October 19, 2006

“Being Pretty Brutal With What They Offer”: California

The North County Times reports from California. “Prices of individual homes and in individual neighborhoods have already fallen in the last 12 months. Declines among newly built homes are likely to be more dramatic, the realtor association’s chief economist, Leslie Appleton-Young, said in an interview. That’s because the glut of new homes is larger, she said; many builders have been unable to find enough buyers to fill entire tracts.”

“That glut could have a particularly strong effect in Riverside County, driving down median prices here more than 2 percent expected statewide, Appleton said. Empty new houses are particularly common in areas with lots of new construction, such as Riverside County, Appleton said.”

“The forecast and Appleton’s comments struck the most cautionary tone to date from a group that has been notably bullish on real estate’s value as an investment.”

The Ventura County Star. “In desirable coastal areas, the slowdown has been startling. Ventura County sales were down 41 percent in August from the same month a year earlier, the second sharpest monthly decline in the state.”

“Real estate investor David Russian has had a house for sale in Oak View for nearly six months, much longer than what he had budgeted. He said his current asking price of $589,000 for the four-bedroom, two-bath home might have sparked an immediate sale if that is what he had asked at the beginning. But he lowered the price in step with the market. Now, he is hoping to break even on his investment.”

“‘It looks like we are going to have to just change up the game plan a little bit and expect the houses to be on the market for a while,’ Russian said. ‘The profit margin gets eaten away very quickly,’ he said.”

The LA Times. “The number of Californians who are significantly behind on their mortgage payments and at risk of losing their homes to foreclosure more than doubled in the three months ended Sept. 30. ‘We were putting buyers in homes with loans they could not afford to sustain over the long haul,’ said Bob Casagrand, a San Diego real estate agent.”

“‘Whereas a year ago, people could have put their house on the market and sold their way out of the problem, now they’re stuck with the house,’ said Richard Pittman, credit counselor in Los Angeles. ‘I’ve talked to two in the last week who thought they had a done deal, and when it came to putting the loan together, they came up short’ and their house went to auction, he said.”

The Contra Costa Times. “Lenders sent 803 default notices to Alameda County homeowners, 1,012 to Contra Costa and 510 to Solano County, causing foreclosure activity to almost double in Alameda and Contra Costa counties and jump 171 percent in Solano County in the third quarter since last year.”

“Ed Jeffry, a mortgage specialist in Walnut Creek who has several clients fighting foreclosure through alternative loans, agreed that most of the foreclosure activity could have been avoided. ‘I attribute a lot of the foreclosure activity to really bad planning,’ Jeffry said. ‘They were more than likely in limited documentation loans and didn’t have to provide proof of income, and then stretched themselves beyond their means.’”

The Press Democrat. “Foreclosure activity accelerated this summer in Sonoma County, rising to a seven-year high. ‘Some of these people are stupid, and others got caught by unscrupulous lenders,’ said Amy Crews Cutts, deputy chief economist with Freddie Mac. ‘And others just had bad luck and couldn’t make their payments.’”

“Negative amortization and interest-only loans have the highest default rates, nearly double the rate of traditional loans, Cutts said. ‘They are performing much worse,’ she said. The number of people falling behind on loans opened in the first six months of 2006 has increased nearly sixfold compared to the same period in 2004 and 2005.”

“‘There is something going on with the ‘06 vintage,’ said Mark Carrington, product manager for First American. ‘The ‘06 vintage, compared to loans of the same period from previous years, are performing much worse.’”

“Vacant apartments are becoming harder to find in Sonoma County, in part because of the downturn in the housing market. More households are staying in apartments rather than buying a home, a decision that reflects their concern over falling home prices. In addition, many renters find it is considerably cheaper to pay rent instead of a monthly mortgage note.”

“That affordability gap is significant between rent and a mortgage payment, they’re happy to stay where they are,’ said Scott Gerber for Meridian Commercial Real Estate. A renter would save about $2,300 a month by renting a typical apartment in Sonoma County instead of paying the mortgage on a typical home, Gerber said.”

The San Francisco Chronicle. “‘Renting is still cheap relative to home owning,’ said Stephen Levy, director of the Center for the Continuing Study of the California Economy. ‘Now that people are realizing that there is going to be no appreciation in the near future, they’re renting.’”

“‘Some of those people who I rent to have hundreds of thousands of dollars in savings and I ask them, ‘Why aren’t you buying?’ And they say, ‘We’re waiting to see what happens with the market,’ said Laura McNabb Gray, a rental agent in San Francisco.”

The Sacramento Bee. “Sacramento-area renters continue to pay some of California’s slowest-rising rents. ‘I’ve actually seen rents go down,’ said Sheri Lutrrell (who) leases houses. ‘Even my real strong markets like Gold River, I’m lowering them $200 or $300.’”

