“List Under Comps, Then Prepare For Further Price Cuts”
A California report from Dataquick. “Bay Area home prices fell on a year-over-year basis for the first time in more than four years last month. Sales were at their lowest level in five years, a real estate information service reported. The median price paid for a home in the nine-county Bay Area was $611,000 in September. That was down from $620,000 for the month before, and down from $616,000 for September last year, according to DataQuick.”
“‘The last time prices dropped in the Bay Area was after the dotcom bust. ‘It simply looks like the real estate market’s momentum last year and earlier this year pushed prices beyond their equilibrium point and the market is reestablishing its balance,’ said Marshall Prentice, DataQuick president.”
“A total of 7,907 new and resale houses and condos were sold in the region last month. That was down 13.4 percent from 9,128 for August, and down 29.4 percent from 11,205 for September last year.”
The San Francisco Chronicle. “A build up of inventory and an increase in the supply of low-priced condos in the East Bay dragged down prices, said John Karevoll, an analyst at DataQuick. The price of new homes fell 12.3 percent in September, which pulled down the Bay Area median.”
“‘It doesn’t mean that they’ve lost value, it means that there’s a bunch of cheap stuff selling,’ Karevoll said.”
The Sacramento Bee. “Three months after Sacramento, Placer and San Diego counties topped California for falling home prices, the malaise has spread across the entire capital region and parts of the Bay Area and Southern California, new September sales figures show.”
“All eight Sacramento-area counties reported lower median sales prices in September than September 2005, according to DataQuick. September marked the first time El Dorado County joined the list.”
“The dips were especially pronounced in Placer County, where prices of all new and existing homes and condominiums were 14.3 percent lower than September 2005. Median prices were down 12.2 percent in Yolo County and 7 percent lower in Sacramento County.”
“That means many people who bought houses during the summer and early fall of 2005, the last months of the region’s unprecedented five-year housing boom, own homes that at the moment are worth less than they paid for them.”
“September sales activity also spread the phenomenon for the first time to a majority of Bay Area counties and to Ventura County in Southern California.”
The Press Democrat. “Sonoma County home sales hit a 10-year low in September and the median price declined for a third consecutive month. Homes are taking longer to sell and price cuts are accelerating, with the median dropping to $567,500 in September, a 7.7 percent decline from a year ago. It was the first three-month price drop in 12 years.”
“More buyers are continuing to wait for the market to hit bottom, frustrating sellers who must increasingly compete for offers. ‘It’s a tough market, no doubt about it,’ said Sandy Geary, broker in Rohnert Park.”
“The supply of homes for sale continues to exceed demand. There were 2,516 homes on the market at the end of September, up from 1,487 a year ago. ‘The higher the inventory the better the deal you’re going to get. There’s good deals out there,’ Geary said.”
“Prices are $80,000 to $100,000 below last year’s prices, Geary said. Sellers should list their homes under the most recent sale price for a comparable home, she said. ‘I’m telling my clients that if you want your house sold, you need to be in front of the market,’ Geary said.”
“Then be prepared for buyers to seek further price cuts. ‘And the buyers are still going to come in and ask for concessions,’ Geary said. ‘You have to be honest with your clients about what’s really going on.’”
“Prices have fallen the most in Windsor, the Cotati-Rohnert Park area and west Petaluma. The greatest increases in inventory, by percent, were in Petaluma, northwest Santa Rosa and Cotati-Rohnert Park.”
“Buyers don’t want to pay more than a home might be worth a month or two later. ‘The buyers don’t want to overpay, and that’s understandable,’ said Rick Laws, Santa Rosa manager for Coldwell Banker.”
‘Julia Ross and Kelly Edwards, agents in Carmel, offered a new Maserati to anyone who would buy a house listed for $4.3 million near Salinas. The house, with about 6,000 square feet of living space plus a pool house and aquatic center on 15 acres, had been on the market since February.
When no buyers came forward, the agents dropped the Maserati offer and tried another tactic — a ‘no-haggle weekend,’ during which they dropped the price to $3,950,000. The Salinas house did not sell and is still listed at $3,950,000.’
“I think people are waiting to see where the bottom is,’ Edwards said.’
‘ It could take years for the wobbly housing market in the Bay Area and the rest of the country to regain its footing, but full-scale declines in the price of homes seem less likely, a top Federal Reserve official said Monday. Yellen did not entirely discard an actual retreat in housing values in the Bay Area and elsewhere. ‘There is a possibility that house prices could fall,’ Yellen said. ‘Given how much they have risen in California and the Bay Area, I could not rule that out.’
‘At least six Sacramento-area homeowners who hired auctioneers to sell their houses are in escrow today after a dramatic live Sunday auction that also proved unable to sell six other homes. Some bids were $100,000 under previous asking prices, reflecting the growing power of buyers in a market that sellers controlled for years.’
‘That does not surprise me. When the market softens, all the bottom feeders come out,’ said Howell Ellerman, professor of real estate and business at Folsom Lake College. In the hotel conference room late Sunday afternoon, sellers and their families sat tensely, whispered nervously, held hands over their mouths and sometimes shook their heads no as real estate agents probed them to consider flexibility in their minimum prices.’
‘There were no emotional bidding wars to make sellers’ dreams of miracles come true. ‘I’m in escrow,” Patrick Maloney of Sacramento said Monday. ‘It was less than I wanted, but some things are more important than money in this life. Another house that sold had a high bid of $435,000, $100,000 below its listing price.’
they STILL overpaid in these auctions if they paid 330-340 in Sacramento…
Yes they did over pay at the auction. I have feeling the auctions will get tighter as the home owners get more desperate.
At least six Sacramento-area homeowners who hired auctioneers to sell their houses are in escrow today
open escrow is not a sale. Lets see the drop out rate, from buyer’s remorse. It ain’t over till it’s over. Yogi, the Bear
First, I’m happy to see auctions doing what they’re supposed to do: they are driving the transaction price down to the true “market price.” Judging from my coworkers, many still believe that the market isn’t going to correct more than 10%… And I work with people who can do math!
But I must also agree with david cee. I’m anoyed by the term “sale” when escrow is entered. Its not a sale and the drop out rate is getting pretty high here in California. I would be suprised if none of those auction homes didn’t drop out of escrow. But I would also be suprised if more than 3 did too.
Neil
‘That does not surprise me. When the market softens, all the bottom feeders come out,’ said Howell Ellerman, professor of real estate and business at Folsom Lake College.
What? This guy must be a realestate agent in his spare time.
Obviously a leading academic at a nationally ranked institution of higher education.
“professor of real estate and business at Folsom Lake College” AKA: Librarian/Guard at Folsom State Penitentiary
unless you’re teaching real property in law school, or you’re a geologist, you shouldn’t be calling yourself a “professor of real estate.”
You have a “soft market” yet it brings out “BOTTOM feeders”?
If this isn’t selfcontradictory I don’t know what is; how is something merely “soft” yet fallen to the bottom?
Is everyone involved in real estate an idiot?
BOTTOM feeder = anyone who works for the REIC
‘I’m telling my clients that if you want your house sold, you need to be in front of the market,’ Geary said.”
And I’m tell the last few morons I can find:
“There’s never been a BETTER time to BUY!”
obviously, this is a rhetorical question!
“Is everyone involved in real estate an idiot?”
With a very few exceptions, yes.
‘When the market softens, all the bottom feeders come out’
I know at least one ‘bottom feeder’ who is nowhere near coming out. Perhaps in 2 years I’ll start looking around, but only after the sellers become hopelessly desperate. This process takes time, a LOT of time. And there will be a long succession of foolhardy optimist to call the ‘bottom’ along the way.
The worst purchase I ever made was in 1989. I listened to the “experts” and ended up buying at the peak and paid dearly for that mistake. But this financial disaster turned out to be a powerful learning experience — I learned to ignore the “experts”. Six years later, I made my best purchase.
I wish Bill’s blog were arround in 1989. Oh well, live and learn.
I hear you. I bought in nov 89. Wasn’t truly at break even (when you consider sales costs) till 2001. But they learned me good, they did, Soes this time I knews what was a commin……. I sold it August, 2005…
Same here.
- “‘It doesn’t mean that they’ve lost value, it means that there’s a bunch of cheap stuff selling,’ Karevoll said.”
WTF!
I know, that was my reaction too when I read that statement. It’s just a flat out bold faced lie. Thank god we know better here on this blog.
yep yhe samre folks that told this real estate bears, that housing “never goes down” are now demanding listings BELOW the comp prices…………While the few buyers left in the market to buy are disparaged as “bottom feeders”…i.e. carp!
Would some one tell the nut job that those bottom feeders are ..leftover homeowner wanta bees. closed out by their pocketbooks!
