4million are at 43 months of inventory.
Ok, the whole market is just over 7 months… but I had to find something to one up you.
Don’t worry, Southern California will be increasing its inventory. Wait for Spring and that “very interesting” 2Q 2007.
Neil
From the stories I have read on this blog, I would give the nod to Florida for overbuilding. Sounds like the place is completely hosed.
CA and FL have always been neck-and-neck in the biggest idiots race. (I say this as a CA resident.)
I remember reading an article in the NYT a few years back w/the headline–Florida, The New California…
Yeah, Florida wannabes may be the greater idiots. But do bear in mind that FL has zero state income tax. Its property taxes are higher than CA’s, which may explain why CA prices got so much higher than FL.
California definitely has the most ridiculous prices in the country, but Florida has 3 things:
1. Much, much lower median income - many of which are fixed.
2. Greatly under-reported median prices (here in Tampa they are reporting $235K, when it is actually $295K) by the FAR.
3. And my personal favorite, we are #1 in foreclosures, and it’s not even close.
Check it: Florida - 28,000 Homes Now in Foreclosure
Florida also definitely has bigger, scarier insects than California, and Calif. ain’t no slouch in that department.
2 words - potato bug
Get this
““Closed sales of single-family homes withered from 1,339 in September 2005 to 887 this September, as inventories swelled from 3,060 last September to 3,926 the same month this year. Most of the median price loss in September came from Santa Clara County’s largest city, San Jose, the county seat, where the median price dropped this year from $721,000 in August to $715,000 in September.”
Inventory up nearly 33% up another 33% for Oct-Nov would put over 5000….
“‘I chatted in the past week with appraisers who say they are getting a lot of orders, but that most of them are to refinance these days. People are trying to get rid of option arms and other loans,’ said Edwin Resuello, president of Santa Clara County Association of Realtors.”
Sadly refi wont help… prices skyrocked from $166K to +$700K in under 10 years. Way out of the ordinary… There is no boom in Silicon valley so why overpay?
I don’t think SJ prices went up quite that fast or far… I lived in Santa Cruz in 1994 - was looking at a 1500 SF condo for $195K - that same one is now about $450. In the meantime, the house I did buy in Portland (1325SF, $125K) sells for about $250K now (priced at $280 but they won’t get it).
8 months inventory isn’t a disaster and is not enough to bring prices down substantially. In NY we have between 10-12 months in most areas which is more conducive for some nice price falls.
Yes, but time has a funny way of marching forward. Since market momentum is gone, those months of inventory will continue to stack up.
Exactly, which is what bubble doubters seem to be missing. So long as sellers outpace buyers by such wide margins, the inventory is only going to continue to grow. Also, anecdotally it seems to me that there a lot of homeowners who would like to sell (not necessarily out of financial need) but are afraid to jump into a weak market. I suspect that a good number of homeowners are waiting until the spring hoping that things get better (one of the reasons why late Q1 2007/early Q2 2007 will be quite interesting, to say the least).
And this is what the market looks like in a relatively strong economy. If/when the weak housing market precipitates a recession, things will get really ugly, really fast. So many households are overleveraged that any shock will be magnified to devastating potential.
Solano County Association of Realtors President Sandy Vollmer said she’s noticed that, too. ‘People could be waiting to buy until the prices hit the bottom, which I think will be in a matter of weeks or months, not years,’ Winders agreed
CALIFORNIA DREAMIN’ ON SUCH A WINTER’S DAY. I am dreaming of a big California price drop, and no bailouts for the many F*CKed Borrowers. Let them eat crow.
“‘I chatted in the past week with appraisers who say they are getting a lot of orders, but that most of them are to refinance these days.
LMFAO-I hope the shmoes doin’ these jobs got a crate of Maalox and TUMS in the closet.
Want STRESS?
Try doin’ refi appraisals on previously inflated values; in a declining market with no comp’s; and a desperate mortgage broker breathin’ down your neck to hit the client’s number-which probably includes an additional $70k to “consolidate” credit card debt, the last years payments on a couple gaz-guzzling worthless SUV’s with 100k on the odometers; 1st semester tution bills for a couple schoolkids; and that $5k tour to Italy taken last summer.
Have fun suckers!!!!!!!!!!!!
Enjoy that $150.00 fee split.
hey,
hd74man,
are you in the MA area?
Pen-
Unfortunately, yes-northshore, up on Cape Ann, about 30 miles N. of Beantown.
HdMan,
That is very, very funny! Great visualization, there.
When are the next months real estate numbers out? For new and previously owned houses? And homebuilders sentiment?
Liareah’s numbers are still a couple of weeks away.
On the NAR site it states that Existing Home Sales are published on or about the 25th of each month. Since that’s a Wednesday this month there’s no reason why it shouldn’t be the 25th.
Interestingly, that’s also the day the FOMC decision gets announced.
Ben, I love your blog, but I’d have to say it’s way to early to call this a “deep buyer’s market”, at least from my vantage point here in the Santa Monica/West LA area, and from what I’ve seen out in Koreatown, Downtown and the SF Valley. I’d say the market here is stabilizing, prices aren’t going up so much any more, and there is a little more inventory, but no buyer’s market for sure. That’s not to say it won’t happen, of course.
Deep market me arse….As someone put is on one of these threads today, we have just summited Everest, now we are gingerly stepping down top of a big glacier on the backside. Crunch…crunch …crunch…slip… pucker..gulp………..ooooooooooo shiiiiittttt!!!!!!
Sounds like a fun ride, if you’re holding cash in that backpack, that is.
Alas,
No cash here, but at least things will look better in the near future.
Yeah, I have to say I’m bored witless waiting for L.A to fall, lainvestorgirl.
I’m in the same boat - looking for an affordable place to buy in the Westside/south SFV.
All I seem to see is houses bering pulled off the market, and less-than-double-digit price reductions.
Even 10%+ reductions still mean that they’re about 250% more expensive than they were in 1999.
Sigh…..