“Janet Regan, a broker and president of the Sacramento chapter of the National Association of Residential Property Managers, said some home sellers are giving up. ‘We use to have all these different reasons why people put up their houses for rent. Now it’s, ‘I can’t sell my house,’ she said. ‘These are people who have moved to other cities and other states. They’re stressing.’”

The Record.net. “Lenders sent out 898 default notices in San Joaquin County last quarter. That was a 178 percent jump year to year from 323 notices in the third quarter of 2005.”

“The last foreclosures cycle in the area ended in 2000, said Stephen Howard, a broker who specializes in foreclosure sales. ‘We’ve gone from pretty much no activity at the first of the year to the busiest we’ve been since the end of the last cycle,’ he said.”

“(Broker) Bob Riggs said sales activity is getting a boost from falling interest rates as well as an increasing number of buyers willing to lower their sales prices in today’s competitive market. ‘If you need a home, there are values out there right now,’ he said. ‘They’re being pretty brutal about what they offer, but they’re seeing opportunities to buy.’”




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265 Comments »

Comment by Ben Jones
2006-10-19 13:53:10

‘Dan Carter keeps a closer watch on foreclosures than most people. He publishes a list of upcoming auctions for future investors. He says people may not want to believe it, but there has always been an element of gambling in real estate, and were seeing it. Dan Carter, ‘Since there is no more retirements, the people were counting on their houses for retirements. Now that may not happen.’

‘One client of Scott Hanson in Sacramento, Calif., had everything mapped out to take full advantage of the booming California real estate market. She would sell her house in the Sacramento area for a bundle, move to a quiet part of Nevada and buy a cheaper house — and fund her nest egg with the leftover money.’

‘But something happened along the way: The California real estate market began cooling. The client put her house on the market for $725,000 about a year ago, but found no buyers. She finally decided to cut the price. Still no buyers. She cut the price again, and then a third time — the house is currently listed for $640,000. ‘It still hasn’t sold,’ Hanson says. The client is now in a serious bind — either she’ll have to sell the house at a vastly reduced price that will barely buy an adequate home out of state and have nothing left for investing, or she’ll have to stay put in the hope that home prices move upward again soon. Either way, she now realizes she has far less money for retirement than she imagined.’

Comment by mrktMaven FL
2006-10-19 13:58:49

Looks like it’s hitting the fan in California….

Comment by Desmo
2006-10-19 15:09:11

That meant Mike Broussard was laid off from his job as a heavy equipment operator.

“I tried to juggle things around — we were eating a lot of peanut butter and a lot of beans — but it got out of control,” said Stacey Broussard, 39.

What is getting out of control, the mortgage or the bad gas?

Comment by HARM
2006-10-19 16:24:05

What is getting out of control, the mortgage or the bad gas?
:lol:

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Comment by nick the wizard
2006-10-19 16:57:51

The Ventura County Star. “In desirable coastal areas, the slowdown has been startling. Ventura County sales were down 41 percent in August from the same month a year earlier, the second sharpest monthly decline in the state.”

41%. there are still 59% buying. who are these idiots? it’s a rhetorical questions.

 
Comment by chilidoggg
2006-10-20 03:18:28

41%. there are still 59% buying. who are these idiots? it’s a rhetorical questions.

maybe the funniest post ever.

 
Comment by Chris
2006-10-20 09:08:01

41%. there are still 59% buying. who are these idiots? it’s a rhetorical questions.

maybe the funniest post ever.

—-

Another MBA student sharing his wisdom.

 
 
 
 
Comment by AE Newman
2006-10-19 14:20:23

Posted ” ‘We were putting buyers in homes with loans they could not afford to sustain over the long haul,’ said Bob Casagrand, a San Diego real estate agent.”

We?…. Did Bob have a mouse in his pocket?

2006-10-19 14:34:57

He had a mouse, but it wasn’t in his pocket.

 
Comment by AZ_BubblePopper
2006-10-19 14:53:35

I know a few Reators and they were saying, in 2005, that they were always amazed that the homes they were negotiating for their clients actually closed. In almost every case they couldn’t afford what they were buying, even at teaser rates. Every deal was like a turn of the wheel at a 1-Armed-Bandit in ‘Vegas. When loans actually funded, the they celebrated like they hit a jackpot. They all agree that the jackpot days are over…

Comment by Loonofficer
2006-10-19 15:16:35

Exactly. Many talk about how borrowers were “sold” toxic loans to get into homes they couldn’t afford. Few actually experience the numbers of buyers asking for these loans in the first place. Many became convinced that i/os and neg-ams were the “smart” loans to get into…. you tried to explain the downside and their eyes would just glaze over and they would nod their head with a zombie-esque “uh-huh”.