No self respecting bottom feeder would be attempting to catch a falling knife at cliff’s edge, while affordability remains impossible for all 85% of wanna be & cuerrent home/ debt owners.
I’m a bottom feeder and proud of it.
50% off. Oh yeah, I’m a bottom feeder. Make that 70%.
Timeeeeeeeeeeeeeeeee is on my side….yes it isssssssssssss. Thanks Mick.
this bottomfeeder will wait a couple more years.this is just getting fun to watch.
I am happy to wait a couple more years. And if prices are not to my liking then, I will wait a few more. In fact, I could wait 10, or 20. Heck, I don’t HAVE to buy a house ever again. While renting is not the greatest thing in the world, it sure beats mortgaging my future for some grossly overpriced POS.
‘That does not surprise me. When the market softens, all the bottom feeders come out,’
When the market softens, all the greater fools disappear.
This market got soft when the supply of GFs ran out - exhaustion. It took a lot this time as even the border-line GFs got flushed out with the absurd financing conditions. This may be the most pronounced & prolonged RE downturn in American history.
Thankfully, I know exactly what is playing out in the market right now. I have had much experience with the laws governing sales, even though my involvement in the housing market is Nil. I bought a condo very near the bottom in ‘98, and I’m flush enough that I could pay off my mortgage if I needed to.
Getting back to my point, I understand the workings of supply and demand. For the past several years, I’ve been a ticket broker on EBay. I’ve had many profitable ticket sales, but it’s the losses which are most important in this comparison.
It doesn’t matter to a buyer on EBay whether a seller is asking for face value or above, it only matters what the “market will bear.” If there are people selling for 10% below face, and you’re asking for face, then your tickets WILL NOT SELL. Further, if you’re trying to unload tickets to a concert/game that nobody wants to see, Nobody is going to bid on your tickets.
The only way to combat this is to lower prices until the tickets sell. The sellers who refuse to do that, either eat their tickets, or perhaps end up reluctantly going to the show instead of getting the money they had hoped for.
In these scenarios, it’s like trying to catch a falling knife. Take the Rolling Stones for example. Their top ticket price was $375/ticket. There are auctions out there for certain less popular shows, where people purchased these tickets in hopes of selling for a profit, and refuse to lower their price beneath their significant cost. The reality is, nobody is going to pay that for the tickets, so unless they accept this, and take the sizable loss, they’re going to be stuck with pieces of paper worth less than the paper itself is worth, once the show passes.
Same holds true for these home sellers that are expecting ‘05 prices for their ‘06 lemons.
Good points. In a market of free trading assets, if it isn’t selling you have to lower the price to create demand. There just isn’t much or any demand at the higher price. Sellers listen up!
Also, it only tends to get worse as time passes. There were many a time over the years, where I was greedy, and asked too high a starting price, while sellers who took a little profit and got close to face value, sold their tickets. By the time I began lowering prices, the market had fallen, and I was unable to get the brea even prices the more cautious sellers had gotten only days earlier.
Then it became a matter of catching up to the dropping prices. I liken it to WalMart and their “falling prices.” I could visualize the numbers falling off the sign as I lowered the auction price more and more to get someone interested in placing a bid.
Greed gets replaced with Pride, which eventually gets replaced with Desperation. The sellers still trying to get last year’s prices are NAIVE if they think that by maintaining current level, their houses have even a 1% chance of selling. It ain’t gonna happen, and they’re only going down further while these IDIOTS are waiting with their overpriced home on the market.
- “Greed gets replaced with Pride, which eventually gets replaced with Desperation. The sellers still trying ….. to have their imaginary dream price manifest itself”
My Father in Law was an aviation artist who always put a price on his paintings at ‘His’ percieved value. Guess what, only after his passing on are the last of the art being sold. However, many pieces sold for many thousands of dollars to his credit and skill.
It’s the 5 stages of grief. Denial, anger, bargaining, depression, and acceptance. We’ve got an awful lot of denial going on out there at the moment.
http://en.wikipedia.org/wiki/Elisabeth_Kubler-Ross_%28five_stages_of_grief%29_-
Yes indeed. Same thing on the floor of the exchanges. I once met a trader at the Chicago Board of trade who had been down there for over 25 years. His sage advice to me was “never be afraid to look like an idiot. If your in a trade and the market is going against you, offer below the bid or bid above the offer and get out. Make sure you’re the first one out the door.” I’ve never forgotten that. So how does this apply to home sellers? Well if the market in a given house in ‘05 was say 500K, and a sale goes of at 450K in ‘06, most sellers will assume thats the new market and lower their price to match expecting 450K. The trend has turned however, and until the bottom is reached (which nobody knows for sure) the expectation will be for continued lower prices. If they truly want to sell they should offer below 450K. Of course it seems ridiculous to equate selling homes with flipping futures contracts or stocks, but isn’t that what this has become? The past 4 years has looked like a game of housing futures to me. Put down a small downpayment and control an asset worth 20x that, with the hope you can grab a quick profit. The big difference though is in the carrying costs and the fact that the market is much less liquid than the financials. Throw in the fact that most of the players lack any experience in speculation and you have what amounts to impending disaster.
- ‘ The past 4 years has looked like a game of housing futures to me. Put down a small down payment and control an asset …’
Well put. As in trading you must be able to ‘Pull the Trigger’ and EXIT the position. I think that rookie ‘house traders’ fail to realize how hard it can be to exit something as illiquid as property.
These owners have been drunken by the media maddness of never endding appreciation and riches.
Offering under the bid is the ONLY way to get out in a fast market sometimes. I’ve gotten caught in 50-60 point intraday downdrafts before (in 1999 and 2000 when a lot of stocks were over 200/share) and the only way to get out was to hit the island bid under the inside, whatever that was.
Yes, and although in housing we don’t have fast market conditions (at least right now), what we do have is a lack of liquidity. Anybody who truly needs to sell needs to lower the offer below where the last sale took place and should expect to transact somewhere below that. I suspect that quite a few of the housing speculators out there are truly unprepared for how large a loss they are potentially facing if they don’t act quickly. Some who bought early but are still holding may still walk away with a gain, others who bought late may be completely wiped out financially.
Very few people can sell a house that they bought for $500K for even $490K. They would have to come up with $10K at closing plus $30K for the Real Estate Agent’s fee, and they have no liquid assets. Just a $500K house with a mortgage they can’t afford and $700 in the checking account. That is the whole rub here - people CAN’T lower prices. Either they get their price, or they pull it off the market and slog through the payments, or they send jingle mail to the bank. Lowering prices isn’t feasible for 90% of Americans!
90% of Americans? I call bull on that one. Of the people I personally know who own homes 90% of them could absolutely lower the price and be just fine. I cannot even come close to believing that 90% of Americans are that hosed.
The new prices will be set by the owners with plenty of equity, who don’t need the money, and are willing to live with the smaller gains, or no gains at all.
This is how the smart money works. The people with the least amount of need for the money, always come out on top.
he meant to post “90% of buyers in the last 3 years.” and “100% of buyers in the last 2 years.”
The new prices will be set by the owners with plenty of equity,
And they will be set by the owners with negative equity and payments of 2x rent. Who will walk.
I agree that prices will be set by the owners who actually have a lot of equity, and as they watch prices drop, they will start jumping on the bandwagon to try and sell and get out with something before it is too late. This will continue to drive prices down as the only way they will be able to sell is to undercut current comps. I know of nice neighborhoods in San Diego country where nice 3/2.5 starter homes were selling at 200K in the spring of 2000. Many of those same houses were up to 600K+ in the summer of 2004. A lot of the original owners still live in them and have LOTS of equity left, even with 30% haircuts off latest asking prices. Out of people that bought in the last 5 years there will be about 1/3 who can afford to live upside down in their houses for many years until prices return to what they paid, about 1/3 that simply can’t afford it and either short sell or foreclose, and the other 1/3 who bought early enough in the run-up to sell at a profit even as the market drops.
‘That does not surprise me. When the market softens, all the bottom feeders come out,’ said Howell Ellerman, professor of real estate and business at Folsom Lake College.
Oh no, Mr. Ellerman. Trust me, the real bottom feeders are still dormant in their lairs, just monitoring the situation. You’ll see us emerge sometime next year, when the panic selling is well underway. See you then, Professor!
Yea, sammy’s waiting under his rock. By the stream where the homeless people live in Ventura…..
You mean Sammy’s waiting in his RENTED MANSION in the most exclusive neighborhood in Ventura. He’s trying to decide where to invest all that dough he’s saving by “not throwing his money way” on an underwater neg-am mortgage. He is in no hurry, being heavily subsized by the mortgage “owner”, who is recouping barely 1/3 of his monthly carrying costs.
My comment was a reparteé to an earlier thread…….I’m sure he situation is as you say……
Next year?
Bottom feeders?
Bottoom feeders, maybe by 2010 to 2012. But then again, maybe not.
Occasionally such as a catfish may spot a juicy morsel falling into the abyss and manage to raise himself slightly off the bottom to grab it, denying his comrades.
$4.3 million near Salinas. I found it on Google Earth midway between Salinas and Monterey. Nice house and all, but..
It’s in a long way from anywhere. Monterey and Salinas just don’t have a lot of jobs to support that level of house price, and there’s a lot of houses in the region nearly as nice. It has a large land area, but I’d bet it’s too steep to subdivide and build on.
Second, if you’re not going to be close to a “big city” like Monterey anyway, why not live a few more miles out where there’s an infinite amount of available land for cheap? Oh wait, there not making any more land something something something.
Salinas is one of the if not the most expensive cities based median home prices to median incomes.
Nearby Montery hasn’t any high paying jobs - too many people want to live in the area.
Good paying jobs are north in San Jose over a rough stretch of 101 called Blood Alley.
For the record, the stretch of Hwy 101 formally known as Blood Alley is now ‘just’ Monterey Rd. A safer bypass was built several years ago. “Good” paying jobs in Silicon Valley/San Jose? Yeah right, there are far more people than ‘good’ (high) paying jobs. Does anyone really think that the average Joe & Jane in the valley can buy the average home here? Let’s see the median income is around 68K, not nearly enough to buy the median priced home at about 730K. Monterey Co. is “worse” at 45K median income and 660K median home price… Any way you do the math, it’s unaffordable and WAY out of whack.
I lived in Monterey from 2002-04 and I can say the prices were extremely high and have been for quite some time. THe people who work there are not the ones who own homes for the most part. It is the extremely wealthy who own there!! Monterey has been hit by the bubble as much as any other CA city but there has been a primium on property for decades!! I would go back in a heatbeat if I could afford anything but a 1000 square foot place, on a postage stamp yard that hasn’t been updated since the 60’s. Best place I have ever lived hands down!!!
“A total of 7,907 new and resale houses and condos were sold in the region last month. That was down 13.4 percent from 9,128 for August, and down 29.4 percent from 11,205 for September last year.”
people are still buying. who are these idiots who are still buying? don’t they know to wait few months. help me out here people. what’s going on?
what’s
In Los Angeles the people who are still buying are at the socio-economic extremes: the uber wealthy or lower income familes. Many latinos, african americans and koreans are still purchasing…. seems they couldn’t care less what the market is doing. They just want to own a home, period. Latinos in particular are avidly house hunting, teaming up with 1-3 other families to buy a house and lenders are falling over themselves to get their business (some lenders don’t even require having a bank account….. mattress money is fine).
At the other end of the spectrum the super wealthy might haggle a little over the asking price but price is not such a significant issue to them.
The market for the middle income bracket has screeched to a halt. They are just freaking out about their ARM resets or the amount of equity they have lost due to negative amortization and the lates lowball comp.
Salinas and Santa Rosa are book ends of the Bay Area. Both are off 101 and have been ranked in the top 5 over-valued house markets as measured by median income. They will fall first.
‘That does not surprise me. When the market softens, all the bottom feeders come out,’
Apparently you’re a top-feeder if you do a bottom-feeder thing like take on enormous amounts of debt on an interest-only loan.
Only realtors could define a universe with record inventory and plunging sales as “normal” and in “equilibrium”.
The REIC knows know bounds when it comes subterfuge, spin and deflection.
Let’s Do the Time Warp Again!
http://dallas.craigslist.org/rfs/221912353.html
$206,068.80 YOUR CONDO IS WORTH AFTER 1ST YEAR BASED ON 12% APPRECIATION
$230,797.06 YOUR CONDO IS WORTH AFTER 2ND YEAR BASED ON 12% APPRECIATION
$258,492.70 YOUR CONDO IS WORTH AFTER 3RD YEAR BASED ON 12% APPRECIATION
12% appreciation!!!!! LOL!!!!! Sucka!
$110,400 YOUR CONDO IS WORTH AFTER 1ST YEAR BASED ON 40% Negative APPRECIATION
$100,400 is what the condo is worth, but no one is willing to pay for yours….Please deduct 4-9 months carry charges in interest taxes and oh yes depreciation.
Dammit Janet (Yellen)
does anyone have the link to the site from CAR that breaks down sales and median prices by SFR and condos and by zip code? Someone posted it here once and my stupid self forgot to bookmark it.
thanks.
i found it. it’s the dataquick la times zip code chart that i am looking for. i can’t get it to load on my computer however. if there is a kind soul out there who has it or who can get it and post it here i will be eternally grateful
http://www.dqnews.com/ZIPLAT.shtm
Hope this link works: this is the sept Dataquick zip chart for La county, which just came out today.
Actually it may be for all SCal counties.
Was able to link up to Sept Dataqick via self-test.
There are I believe 270 LA Zips, and 78 of them showed YOY Declines(28% of La zips in negative yoy.
Found a possible glich in the data: The extremely insignificant tiny way-out in the desert boonie town/region of LLANO(east of Palmdale) listed two homes sold for $383.000, a 1440 % yoy increase according to dataquick. Could Any one good in math figure out if this could screw the YOy percentages.
Has anyone else seen this on the LA Sept Dta quick Chart.
Yeah, statistics are meaningless with such a small sample size. My zip code, Westlake Village, 91361 showed exactly 1 sale in Sept after 7 sales in August. I know I inhabit a very small corner of the world but this bears out my perception that sales really fell off a cliff in Aug-Sept and the Sept-Oct data that comes out in November is really going to push this whole thing over the edge shortly after the election. Of course, that means the rethugs will blame the democrats for the housing bubble implosion…
The dq page still won’t load on my computer and I am looking for the numbers for Ventura County as well, Simi Valley primarily. Could you copy and post those on this thread please?
Much obliged.
Bell Canyon 91307 2 $1,600 -18.8% n/a n/a n/a $381
Camarillo 93010 36 $637 -3.8% 7 $406 -11.3% $376
Camarillo 93012 23 $729 3.4% 17 $390 -16.8% $381
Fillmore 93015 12 $465 -19.8% 1 $370 12.1% $348
Moorpark 93021 34 $600 -7.1% 9 $395 -7.7% $330
Newbury Park 91320 32 $814 7.3% 10 $442 5.0% $344
Oak Park 91377 11 $849 11.0% 4 $594 34.9% $369
Oak View 93022 7 $573 -10.4% n/a n/a n/a $424
Ojai 93023 18 $643 7.1% n/a n/a n/a $501
Oxnard 93030 23 $635 -3.7% 6 $589 24.3% $355
Oxnard 93033 38 $580 4.7% 5 $389 3.7% $446
Oxnard 93035 25 $835 34.7% 9 $440 -23.5% $456
Oxnard 93036 26 $665 3.3% 4 $390 -6.9% $340
Piru 93040 n/a n/a n/a n/a n/a n/a n/a
Port Hueneme 93041 10 $500 -12.3% 24 $370 2.6% $447
Santa Paula 93060 16 $496 -10.7% 4 $347 15.8% $431
Simi Valley 93063 53 $579 -3.5% 22 $410 0.5% $345
Simi Valley 93065 74 $584 -2.6% 22 $405 1.4% $334
Somis 93066 1 $630 6.8% n/a n/a n/a $351
Thousand Oaks 91360 38 $690 1.5% 8 $460 -5.2% $383
Thousand Oaks 91362 28 $984 18.3% 17 $675 21.6% $371
Ventura 93001 18 $715 10.4% 4 $395 -9.8% $636
Ventura 93003 27 $585 -13.9% 18 $379 -6.7% $434
Ventura 93004 28 $601 -4.3% 2 $440 -8.7% $380
Westlake Village 91361 10 $925 -30.9% 7 $437 -30.5%
“Do you even listen to yourself talking?”
“Eh, I drift in and out.”
Yellen - Bernanke’s inflation apologist queen. I think today’s PPI core number will shut her up. Definitely not going to lower interest rates in the next 12 months, and at least on 0.25 increase just to show that Heliben means inflation-fighting business.
It’s astounding, time is fleeting
Madness takes its toll
But listen closely
Not for very much longer
I’ve got to keep control
Real estate agents,
It’s all over
Your mission is a failure,
your lifestyle’s too extreme.
“Make you Money give you a 512% Return!!!!”
I’m always persuaded by people who can’t even spell a headline correctly. Me lose Money? That’s unpossible!
And this is a ReMax agent — her link is in the ad.
ahhh ralph wiggum, alive and kicking.
thanks for the laugh betamax
Not to mention all those GOD-AWFUL capitals in the CL ad - it’s like the agent is screaming at you to make money. RUN!