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Comment by bottomfeeder1
2006-10-19 15:34:29

sounds like cya loonyofficer

 
Comment by Loonofficer
2006-10-19 15:37:23

Mine’s always covered, thanks.

 
2006-10-19 16:05:15

When a friend sold his rental property (much later in the cycle than my advice). His buyer was on hold for so long, he was really worried. They couldn’t even bring $3K to the table. Without 110% financing this bubble would have popped much sooner. I can only assume said borrow is easily underwater now.

 
Comment by mrincomestream
2006-10-19 16:12:31

LoonOfficer-

You’re wasting your time even trying to explain it. Especially here. Some will never get it. No matter what side of the bubble they are on.

 
2006-10-19 16:27:59

So tell us Mr. Income, why do you waste YOUR time here? You seem to suffer from periodic fits of bubblemania and overt bullishness despite appearances occasionally. You’re probably a multiple property owner with many gators to feed

 
Comment by imploder
2006-10-19 16:54:08

Loan brokers I know told me the industry “pushed” these loans with back end points? Is that untrue?

 
Comment by feepness
2006-10-19 17:43:45

I would say both were true.

I personally tried to explain this to friends and saw their eyes glaze over. Now I’m sure that the loan officers were pushing the kool-aid… but those that didn’t wouldn’t get any business at the end.

It was survival of the dumbest.

 
Comment by Sunsetbeachguy
2006-10-19 19:45:41

Take it easy on Mr. Incomestream he has got legit bear credentials.

Look at what happened to Robert Cote, the board is poorer for that.

 
Comment by mrincomestream
2006-10-19 19:58:47

Suzanne, I researched this!

Yep… Multiple property owner as a matter of fact I have two in escrow now. Gators? Yea, depending on how you look at it I guess they are. As far as refinancing did that already the rates are too high right now. Oh and FYI appraisals never effect a refinance or purchase of mine.

imploder-

“Loan brokers I know told me the industry “pushed” these loans with back end points? Is that untrue?”

Quit spending so much time at the sports bar picking the brains of rookies and hacks. Which were the one’s “pushing” those products for the past five years.

 
Comment by imploder
2006-10-19 20:25:28

Mr Income Stream

“Quit spending so much time at the sports bar picking the brains of rookies and hacks. Which were the one’s “pushing” those products for the past five years.”

Yes Sir…..

P.S.
These, Rookies and hacks own and work Brokerages in Calabasas. But I’ll take your advice under consideration….

 
Comment by mrincomestream
2006-10-19 21:06:24

“These, Rookies and hacks own and work Brokerages in Calabasas”

LMAO, I stand by my statement of rookies and hacks. You do realize that the F.B.I. has spent so much time busting brokers there and along that mortgage broker central corridor of Ventura Blvd that I’d be careful letting anyone now I was friends with anyone that worked in that area. Hell, at one point they were cuffing them up on a monthly basis, the feds have probably considered putting a substation there. LMAO Calabasas/Ventura Blvd ranks second to Downey as the capital of mortgage fraud in SoCal probably the nation. Yea, you should really consider taking my advice under consideration because if there is a perp walk in Downey at 9 there will be one in Calabasas by 10. Those guys change addresses, company names and companies over there like most folk change there underwear. Mode of Operandi is fraud those guys make the movie “Boiler Room” look like a film on ethics.

LMAO Calabasas… Bwaaahhhhaaaaaa. Stop it you’re killing me.

 
Comment by imploder
2006-10-19 21:36:44

Thanks Mr Income…..

OK…Look, to THE WHOLE BLOGGING WORLD:

I,….I made all that up. I,…I don’t know any brokers or owners of such firms and if I DID!!, If I DID!! I certainly would NEVER , NO NEVER be seen in a drinking establishment with them! Well, UNLESS, UNLESS mind you, it was DARK!…. and THEY, THEY … WERE BUYING!!!! OH THANK YOU, THANK YOU, Mr INCOME STREAM…. I now know to NEVER! no NEVER set foot with in the city boundaries of Downey before 9.00 AM, lest I be picked up for KNOWING A MORTGAGE BROKER!!!

Also, per your advisement I hereby promise to NOT, I REPEAT NOT GET OUT OF BED! before 10 am (not a stretch), lest the same fate awaits me in yon distant Gomorra, Calabasas. Thank you for your Federal Law Enforcement Advisory…

So, besides all that, what you’re saying is that Countrywide and others “didn’t offer back end points” to get their “preferred” loans written…. ?

 
Comment by imploder
2006-10-19 21:52:11

p.s. my friends have been in business for over 15 years….