That’s worthy, tx.
I say: “Let’s Do the Time Warp Again!”
The San Francisco Chronicle. “A build up of inventory and an increase in the supply of low-priced condos in the East Bay dragged down prices, said John Karevoll, an analyst at DataQuick. The price of new homes fell 12.3 percent in September, which pulled down the Bay Area median.”
“‘It doesn’t mean that they’ve lost value, it means that there’s a bunch of cheap stuff selling,’ Karevoll said.”
Isn’t there some indicator that compares apples to apples? What good is it to say the median price is declining, when housing bears just use this to claim buyers are getting more house for their money, while brokers claim that the decline is due to greater numbers of cheap condos.
“Isn’t there some indicator that compares apples to apples?”
CSW index — used to compute the OFHEO housing price index #s.
S&P Case-Schiller indices (which the CME real estate futures are based on) compute the change in value of the same properties selling every few years, without improvements. But they’re on a 3-month delay. Out last Tuesday of every month. Check out http://www.macromarkets.com for more info.
I would like to see an indicator strictly for the typical California ranch style sh!t box: 3 bed, 2 bath, 1700 SF, 6-7000 lot, zip code by zip code.
” would like to see an indicator strictly for the typical California ranch style sh!t box: 3 bed, 2 bath, 1700 SF, 6-7000 lot, zip code by zip code. ”
These type of homes are fairly typical post WWII built stucco units. Downey consists of almost nothing but these size homes and lots. East Long beach, Torrance, lakewood, pico Rivera, Garden grove, westminister,San Fernando valley,Burbank,Van Nuys,ect. are virtually endless seas of these types of homes. The suburbs where these homes are located seem to be located about 20-30 miles from the center of Los Angeles in the second older outer ring of burbs going up just after WWII and up to the 50’s and 60’s. Seen the latest Sept LA Data quick prices for these areas, and it looks like they are showing barely positive or negative YOY. These are the in-between zones of LA, neither really posh nor seriously declining, as the innor LA ring cities are. As of now the average prices for these units range between $550,000 and $700,000 depending any no of reasons.
After arriving in the LA in 1988, first thing we said was NFW were we paying a quarter-mil for one of those. The idea that anyone could consider these little POS places worth a half-mil or more is un-frickin-believable.
A friend has one on the market Palms area 840k….
FYI: CSW = Case-Shiller-Weiss
Sorry, didn’t make the connection.
I’ve been thinking about the median. It seems to be useful for tracking general direction, but isn’t as helpful when a market makes a major transition. It could be that existing home prices are down 12%.
How about a price per sq foot measurement, Dataquick?
They have this as well - on the dataquick page, click on the Chronicle Chart link to get $/sq. ft. by zip code. Historical info is not free, though, and you get a sample of only what sold the previous month. So if some moron overpaid $1,500/sq. ft. for a condo, the average is skewed.
The newspapers, dqnews collects the data for, sometimes have archives. Here is Sacramento bees archive
http://dwb.sacbee.com/content/homes/re_news/story/13112695p-13957141c.html
I had always hoped for price per square foot as a published measurement, assuming they would use air-conditioned square feet (excluding basement, garage, etc.). In areas where basements are common, it is very difficult to guesstimate replacement building cost, for example, from ads in realtor.com because at best they give you gross square feet and sometimes no size at all.
excellent point. using the change in price per square foot (from the la times zip chart) on the home i was briefly in escrow in january 2006 (2300 sq. feet), i would have lost $248,000 by now. phewwwww!!
The problem with using price/sf is that in places like So Cal, the premium is in the lot.
You can have a McMansion @ 4K SF at $300/SF with a small lot and HOA/Mello Roos. A couple of blocks away, you might find an 1100 SF house built in 1947 (never updated) on a half-acre lot with a pool. This one might be priced at $800/sf. because of the lot. People tend to pay for the land & neighborhood in CA, not the house.
Now, if there was a way to follow same-house sales and/or comparables with model matches from the same development, that would be very useful.
“‘It doesn’t mean that they’ve lost value, it means that there’s a bunch of cheap stuff selling,’ Karevoll said.”
“I.e., the median, upon which we base 99% of our data anlysis, is worthless and shouldn’t be relied on. But please keep buying our reports.”
and what was Karevoli saying when the median price was rising?
“The market is increasing, its just the median price is distorted by disproportionate sales of bigger houses”.
I’ll bet he said that….suuuurrrre.
This all about no RE having no oversight from FTC or self regulating body.
Its the wild west… shot off your mouth market.
They can say anything do as much cheating and get away with it.
In this case, the temporary flush of low cost condos in the east bay will be a temporary drop and so median prices will recover. Obviously sales are slowing.
It brings up a point that with skyhigh prices, builders will focus on the lower end of the market to get FB. Maybe median sales will be depressed with this switch in focus in this particular area BUT that means home resale prices should hold firm. If they don’t, that unspinable fact will be in the papers for sure.
It does mean that houses have lost value, because this is the metric that we all live by, good or bad.
Wealth destruction is picking up momentum, and further wealth destruction will continue. Can anyone calculate the wealth destruction that has already occurred, and can anyone actually say the words, Wealth Destruction?
“‘It doesn’t mean that they’ve lost value, it means that there’s a bunch of cheap stuff selling,’ Karevoll said.”
Inventory buildup = there are no buyers willing to pay what the sellers are asking, because the wishing prices are above the market value. It is theoretically possible for this to happen without loss of market value, if sellers get so greed-crazed that they keep pushing their wishing prices beyond the point where the buyers have collectively shouted “no maz.”
However, a more likely interpretation of a sudden inventory buildup is that the market value of the homes have dropped and sellers have not caught on. YOY drops already reported for smaller areas (which represent less variation in quality) support this interpretation.
What does Karevoll have to say to this kind of anecdotal information from agents?
“Prices are $80,000 to $100,000 below last year’s prices, Geary said. Sellers should list their homes under the most recent sale price for a comparable home, she said. ‘I’m telling my clients that if you want your house sold, you need to be in front of the market,’ Geary said.”
Or does he simply choose to ignore these “data points?”
The guy is right! Just like during the last 5 years, though median prices increased through the roof, it doesn’t mean that houses increased in value…it just means that there’s a bunch of very expensive houses selling. Riiiiight. Funny how things only work in the direction realtors want them to.
Let me assure all of you that there is no bubble in the Bay Area. Look at these GREAT VALUES:
http://sfbay.craigslist.org/sfc/rfs/221984135.html
http://sfbay.craigslist.org/sfc/rfs/221875121.html
WIthout question, those have to be two of the ugliest homes in SF!
1.I thought this was 165000 - and still thought it was overpriced. Looks like a dentist’s office and that red carpet is hideous.
2. It reminds me of a cross between the Playskool castle toy and the Excalibur in Vegas. It is truly horrible.
My vote? Both need to be bulldozed - and then plant a tree.
Does the price of the second one include a minture golf course in the price?
I expect the seller to look like the current Burger King pitch man.
OK, so you guys are obviously not into the $1 million and over properties. Let me show you some of our starter homes:
http://sfbay.craigslist.org/sfc/rfs/221446802.html
http://sfbay.craigslist.org/sfc/rfs/220268821.html
http://sfbay.craigslist.org/sfc/rfs/222028069.html
Remember, if you don’t buy now, you’ll be priced out FOREVER!!!
Most people don’t think 1960s when they think of old world charm.
It’s damn sad that anyone would even think of buying much less living in that kind of crap for those numbers. I guess I will never get it.
SFer — LOL — that first listing in “under $1M” is the godawful-ugliest thing, house or other, I’ve ever seen that is described as “beautiful.” In fact, it is almost the dictionary photo for s***box, IMO.
And the third listing - the neighboring homes (apts?) on either side look like they are trying to encapsulate it and make it disappear. Notice how both of them are the same blue color? Wouldn’t be surprised if the “for sale” house was owned by the only old codger /codgerette on the street that wouldn’t sell in a block of new places.
Soon they’ll be selling the cells as condos in the “up and coming Alcatraz District”
Chip said:
“SFer — LOL — that first listing in “under $1M” is the godawful-ugliest thing, house or other, I’ve ever seen that is described as “beautiful.” In fact, it is almost the dictionary photo for s***box, IMO.”
*******
Another thing, for you who don’t live around here… is that there are hundreds of thousands of houses in/around SF that look just like that. Hundreds of thousands.
A shoebox sh**box.
I’ve crapped prettier things.
dd
That Bayview “crib” brings back the memories! I had a Bayview repo, a 1977 cadillac seville, but it was never seen at the address. About two blocks away was a totally stripped shell of a car in the street (nice neighborhood) with kids playing in/on it; I passed it every day for a week. Finally, I stopped to look at the VIN, and low and behold it was my repo! Since the buyer was a flake, and they lived in a redlined zip code the vehicle was sold with insurance rolled into the loan, so the stripped shell was loaded on to a flatbed wrecker, and the lender happily closed-out their books.
Stock the refrigerator with Sliders. It looks like a White Castle.
That said, nice location and views.
GetStucco,
And can you believe that classy statement? I’m sure all of the poor schmucks that bought that “cheap stuff” from his realtors feel very much reassured by his kind comments! What an a$$. Of all the bozos on this bus I’m enjoying John Karevoll and Marshall P. squirm the most! They were even more arrogant than Leslie/Gary/DL (if that’s possible).
Can people be sued for all the price gouging that’s been going on in home prices over the past 3 years?
‘It was less than I wanted, but some things are more important than money in this life.
Funny, you would have never guessed that from the feeding frenzy of the past 5 years.
Yeah, like getting out from under the PIM Ins & assoc fees ahead of the upcoming meltdown. Let some other sucker ride it down another 40%+.
Moey isn’t important my A$$.
Yeah, that one kind of jumped out at me too! If……. there are things more important in this life than money then perhaps you should have donated it! WTF kind of gobbledy gook is this? Oh I get it! Perhaps Mr. Mahoney means “more important than losing EVEN MORE $$$!” Where is he going with THAT? These people have gone absolutely batsh@t! Only too happy to see them take in the shorts.
It’s like reading the Yahoo boards when a stock wipes out, like Elan from 28 to 3 in a couple of days. Suddenly everyone on the board discovers God and their appreciation for their “lovely wife and family.” LOL, I hate to be so cynical but when I get whacked like that, the only appreciation I have is for my handy 20 lb. trout so I can bitch slap anyone who dares to speak to me
Funny, but I just envisioned Monty Python’s ‘fish-slapping dance’. The first guy (with the little fishes) was the sellers smacking the buyers around. The second guy (with the big fish) is the buyers smacking the sellers. Hard.
It made me smile…
Or when the over priced homeowner says I was just testing the market, and if I can’t get my price…I won’t sell.
This is truly a losers mindset
They are bluffing, and will be spending many sleepless nights waiting for a sucker
“It’s like reading the Yahoo boards when a stock wipes out, like Elan from 28 to 3 in a couple of days. Suddenly everyone on the board discovers God and their appreciation for their “lovely wife and family.” LOL, I hate to be so cynical but when I get whacked like that, the only appreciation I have is for my handy 20 lb. trout so I can bitch slap anyone who dares to speak to me :)”
I nominate this as one of the funniest freakin’ posts of all-time!
Haven’t shot that much liquid outta my face since I ran into a light pole, drunk on New Year’s Eve!
(’cept that was blood.)
txchick, question for you. I know your stance that the bubble is just as big in Texas as elsewhere but do you believe things in Dallas/Plano/Richardson areas are also prone to double-digit drops over the next few years? If so, why? Just thought I’d pick your brain a bit. Thanks.
Yes, I do, for several reasons
the credit quality is horrible in Dallas, well below the national averages (pretty sure about this)
the allowance by the TX legislature of home equity lending in 1998 just opened the floodgates for these chronic debtors/spenders to leverage up their houses and spend more. they could not do that before. they’ll be the distress sellers of the future
Plano and Richardson were never much to begin with but got absolutely wiped out by the telecom bust in 2000 and beyond. The east side of Central Expressway has become very “ethnic” shall we say in both of those places.
I have quite a bit of experience with bankruptcies in the Eastern District (Plano Division). People out there make living beyond your means an art form.
There are far too many houses already and more being built north and east of those places.
The area is extremely vulnerable to any sort of economic downturn/job losses/recession, what have you. A lot of the residents are barely holding on.
You almost cannot sell a house in Collin County unless you practically give it away. The speculators and “investors” from out of state are finding that out.
I wouldn’t pay over a 1994-1995 price for anything out there and even then, I’d only buy if I knew I wasn’t going anywhere for years.
I’ve been doing a lot of research into Dallas lately and have read that a lot of people from Cali are moving to the north of Dallas- especially McKinney. I hope the “equity locusts” don’t cause another mini bubble in N. Texas.
That would not be possible, Brandon. There aren’t enough people in the entire state of California to eat up all those junky properties in Collin County and beyond. Worry not.
Naw, they are looking at San Marcos, according to the SDCIA forums.
Houston has a lot of the same problems as Dallas. Overbuilt in the exurbs, too many buyers with poor credit and a lot of younguns that didnt experience the 80s crash.
Speaking of Texas….I saw Flip this House with the San Antonio boys ‘Montelongo.’ According to them they ‘own’ the market and they are the ‘fastest growing’ flippers around.
My real guess is that these arrogant ass’s are going to have the ‘Hammer’ drop right on there heads.
Sobay…I dislike all the flippers on those shows (I watch all of them just to laugh) and the first episode with the Montelongo’s fit the normal bill (ditsy hot wife making stupid decisions). However, after a few more episodes, I think they are a group of re-habers that actually knows what they are doing. I wouldn’t really call them “flippers” as what the current defination implies. They seem to search for underpriced properties in really distressed areas, buy them at next to nothing, use their crew of contractors that work almost exclusively for them, and then sell them quickly at rationale profit margins. They even do the all the transactions with their own real estate company. I may not like their style (Escaldade, fake tit wives, etc.), but I think they have the formula down to be successfull in any market.
Sellers still aren’t getting it. Yesterday I had a RE Agent put an offer on a house for me. The most resent sale was 405k. DIRECTLY ACROSS THE STREET for the house I liked. The Seller had their house listed for 530k. I offered 350k. (because this house was a fixer) The Seller flat out refused my offer. They didn’t even try to bargin up.
Obviously sellers aren’t hurting enough that they’re willing to sell. Or, They simply can’t sell and intend to get their number or go into foreclosure trying for it.
The owner is also behind on payments.
Also, Also the NEXT DOOR NEIGHBOR of the house that sold for 405 thinks their house is worth 650k. They were having an open house so I stopped by and asked about the house that sold for 405 next door. The agents face went white and he started trying to sell me on his mortgage business.
* True Story
* * Talmadge area of San Diego
The owner is also behind on payments.
Wait a couple of months and buy it from the Bank.
Yea, I’ve got my eye on the property. Something will happen I’m just being patient right now. No need to get worked up about buying a house from people who don’t feel they need to work with you.
Did I mention that the house was vacent? The owner can’t last much longer. It’s just a matter of time.
shadash,
Incredible ain’t it? Freaking arrogance right to the bitter end. I’ll bet his lender would have been open to counter offering! And this is my WHOLE POINT! Why are buyers even having to deal with these clowns! Wether or not this FB realizes it you may have been his last salvation. If it goes into foreclosure Lord only knows what they’ll get out of it? As this scenario progresses I’ve got a feeling the “lenders” will do everything possible to circumvent this and deal “lender direct” just take over the payments and negotiate your price!
I wish I could deal directly with the lender. That makes a lot of sense. The current owner has shown that thay aren’t responsible by being late on payments. I bet if I could deal directly with the lender they’d be much more willing to sell considering the latest comp across the street.
I don’t know what to say in this case. The owner astounded me with the price they are asking. And once again astounded me by not even wanting to negioate my offer.
I bet they come back to you with a counter….after all, you may be the ONLY one to even throw ANY offer to them.
I agree. They will call you during the dark days between Thanksgiving and Christmass. Offer $275.
Any RE agent who gets an extreme lowball offer (I mean, what they consider an extreme lowball) is going to tell the seller that she has an offer that’s not serious, that she’s ashamed to have to call with the offer, blah, blah, blah, but that she is required by law to present the offer. These RE agents have mostly only been around during a time when 2% off listing is considered lowball. If/when they come back to you, start the negotiation below 350 - it will establish who’s in charge. There are more houses coming on/being marked down every day, and it’s not going away anytime soon.
“These RE agents have mostly only been around during a time when 2% off listing is considered lowball. If/when they come back to you, start the negotiation below 350 - it will establish who’s in charge.”
I heartily agree with that. It’s worked well in the past, as documented by posters here, and I believe it will work again as this bust unwinds.
Amazing thing is that bay area and Sonoma prices didn’t really peak until spring of this year (at least according to the OFHEO, which shows prices still going up in Q2 vs. Q1 vs. Q4 ‘05 etc.) - which means that if the median is already 7.7% below this time last year, then in just a few months it’ll easily be 15% below. The bubble pop (excuse me “deflating”) is hitting that area fast and hard.
hi pacman,i’m a loan broker in santa rosa,and the price in santa rosa/sonoma county peaked 8-05,you got a home in much better shape this spring,and a bit larger for the same $.the usual skewing of the median.the quote of $100k off last years price is conservative when looking at actual sales.we are at mid ‘04 prices now,and falling.