PLEASE DON”T TURN ME IN FOR KNOWING THEM!

 
Comment by imploder
2006-10-19 22:46:58

Ps, John, Bob, Mr. Income this was my intended addendum post, sorry for the mistake:

SHOULD HAVE READ:
See it’s funny (or not) that he, used the term “We”, instead of “THEY”. Freudian Slip Get it? He’s in no danger of prosecution, I’m sure….

Relax, lads… no need to: “Bwaaahhhhaaaaaa” on me…..

 
Comment by imploder
2006-10-19 22:54:29

..He’s in no danger of prosecution, I’m sure….

persecution is what your worried about, right….. I don’t blame you…

 
 
 
Comment by imploder
2006-10-19 15:37:45

We were putting buyers in homes with loans they could not afford to sustain over the long haul,’ said Bob Casagrand, a San Diego real estate agent.”

This man speaks the truth, “We” meaning him and his mortgage broker buddies. They did it to make their commissions.

He’s admitted his complicity….. He should be Arrested for Fraud perpetrated against the loaning Bank. He should be sent to the Casagrand, i.e. “The Big House”.

Comment by John Doe
2006-10-19 15:45:18

Casagrand has been one of the few realtors that has acknowledged that affordability got out of control and that there is a declining market.

Most are still turning up daisies while he tells the real deal. I hardly think he put a gun to anyone’s head. In that case, he stands just fine by me.

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Comment by imploder
2006-10-19 17:21:36

Don’t worry, uh, John Doe. The above statement didn’t carry any statutory weight. Just a funny (or not) comment on a blog.

See it’s funny (or not) that he, used the term “We”, instead of “I”. Freudian Slip Get it? He’s in no danger of prosecution, I’m sure….

I’m glad he’s not “turning up daises” or that he’s never “put a gun to anyones head” Both of these events would be most unfortunate, either for Bob, or his clients.

I stand by your right to stand by Bob Casagrand. Please feel free to continue to do so.

 
Comment by CA renter
2006-10-20 16:11:48

imploder,
Here is a write-up by Bob Casagrand. He’s been linked here a number of times, and I’ve seen nothing but an honest assessment from him. He is one of the VERY FEW ethical Realtors I’ve seen in San Diego. When he says “we”, I assume he means those in the REIC.

BTW, he (and other posters) are right. Anyone who’s tried to warn people over the past few years know that the idiot sheeple think the bears are clueless “bitter jealous renters” or some such nonsense. I’ve tried to counsel many people on these suicide mortgages, only to be buffed off, no matter how much “proof” I provide or how I lay out the logical facts.

And, yes, there are many mortgage brokers who “push” these loans. I make a habit of calling up mortgage brokers just to check what’s available and get a feel for credit conditions — loosening or tightening. I’ve heard the, “LOL, 30-yr FRMs are obsolete. Nobody gets those anymore. Savvy buyers are using the new, more flexible mortgages, because you can just refi or sell at a later date and use ALL THAT EQUITY to move up into a better house.” They are whores.

http://realtytimes.com/rtmcrcond/California~San_Diego~bobcasagrand

 
Comment by imploder
2006-10-20 18:18:15

Fine, I’ll take everyones word from SD that he a good realtor, better than most. The post was a joke. Anyone that doesn’t think a realtor saying in a direct quote:

“We were putting buyers in homes with loans they could not afford… ”

Doesn’t get my humor. To me it sounded like congressional testimony at a mob hearing or something. I’m sorry.

It’s obvious it stirred up the san diego real estate investment board, cause everyone came by and took a dive bomb. Wow what a hornets nest! I hope this clarifies the post. A joke.

 
 
Comment by mrincomestream
2006-10-19 16:19:53

imploder-

What in his statement indicated fraud. Don’t confuse your wishes and cheers from the bubble audience with reality.

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2006-10-19 16:43:54

Mr. Income must have a few mortgages resetting. Appraisal come in too low for a refi, bub?

 
Comment by imploder
2006-10-19 16:44:51

Yes sir.

 
2006-10-19 16:47:24

Only Ben can confirm by IP addresses, but yesterday OCDan was trolling this blog with “no crash” trolls and now seems to be back to his old bearish self today. Now mrincomestream is trolling. Since we don’t have official user IDs here, perhaps the two are being spoofed. Although Mr. Income is often of two minds.

 
Comment by imploder
2006-10-19 17:26:42

Don’t worry, uh, John Doe Mr Income Stream. The above statement didn’t carry any statutory weight. Just a funny (or not) comment on a blog.

See it’s funny (or not) that he, used the term “We”, instead of “I”. Freudian Slip Get it? He’s in no danger of prosecution, I’m sure….

I’m glad he’s not “turning up daises” or that he’s never “put a gun to anyones head” Both of these events would be most unfortunate, either for Bob, or his clients.

I stand by your right to stand by Bob Casagrand. Please feel free to continue to do so.

 
Comment by Peter T
2006-10-19 18:39:20

mrincomestream,

I’m with you on this one. “We were putting buyers in homes with loans they could not afford to sustain over the long haul,” is a moral capitulation on behalf of real estate agents, but Mr. Casagrande has not claimed (yet) to have done anything illegal, like telling clients to state wrong incomes. The agents just ran their legal real estate casino and fleeced the gamblers.

Regards,

Peter, member of the bubble audience

 
Comment by imploder
2006-10-19 19:56:25

SHOULD HAVE READ:
See it’s funny (or not) that he, used the term “We”, instead of “THEY”. Freudian Slip Get it? He’s in no danger of prosecution, I’m sure….

hope you get the point

 
Comment by robin
2006-10-20 05:54:52

Can’t “we”, as a member of a group, imply the final outcome of a decision, regardless of one member’s vote?

I think so, just as in a board of directors’ decision, even though there were dissenting members in the minority.

At least that was the accepted rule when I was teaching English. - :)

All of my recollections of Cassagrande were also of him as an ethical good guy.

 
 
 
 
Comment by AE Newman
2006-10-19 14:31:10

posted “‘We use to have all these different reasons why people put up their houses for rent. Now it’s, ‘I can’t sell my house,’ she said. ‘These are people who have moved to other cities and other states. They’re stressing.’”

Wait till they get a deadbeat renter and live out of state. Add the fact the house is still falling in price. Wait till some renter makes a “indoor BBQ” out of the 2nd bathroom. Don’t laugh it can get better.
True story. I had a friend who’s dad had a duplexin San Berdino years back. He rented each to 2 couples that were friends. They did the “indoor BBQ” trick in one bathtub…. then took a chainsaw and cut a path way between the common wall to save an out door trip. LOL……LOL!!!!

Comment by Arizona Slim
2006-10-19 14:45:22

I have a friend whose husband rented to a group that he called The Cretins. After they left, he had to use a rake to clear out the interior of the house.

Comment by imploder
2006-10-19 20:01:39

I really liked that band… Didn’t they do: “Kickin out the Jams and Kickin in the Wallboard”?

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Comment by Pen
2006-10-19 14:47:45

..and they better hope, nay pray, that the insurance company doesn’t find out the it is a rental now…

Comment by imploder
2006-10-19 15:40:30

Give Txchick57 names of all new landlords. She will personally see to all insurance company notifications. (and I may not be joking!)

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Comment by AZ_BubblePopper
2006-10-19 15:32:31

I know a guy in commercial construction. He did a project in an Indian reservation in AZ where he built around 50 very modest homes. These contracts have guarantees for some period on materials, workmanship and also in this case the appliances. He got a call to go back because ranges weren’t fuctioning a couple of years later. He was shocked to find that the occupants decided to use the ranges to erect wood fires on which to cook their food. He did the repairs, obviously out of warranty and went on his way. I guess the owner’s manuals weren’t consulted…

 
 
Comment by implosion
2006-10-19 14:54:23

Sounds like she has a big oooops for her plans.

Comment by imploder
2006-10-19 22:57:47

big oooops often help…. enthusiasm is everything…

 
 
 
Comment by ockurt
2006-10-19 14:04:01

‘Some of these people are stupid, and others got caught by unscrupulous lenders,’ said Amy Crews Cutts, deputy chief economist with Freddie Mac..’

Classic.

Comment by AE Newman
2006-10-19 14:37:49

Posted “‘Some of these people are stupid, and others got caught by unscrupulous lenders,’ said Amy Crews Cutts, deputy chief economist with Freddie Mac..’”

Should read, all were stupid, all were unscrupulous!

Comment by imploder
2006-10-19 15:42:50

momma always said, “unscrupulous is as as unscrupulous does”……..

 
Comment by az_lender
2006-10-20 09:59:29

I may be unscrupulous, but I get Christmas cards and thank-you notes from my borrowers. So apparently I have them fooled.
N.B., I never sell a note. I don’t charge any fees, just interest. REAL lenders aren’t the problem. ?????

 
 
Comment by Pen
2006-10-19 14:49:01

but they were brilant when the houses were appreciating.

that good ole rising tide…

Comment by AZ_BubblePopper
2006-10-19 15:34:40

Now the tide is going out and you can bet your a$$ there’s going to be a frenzy of finger pointing to find out who the blame can be struck to.