I can vouch that in my neck of the woods (East Bay) the peak was also in the summer of ‘05. Comparable houses I’ve had my eye on are selling for less now than a year ago. It pays to be very location-specific when looking at house price trends — all the easier with redfin.com at our disposal for Bay Area ‘hoods(and Zillow nationally — not for the silly “zestimates” but for recent sale price data).
I was panicking in Sept-Oct 2005 for my place to sell in Sonoma County. There was still market momentium, but I felt it was going to be time that dried up. Thankfully, I still got a peak price offer. I was willing to take 4% below recent comp, but the offer was 4% above the comp. The buyers overpaid, and I couldn’t imagine it being able to sell for more than 89% of last sale price today.
My coworker who is down the street claims his model of house with a granny unit is still doing well (read: flatline/not falling) with comps even now. I don’t think he is actually special.
My sister is putting in a bid tonight on a tiny craftsman home in willow glen CA. She said she is worried because there was a flipper there the same time as them mouthing off about all the renovations he was planning on doing and that he would sell it for 1.5 Million next year.
Ha! That guy is delusional. I hope he wins out, and saves your sister from the falling machete. Willow Glen. Some cute older homes with lots of status symbol yuppies, but the name is just a cover-up. It’s still a San Hosebag address! No one should pay these prices to live in such a crappy city.
here’s the kicker, termite damage !!!! Whee !!!
Has her place sold?
Yes, 1st sale fell through when buyer balked. 2nd buyer looks for real, offer accepted last week on thursday and no cold feet yet.
yet…..
I wish , moving from a georgeous new 2000 ft town home to an old cramped cottage makes no sense.
Careful - the “flipper” could have been a plant.
come on…. that would be “dishonest”…
Was he in a grey or black suit? If it was black, then you can trust him.
Mo Money — you’ve posted here for a long, long time, so you clearly had “religion” about the bubble long ago. Apparently, your sister does not look to you for advice about real estate. Nor does mine, and she is younger than I. My sentiment: too bad — I was there for you if you wanted the help, but I’m not going to force it on you.
$4.3 million near Salinas? Isn’t that place like Modesto- just closer to the coast?
Modesto is god awful. Salinas is only slightly better. It’s an agriculture based, e-coli breeding ground. Had a relative that was a paramedic there for a couple of years. Plenty of good trauma experience from all the gang stabbings/shootings. If you can afford a $4.3M house you would be far better off looking for vacant land/custom home out in unincorporated Monterey County.
Salinas cow dung is rife with toxic E Coli. But Modesto probably has more meth production. Choose your poison.
you guys are cracking me up!
hey, at least he got good trauma experience! Ha-ha!
I am re-posting this cause I posted it late last night and I am still shaking my head today. I reiterate WTF
http://austin.craigslist.org/cas/221715586.html
Thats a MAN baby !
That’s not real, is it? Maybe someone is pulling a prank.
Yea, read the text, someone’s doggin her. Probably a wife found these shots. Putting this out for this gals hubby to get directed to…
Everbody…. Flag it: “Best of Craigs List! That way it will go national! This sh#t rocks!
Just did — funny. There’s revenge painted all over that ad.
WTF is right. At first I figured you were a troll until I read the page a second time. What a pathetic person.
Wow - NOW I have see everything. Does her husband like her to post that? She looks like a KMart shopping whore.
is she on the kitchen counter in second pic…?
she is.
what is it with the kitchen countertop as “stage” for biatches cruising the ‘net? My cousin busted her husband, found his stash of jpeg ho’s. And God as my witness, 3 out of 4 were posed on the kitchen counter.
much cheesy lingerie…no granite countertops, though
Well, at least we now know where the bottom is.
LOL
cupcakes, anyone?
ROFLMAO!!!!
BTW, someone in the “bits bucket” thread found another ad from the same chick, but with a different picture (just underwear and not on the kitchen counter). Also, additional text about her being married, etc. Too funny!!!
““‘It doesn’t mean that they’ve lost value, it means that there’s a bunch of cheap stuff selling,’ Karevoll said.””
Yeah, only the “stuff” that is selling counts.
Hey, bubblehead, did it occur to you that the other stuff is over-priced?
Thanks for the laughs.
Jas Jain
AND the ‘cheap stuff’ isn’t really cheap. It’s only less expensive that the obscenely overpriced other stuff.
““I think people are waiting to see where the bottom is,’ Edwards said.”
I bid well under what your asking and as incentive will provide for your (realtor) funeral arrangements.
Evil laugh >>> BAHAHAHAHHAAHHAHAHAHAHAHAH
any link for auction results site ?
tia
I have seen an appraisal use current listings that were under the sales comps and use this as a cap.
This appraisal, done in coastal Los Angeles county: Sales price of townhouse: 555,000. Prior sales from 550,000 to 559,000. Current listings, 2 of them at 542,000, one at 549,000. All sales and listings were of the same model townhouse. Based on listings times and using them as a cap, the Appraised value: 540,000. This was in August……
That sounds like the right way to do it, to me, but I’m surprised that appraisers are holding that line. Good news, in any event.
The underwritting dept actually accepted this? Maybe I misunderstood, under the sales comparison approach the appraiser used listing as comparables?
Is this correct.
let me know.
If so, the appraiser is a lucky bastard and I am green with envy.
Well here you have it from the three wise monkeys…….
http://online.wsj.com/public/article/SB116100680840693865-KaF49km2Dnq8s4uHaaKaKeXBF_I_20061116.html?mod=tff_main_tff_top
Good find! Anyone else getting extremely annoyed by all these “experts”? I am so sick of hearing their “no national market” crap. They then go on to list the northeast, California, Arizona, Vegas, and S. Florida as potential trouble spots. Do they not comprehend how much of the nation’s population and wealth is concentrated in these locations? WTF? I agree with them, there is no true national market. However, as the bubble unwinds in the aforementioned locations, watch out! California is what, the world’s seventh largest economy? All those commentators deserve a serious dose of bit*h slapping from txchick and her 20lb trout. Moronic, shameless shills, every one of them.
All the best lies are hidden within a kernel of truth. They’re absolutely correct when they say there is no national market for houses.
What they hope you’ll miss is that there is a national market for mortgages and MBSes.
In fact, I think its time one of the Canadians or us Northeasters send a Lake Trout over to TxChick. When 20 lbs won’t cut it…
In that article Susan Wachter wrote: “I agree with both Chris and Celia’s points that the impact of the housing slowdown on the overall economy is contained, impacting mostly the housing-related industries.”
Do people never learn? This reasoning is the same crap the CNBC crowd trotted out to explain why the 2000 internet blow-up would be “no big deal”. And now, we have the 2006 housing blow-up with an economic reach that makes the internet fiasco pale in comparison.
Yeah, it’ll be contained! LOL!
Hey-Am I reading this right?
I found this paragraph from the Bloomberg Link Ben provided on an earlier post today.
“If the U.S. population of 300 million is growing at a rate of 1 percent per year, and there are about 2.6 people per household, the base demand for housing is about 1.15 million units. The new-home construction rate was 1.7 million in August. There are roughly 4 million unsold homes on the market today.”
Questions:how do they get the demand statistic or the growth statistic? Are they saying that 1.15 M is the houses we are predicted to need over a year and we built more than that in ONE month? Considering the ‘hidden’ inventory we all know is there– well, I think there are going to be too many houses. No, not like we wanted. Like really, wayy too many houses.
This is so depressing.
I was a bit excited about the overbuilding because it would hasten the crash we are all waiting for. But this run up in inventory is enough to invalidate RE as an investment for the next 30 years.
We may get a house for cheap in 1-5 years, but I don’t think we are going to be able to plan to sell it for more than we bought it- even with 5-10 years holding time.
Reactions?
Hmm, I think you might be on to something. I wonder what would that insane oversupply eventually do to rents?
Rents will go down. It may take another year or so. Oversupply will kill the prices as well as the rents.
See —
American Housing Horror Show: Twice As Many Units Built Than the Demand!
http://www.financialsense.com/fsu/editorials/jain/2006/0906.html
Jas Jain
according to your scenario, and I think what you might say may happen and be doubly wicked with the hard landing of RE in the next few years, unless you are willing to live in the house for at least 10, but more like 15, you will lose money on the deal, except in maybe a few of the coastal locations. However, in the South OC like RSM, you wil get killed. Let’s say housing goes down 50% to 300K in RSM, it will take a loooooooong time to recoup that kind of investment. As for rentals, I think they will head down as well. Over supply plus no buyers, plus overpricing means only one thing. Lower prices for everyone. At any rate, if the market goes as you say, at that point who would want to buy. Sure, I would like to stay in one house for 30 years, but who knows what can happen and I don’t want to be stuck with a depreciating asset, esp. one I can’t get rid of unless I bring a lot of cash to the table. YUCK!
Nice Graphs JJ. And I second your YUCK OCDan.
I am still reeling from the revelation that the oversupply appears to be exponentially greater than I (a devoted housing bear) thought.
Even the demand statistics are probably off by a mile. The demand stats are probably based on PAST demand (please correct me if I am wrong), which just dried up and flew away. With birth rates dropping, and the coming economic collapse, what new people will want to live in these new houses? No one. And the flippers have still not given up their collections, and all the joe and jane normals have not yet put their vacation houses on the market. I now beleive the inventory will reach STAGGERING proportions in the upcoming months. I am worried now that when there is blood on the streets and the sheeple all think that RE is a terrible investment, I may agree with them- because its hard to see now what could drive prices back up- and like OCDAN I don’t necessarily want to be trapped in a place for 30 years (with no appreciation its hard to justify the closing costs of a move into a same priced house).
But yeah, I agree with you both that rents will eventually drop through the floor. Maybe I should try to love renting more. Maybe I should rent for life.. Maybe I should change my screen name to..Happi Rentr…yeah..
OK- got to go find a new game plan for my life.. Please tell me I am overreacting.
I think there might be a short term (1 year or less) upward movement in rents in some markets, but eventually, the rents simply must fall. That changes the whole landlording equation, eh?
I know this is overkill, but hey… I realize these builders have to produce something to keep the businesss going, but how many houses can one produce. Again, let’s use the automotive industry as an analogy. The big three just kept producing and producing and prices got higher and higher and what happened? People either bought foreign or they held on to the car for 400K miles. Same thing is going to happen with housing, except no foreign builders to buy from. That leaves people renting or staying put for a long time. It may take a couple of years to get to that point, but it will occur. When it does things will get real ugly because there will be no movement and very few will want to buy a home at high prices knowing that the list of future buyers is short. What makes all of this even more fascinating, but scary is the number of college and graduate students with enormous debt and not just from credit cards. We have all read about the boomerang kids, whether good or bad, they are coming in droves. I know I am a broken record, but our economy, if not already, is already headed for the outhouse.
apocalypso I for one do not think you are overreacting. I for one firmly believe that this economy, national and worldwide, is headed for a serious depression that will make the great depression look like a picnic at Disneyland, and I mean no disrespect to those that lived through it. The world’s economies produce very little of real value that anyone needs. Most of what the US imports from Asia is crap that we really don’t need anymore of. What another TV. Stats show the average home in the US already has 2.5-3 tvs. This whole debt/consumer/knowledge/paper pushing economy is a joke. In the end this thing is going to crash big time and because everything is interlinked it will be the undoing of most of us. Yeah, FDIC, what a crock. Won’t mean squat when the maximum debt load is reached and there is no more money left. Fiat money only goes so far. At any rate keep the powder dry and be ready. Face it, no one thought Orange County would ever go bankrupt, but it happened. No one ever thought the great state of California would pay its employees with IOUs, but it happened and these are not ancient history occurances.
“The world’s economies produce very little of real value that anyone needs.”
But the flipside of this statement is that it wouldn’t take much effort to provide everyone with the food, clothing and shelter that they DO need.
Today the US has all the resources it needs to feed its people, clothing is cheap, and there is a glut of housing. All that’s needed is to allocate it to the people. A financial implosion won’t change the reality of the physical resources that we have. In fact, we’re probably about to have a ringside seat to watch some of the crazy results that our financial system is capable of.
I predict that perfectly good housing will be bulldozed by governments even as people go homeless because they have no job and no way to pay for housing.
They use to burn crops in a feeble attempt to stabilize prices during the depression….
They bulldozed lots of not-all-that-old SFHs to build inner city projects.
Imploder: I’m reminded of a Heinlein story The Door Into Summer where a guy gets a job junking cars that were bought by the government to keep autoworkers employed.
There’s a beautiful, hauniting scene in Douglas Coupland’s Generation X where the main characters drive out into the desert past Palm Springs and have a picnic in a suburban ghost town–a crumbling, eerie abandoned subdivision built in an overly optimistic post-war age.
I think we may be seeing a lot more of those in real life.
Comment by AHinOH
2006-10-18 12:00:35
Probably the Salton Sea area.
As reflected in my own experience you are probably over reacting. I wanted to buy for the first time in 1990 in San Diego. Could not qualify for anything. Bought in 1992 & 1995 …like taking candy from a baby… 40% below previous sale prices in each case. Both times I used 60% of the funds a lender was willing to loan me. I am very conservative and the last decade would have been a good time not to be too conservative in real estate. I made a pretty big work related lifestyle change and did not buy a property again until 2004. It was an extremely good deal even though chronologically speaking it was made near the peak. In any case its paid for and has lots of potential. Anyway, I think the point being missed is that you can not start to have your house paid off until you own one. When the time is right make what seems like relativily reasonable home purchase and be intent on getting debt free. It takes years to pay the mortgage off, depending on the market and your earning and spending habits but not as many as you would think and we are supposed to live to be very old. 15 years should do it if things don’t get too unstable in the economy. By the way I do not subscribe to any arrogant one size fits all strategy for investing or spending. You seem like you would like to have a house of your own. You probably need not despair unless you just bought one last week. Rents may fall or plateau or whatever but you still have to pay it. And..rents will go up again in the future. No way out of it without buying your own shelter or living at moms. On the scary side…All bets are off if this country goes into a overpowering depression. Real estate will be worth what it is in other impoverished nations. But if this happens, and it might not, I don’t think such a little thing as a foreclosure should matter much. The world war raging will be much worse of a thing. Hell, the bank might not even bother to come get the keys since the property will be worth nothing.
Good Luck
Hey Russell lay off the sauce before you go posting blogs okay. “It takes years to pay the mortgage off, depending on the market and your earning and spending habits but not as many as you would think and we are supposed to live to be very old. 15 years should do it if things don’t get too unstable in the economy.” What you freakin retarded? You forgot one major component…price at the time of purchase. You are the typical Clownifornian who has benefitted from the run and traded one overpriced house for another. Well, let me tell you something, you’ve priced out the first time buyers…now there isn’t anyone left who can…get ready for this…actually afford the prices.
10 sizes fit 99% of everybody. So who needs a thousand choices?
Anyway, I think the point being missed is that you can not start to have your house paid off until you own one.
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Russell,
You’re missing a very important point. If a potential buyer has a significant down payment saved up, a good portion of their house will be paid off upon purchase.
Heck, if we’re REALLY lucky, the entire mortgage market will shut down, leaving only cash buyers in the market. Happy days for us.
(kinda kidding, as I know the whole chaos/Depression thing would set in, but we can all dream…)
“Anyway, I think the point being missed is that you can not start to have your house paid off until you own one.”
In Bizarro world, we say, you cannot start to own your house until you have paid it off
Bizzaro world …good semantics . You are correct. I should have said “buy one”. If you pay cash you are way ahead of the game. On the other hand holding title is a type of ownership. Go pay off your neighbors house or your landlords and see where that gets you.
Ca Renter…
I hope you get the best of all worlds whatever that is. A word of caution though …after you think you have timed the bottom do not dump a huge down payment in right away. Do what you have to to get in and then wait and see what kind of world you are in. You don’t want the illiquidity problem to get you. I know it gets complicated because your rates and payments are based on your down payment. But you can put your cash in and refinance after you are sure you did a good thing. Or if you really timed it right you can use your cash to qualify for rentals. It might even be a better strategy to stay renting and buy rentals.
I know there are some people who are pathological Real Estate haters here that blast people like me and go on spewing garbage and hate. They get real picky about the quality of the argument if you have anything hopeful to say. But at the same time its obvious they don’t read the post thoroughly. I call them the Character assasins of Ben’s blog. They don’t scrutinized the other idiotic sore loser haters at all. The hypocrysy is amazing. Then they feel proud if they can run someone off the blog. Thank goodness they are the minority . Even with that I think I will quit using my real first name. I appreciate those that try to maintain some semblance of class inspite of the fact that being anonymous is a huge temptation to act out. Maybe I’ll be “friends don’t let friends buy houses” again . Oh Yeah, I forgot…they ran that brain dead retarded idiot off a long time ago. They think they did it with their fantastic data and logic. More like venom. Anyway I am sure those few fellas need cyber space more than I do and for that I pity them.
Have a good day.
…pssst…
Hey kid, lemme tell ya a secret.