 
 
Comment by GetStucco
2006-10-19 14:54:22

Isn’t Freddie Mac in the business of helping unscrupulous lenders make loans to buyers of unaffordable homes, through purchasing and securitizing the paper before it rots in the lender’s hand? Or did I confuse Freddie with Fannie?

Comment by diogenes
2006-10-19 15:12:14

Or were you referring to Freddie’s Fannie?

 
Comment by bluto
2006-10-19 17:02:38

Only if you consider a loand with 20% down (they don’t necessarily consider a HELOC for your 20% to not be down so long as the HELOC loses their shirt first), 30 year fixed or ammortizing ARM, and that can’t be for a home that costs more than ~$400,000 helping unscrupulous lenders buy unaffordable homes.

 
 
 
Comment by rog56
2006-10-19 14:04:48

“They’re being pretty brutal about what they offer, but they’re seeing opportunities to buy.”

Yet another example of the very odd idea that buyers’ offers might hurt or offend sellers. If sellers are such delicate souls, they should simply state ‘no lower offers accepted’ in their listing details, to avoid the ‘brutality’ they might face from people saying they think the house is worth less than the price asked.

Back in the old days, when sellers used to up their asking prices by 20% above what a neighbor’s house sold for, was that ‘brutal’ or ‘insulting’ to buyers?

Comment by txchick57
2006-10-19 14:08:20

They ain’t even begun to see brutal yet.

Comment by JWM in SD
2006-10-19 15:00:13

Oh the pain the will feel soon…

 
Comment by imploder
2006-10-19 15:56:20

You’re not kidding…..

 
 
Comment by Grateful in Reno
2006-10-19 14:13:50

‘She would sell her house in the Sacramento area for a bundle, move to a quiet part of Nevada and buy a cheaper house — and fund her nest egg with the leftover money.’

Exactly why the Reno area is seeing a bubble!!! All the bay area and Sac people thinking they could “get rich quick” by selling and moving here.

 
Comment by implosion
2006-10-19 15:00:53

Brutal? I’m waiting for the offers to make them start squealing like they were used in a remake of ‘Deliverance’.

Comment by mrincomestream
2006-10-19 16:23:20

Most won’t last enough to see truly brutal offers. The banks will inherit that honor.

 
 
 
Comment by P'cola Popper
2006-10-19 14:06:07

OT MBS Shocker: B of A to Reduce MBS Portfolio

http://tinyurl.com/sdv6z

Comment by txchick57
2006-10-19 14:09:24

I heard today they’re going to offer no-points mortgages to high balance checking account customers.

Comment by Claire
2006-10-19 14:23:54

Hey, we got a letter today for a no points mortgage from B of A - are they good then? See, I’m so into don’t buy until the bubble collapses I’ve not even researched teh mortgage options.

 
Comment by Pen
2006-10-19 15:02:27

I bet the $%&#@ you on the rate or closing costs or only offer a 30 day rate lock…

 
 
 
Comment by Jason
2006-10-19 14:12:05

The Ventura County Star. “In desirable coastal areas, the slowdown has been startling. Ventura County sales were down 41 percent in August from the same month a year earlier, the second sharpest monthly decline in the state.”

So much for all those who said, the coast never slows down, and never goes down in value. I heard that so many times when we lived in CA. But I watched the slowdown, and I think we’ll soon see the price freefall

Comment by Awaiting bubble rubble
2006-10-19 14:37:07

“Desirable coastal areas” in Ventura county include mostly Oxnard and Ventura, trailer parks with bad schools, bad air quality, high crime, and lots and lots of toxic agricultural waste. Yes, many people don’t want to pay $600K for a starter home in gangland.

Comment by imploder
2006-10-19 17:50:11

I don’t live there, but have known people that have. The description you give is one sided and unbalanced. I think the weather’s great and there are many nice places to live there. Just like everyplace else it’s 50’s over priced at every level. But that will change.

Comment by imploder
2006-10-19 17:52:42

50s=50%

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Comment by cactus
2006-10-19 18:28:46

I did live there, the schools in Thousand Oaks are very good, the schools in Oxnard are very bad, Moorpark is a mixed bag as is Simi, Ventura schools not so good, Camarillo good, Santa Paula not good. Who did I miss? Fillmore? Do they have schools in Filmore?
The weather is nice.

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Comment by AE Newman
2006-10-19 19:38:51

Posted ” Simi, Ventura schools not so good”

Yor ful off turds i got learned thar

 
 
 
Comment by lainvestorgirl
2006-10-19 17:53:01

IMO, Ventura is beautiful. Go further inland to Bakersfield, it definitely doesn’t get any better!