See dees ‘maniyas’…
…well…people gets all wuhyked up and nows you gets dees… ‘overractions’.
But see, dats a GOOD ting. Sees.
More yous ‘overreacts’ and talks bout all dis out der in da public…and all ova dem blogs…
…Da more deys gets like dem frightened little guls you usd ta play wit on da schoolground. Yah see?
So goes aheads der and ‘overreacts’.
Take it from me, a shark goes by da name uh Auction.
You want a ride on a comet? First you gotta shoot for da moon.
Sees?
1 - Pop. growth (approx. 3mm/yr.) divided by household size=primary demand growth=1.15mm units. Those numbers seem about right, although even though I have used the 1% pop. growth number myself the last time I checked it was slightly under that, in the 0.8-0.9% range. Add in illegals which are growing faster than that and 1% is probably accurate.
2 - New home construction is an annualized rate, even though it is quoted for a particular month.
We get new numbers tomorrow. A lower-than-expected number will likely be interpreted as a positive for the market and housing stocks.
Thx OCDan and Paul-very thoughtprovoking and helpful comments.
Paul- what exactly does ‘annualized’ mean? Does that mean they are taking a chunk of data from the year ( e.g. any month, not necessarily August, multiplying it by 12 for the ‘annualized’ rate, and then dividing it again by 12 to get what they are reporting at the August rate of homes that are built?) I assume ‘new homes’ means SFH’s and condos, right?
Either way, now that the playing field has shifted and we are seeing more homogeneity than heterogeneity in the behavior of our various regional ‘bubbles’, (albeit different timelines and predicted severity of declines), I want to start paying more attention to national stats when the numbers are available and comprehensible.
August reported starts X 12 X [seasonal adjustment factor]. I’m kind of out of the loop these days on how the data is gotten and calculated, but it used to be that seasonal adjustment factors were done with an econometric model based on a sliding scale where year n-1 (today being n) had a stronger input in the adjustment factor than year n-2, and so forth. But the smoothing only went back a few years (5?)and was not very statistically sophisticated (not enough data for one thing), so that the adjustments were almost as bad as nothing at all, since random events like weather, politics, etc. could throw off a particular monthly series.
Statistical aside - as long as an estimator is “unbiased” or a “best” estimator, then even if the correlation with what is being measured is low, it is still the best available data and its low reliability doesn’t mean that you shouldn’t treat the data any differently (for trading purposes) than you would with a high correlation “best” estimator.
How economic data is calculated is a very interesting topic -some of it is quite sophisticated, and some of it is just off the wall - industrialization utilization, for example - used to be based mostly on secondary data, like utility usage.
She boinks for refis with the hubby’s OK.
OT, sorta, but I couldn’t wait to pass this gem along. Last night I was working with a guy who was using the downtime to study a big spiral-bound book.
“What are you studying for?” I asked.
“Real estate broker,” he replied.
Maybe he’s getting ready for the NEXT boom.
Yeah, one of the garage sale re-sellers at the flea market was gabbing about getting her Real Estate License soon.
Jas Jain, I know used the term oeak debt in your charts above. At what point do you think the US will reach that mark? I remember hearing that as long as the debt was not as high as the GNP, as it used to be called, the country was okay, but now that we are at what, 80% of that, I think the time to worry has passed. Now it is time to get ready!
Sorry, meant peak debt.
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My mantra continues to be: Offer 1997 prices plus 3.5% annual appreciation. This should protect you from catching a falling knife.
http://www.files.bz/files/11251/RealEstateValuationMethods.xls
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REAL ESTATE VALUATION METHODS
1. Replacement Cost (Price Per Square Foot)
2. Rental (Cash Flow, Return on Price, Price/Earnings Ratio)
3. Appreciation Extrapolation
4. Assessed Value Plus Margin
Gekko,
This is great! Thanks.
Two questions:
1) How do you determine 1997 prices? I live in SW MO Zillow doesn’t cover this area.
2) Under the rental scenario, what is the “cost” number?
Thanks.
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1. For 1997 prices or earlier, if zillow doesn’t work, ask a realwhore to look it up for your or check county records.
2. Regarding “Cost” - look again at the spreadsheet - “Cost” is simply a heading for all of the Costs.
Any more ideas for valuation methods? Thanks for the feedback.
http://www.domainia.com
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Comps are irrelevant in a declining market. I look through the front windshields when I drive, not the rear view mirror.
It seems that none of the valuation methods work currently. That is if a valuation method is something one uses to see if a property price makes sense. You can come up with that works for you but it doesn’t mean you can ever have the property for that price or that it won’t at some point be much less than that price. To say something like 1997 prices is pretty arbitrary. The cycle has to play out. I think your real estate valuation method number (2) Rental ,cash flow ect. will be in put in play most effectively before this correction is over if it is not a complete downward spiral to hell. Number(1) is out the window. Replacement costs of land plus improvements is way to high relative to trending down prices. This is the crux of why builders are dumping land. Then you have places like Buffalo where resale houses cost a fraction of what the materials to replace them would cost. Yes people do live in them. Number three is what we all should have choosen from 1997 to 2005. Its awful hard to pinpoint what appreciation rate should be used in real time. See: “Pulling numbers out of your @zz” by GS below.
Number (4) should be assessed value + or - margin and then you are sort of just doing comps again.
When a property is a viable investment the upside is obvious by some factors and I guess it helps to have confidence in your analytical faculties at the time of writting the offer/negotiating on the given property. At other times I am not sure the analytical faculties are worth much in these regards. We all seem to agree it mostly a good time to be on the sidelines but it seems many people on the blog are insecure about when it might be a good time to get off the sidelines. It will be self apparent to the thoughtful and observant and it doesn’t matter who made what predictions or analyzed whatever in the mean time.
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1. Determine 1997 (or earlier) prices through county records or ask a realtor to look it up for you.
2. “Cost” in the spreadsheet is simply the heading for that column. Costs are the costs the landlord would have to incur as owner of the property vs. the gross rents generated.
Since wages are negative in real dollars for the past 5 years, I would say, 1997 prices plus .5% appreciation.
Gekko,
You forgot some popular valuation methods:
- Lying
- Pulling numbers out of your @zz
- Hitting the number needed to get the deal to go through
Hey GS………
Did you mean ass?
“Hello, is this the maitre d’? Please reserve Elliott Wave 4 for the Gekko party.”
core PPI up, up & away! That’s a shocker!!!
What’s the Fed to do now? I certainly wouldn’t want to be illiquid right now… na na na na, hey hey hey, good bye!
check out the power of multiple foreclosures in one community. see my new post, 4Closure Ranch.
Wow! I thought everyone who lived in 4S Ranch was a millionaire! I guess some millionaires don’t have cash that flows…
They are still building in 4SquareRanch — a hoity-toity gated community no less. I am wondering how they will find FBs for the new homes without deeply screwing up the comps, especially if rumors of growing numbers of foreclosures turn out to not be rumors…
The bottom is dropping out in CA. Are there any counties where prices have not already dropped?
“Three months after Sacramento, Placer and San Diego counties topped California for falling home prices, the malaise has spread across the entire capital region and parts of the Bay Area and Southern California, new September sales figures show.”
“All eight Sacramento-area counties reported lower median sales prices in September than September 2005, according to DataQuick. September marked the first time El Dorado County joined the list.”
“The dips were especially pronounced in Placer County, where prices of all new and existing homes and condominiums were 14.3 percent lower than September 2005. Median prices were down 12.2 percent in Yolo County and 7 percent lower in Sacramento County.”
Hey, wait a minute! How can the “malaise” be spreading? I thought all RE markets were local?!?!?!?
BWAHAHAHAHAHAHAHAAAAA!!!!! LOL!!! LOL!!!! LOL!
These lying sacks of crap and their filthy evil lies are finally being exposed. Unfortunately, my “I told you so” party will be cut short by the economy crashing on the rocks. In the immortal words of Eric Cartman, “I am so pissed-off right now.”
Could it be they meant ‘mayonnaise’ is spreading?
Is mayonnaise spreading everywhere?
Someone please call the mustard!
Real estate markets are local! San Diego is special…it will only drop 25-30%, while Sacra-ghetto drops 40%!
Salinas, Salinas???? I lived my whole life in CA and I can not even conceive of a property near Salinas that would cost 4.3 mil. It’s like saying there is life on the moon or something. Monterey is another story, but Salinas is waaaaaaaay different than Monterey even though they are not that far apart. The key here is that the owner should have just come up with a new name for the area like: Monterey Adjacent or something like that.
screw you guys, Im going home.
e. cartman
Oh yeah. I am willing to call the bottom on that place. 2.1 mil.
Slightly OT but I sold in Los Angeles in June 2005. My agent had only one other listing and people were lining up to get into our open house. Now he has 12.