Comment by awaiting bubble rubble
2006-10-19 19:49:55

Ventura is physically beautiful. If you’re white the skinheads there will leave you alone. I lived there when married to a Korean (Harvard educated MD) and they keyed a swastika on the hood of her car and left live ammo on her side view mirror. They also attacked an interracial couple on the beach when we lived there so we moved to Camarillo, which is NOT coastal, nor is Moorpark, Fillmore, etc. Camarillo has great weather and pretty good schools but Ventura is cold and foggy 70 percent of the time. Oxnard is Pacoima by the beach with BAD air quality (yes it’s true), gang violence galore, horrible schools, and a port. Most residents make less than $15/hour (the median incomes only include people who are legally there and earn W-2 income) and a very large percentage drive without insurance. It does beat Bakersfield however. I grew up in Alabama and had fewer problems with rednecks and violence there than in “coastal” VTA County.

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Comment by imploder
2006-10-19 20:47:49

But doesn’t that kind of stuff happen everywhere?….The OC, Bakersfield, West Hollywood? A few peoples actions, do not a community make.

I thought I read that the Ventura authorities were quite aggressive in their prosecution of some crimes similar to what you mentioned. Of course from your perspective it’s was a visceral, real experience. What general part of Ventura did you live in. An ex girlfriend lived there, on the hill above Main Street. Did this happen in The Avenue area?

 
 
 
 
 
Comment by stanleyjohnson
2006-10-19 14:15:14

That’s because the glut of new homes is larger, she said; many builders have been unable to find enough buyers to fill entire tracts.”
But what about all those 1000’s of people coming in at night through San Ysidro. Where is Wells Fargo bank to help these people attain the American dream? A home in Riverside or Corona.

Comment by mrktMaven FL
2006-10-19 14:23:00

I sense some resentment from Appleton toward builders b/c of their ability to lower prices and aggresively offer incentives. Is her statement true, the glut of new homes is larger than existing homes? Seems innacurate to me.

Comment by turnoutthelights
2006-10-19 14:42:37

Well, in one sense it is. A builder sitting on a interest-churning construction loan must sell the property. Timelines are very definite - and inability to sell at one price point simply means lower the price point. LAY’s comment gets to a darker reality - that even with the incentives and price cuts currently offered, the new home inventory is still building. At some point her developing frustration will reach scream level. When the incentives drop away in favor of true, large price cuts.

Comment by imploder
2006-10-19 15:54:45

Builders will cut her constituents (sellers of used homes) off at the knee caps. Once a builder decides to cut and run it’s a one time business decision, immediately implemented. WHAM !!!! 35% OFF…. Brand New Product.

Realtors are forced to deal with convincing each and every seller on each and every transaction to be competitive. All that useless hand holding and blubbering, Of course she’s resentful……
The Home builders will sell their sh#t to the last buyers. Resale is left holding the bag.

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Comment by emcee
2006-10-19 15:28:14

That’s my take on it as well. The new home builders must chase the actual demand. Resale homes in the vicinity of newly constructed homes will likely need to undersell those new homes … ouch.

 
 
Comment by dude
2006-10-19 14:54:15

“But what about all those 1000’s of people coming in at night through San Ysidro.”

Believe me, they’ve been buying. This is a little understood part of this bubble. Any illegal alien can apply for a TIN (taxpayer ID number) and presto-chango they have a credit score.

I am absolutely certain the family who bought my ridiculously overpriced house were illegals. The dad worked as a fry cook at a valley deli. The teenage boy didn’t speak english.

There is much more fraud induced pain out there than anyone is letting on. We may come out of this with some real and effective changes like proof of residency to open a bank account, or get a mortgage.

Comment by Pen
2006-10-19 15:52:10

“But what about all those 1000’s of people coming in at night through San Ysidro.”

Only one house is needed…

Comment by imploder
2006-10-19 15:58:17

1000? the garage too….

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Comment by peter m
2006-10-19 18:01:30

San Ysidro is in the Otay Mesa area, which has a large number of newly-bullt commercial Bldgs and parks. One of these buildings was the terminous of an ingenious tunnel running from Mexico. The tunnel ended up right beneath this warehouse, which kept it of out of sight from the border patrol. It was used for both narcotics and human trafficking.

Then there is the problem of illegals using the sewage drainage system of Otay Nesa to crawl thru and emerge from manhole covers. It is said that thousands crawl into the US weekly thru the sewer pipes of OTay Mesa, to be picked up by coyotes/accomplices.

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Comment by bruin
2006-10-20 06:20:17

Gee, they sound like sewer rats. Not human even. But I guess that was the point of your word choice, wasn’t it?

 
 
 
 
 
Comment by incessant_din
2006-10-19 14:17:01

Still no sales for my two co-workers trying to sell in Modesto. Neither one of them needs the (2nd) Modesto home, and neither one is hurting financially from it either. Just taking the slow bleed for now. Maybe in the spring… Probably not. I think each is smart enough to make a big discount when it is really time to sell. Both houses have been on the market since early summer, with little activity.

Comment by pt_barnum_bank
2006-10-19 14:32:23

Where do they live? Each one bought a home in Modesto to flip?

Comment by incessant_din
2006-10-19 14:45:36

Both live in Modesto. One is currently splitting time between Modesto and Oregon, where they already bought the retirement house. He is still working locally, so he’s OK, but could retire as soon as the house sells.

The other guy also lives in Modesto, and was renting out the second home and one other, then decided to sell the rental properties. He unloaded one, and priced this one slightly below comps (it’s in pretty good shape), but has had no luck.

The point is both guys have “extra” homes they don’t need. Both will sell for the lower end of the listed comps. Neither is getting any action. How’s the market in Modesto? It’s dead, Jim.

Comment by ockurt
2006-10-19 14:59:13

Bones….Bones…Bones! (insert W. Shatner’s overacting voice here)

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Comment by Gekko
2006-10-19 18:40:37

-

Did that realtor ever sell the Scott Peterson house?

 
 
Comment by Army No. Va.
2006-10-19 14:23:39

This is the deal nationwide…

Expect double the depreciation more than 10 miles out from employment / cultural centers and more than 1/2 hour commute. Especially in or near new development where all the houses are one of say, four models, and they all have the same stick trees planted in front (or the same trees in the same place in every yard that are a bit more mature).

Condos in town will fare the same - double the depreciation of SFH in town.

You will fare far better if you can drive down several of the streets and out of, say, 200 houses, there isn’t any one house that is the same model or plan as another…e.g., most of the homes are unique.

Farms, resorts, and small towns may be different (worse, better?) - I’ve no experience in a downturn or bubble in that setting.

Comment by dude
2006-10-19 14:57:19

You just described 99% of SoCal.

Comment by imploder
2006-10-19 16:01:16

Just a hunch, this may not bode well for the I.E.

Comment by imploder
2006-10-19 16:05:07

30 min out? That’s how long it takes to get from Sepulveda to La Cienega? You mean I gotta move out of the 310 and into the 323?

NEVER! THIS IS WHERE I DRAW MY LINE IN THE SMOG, I Mean, SAND!!!!

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Comment by oknish
2006-10-19 20:55:36

And, I guess no more moving west down ventura
Blvd for the SFVV vampires. Or east for that matter.

 
Comment by imploder
2006-10-19 21:47:49

Tell me about It, I grew up in the VAlley. Now can take 30 min from Topanga to Hollywood Fry, 2:00 pm on a Saturday!… It used to be “the sticks!”

 
Comment by Army No. Va.
2006-10-20 07:01:17

I’m not a Californian…maybe it’s “different” there :-)

I’ve lived in New Orleans area, Akron Ohio, Austin (boom- bust-recovery), NYC Westchester Co (bust–boom-got out), and Atlanta (slow and flat).

 
 
 
 
Comment by glorgau
2006-10-19 15:50:11

Comment by PBRenter
2006-10-20 11:54:06

This is the most convincing post I have seen yet on this blog. I am swayed by its simplicity.

 
 
 
Comment by Thomas
2006-10-19 14:25:43

It’s simple, really. Speculators replaced first-time owner-occupier buyers. Now the short-term speculators are gone from the buying pool (since it should be obvious to anyone but a Realtor on meth) that no amount of appreciation is “in the bag” for this year, and probably the next. Rents are so low compared to prices that even though there may be some investors who think that this slowdown represents a good opportunity for long-term investment, not many people have the cash on hand to sustain the massive carrying costs of property for any appreciable length of time.

So that leaves us with owner-occupiers as potential buyers. People who are “trading up” can still buy, since their existing houses have generally appreciated at the same rate as their targets, and their incomes have often increased enough to cover the cost of the upgrade to a better house. In other words, the massive run-up in prices has lifted all houseboats, so existing owners aren’t “priced out.” (Of course, higher absolute prices mean higher taxes, insurance, etc., but leave that aside for a moment.)

However, those who DIDN’T own a house at the beginning of this run-up have been left far behind, as speculators borrowed wildly and bid up prices with Other People’s Money. The normal contingent of first-time buyers, who normally make up about a third of home sales, is out of play, with prices this high. It’s a simple matter of comparing median incomes with median prices x interest rates. It’s not “psychology,” as some Realtors desperately try to believe; those people are simply unable to afford houses at these prices. The numbers just don’t work.

So the 30% of the buyer pool that was once first-time buyers was replaced (temporarily) by speculators. Surprise, surprise: Once speculators left, sales dropped by 30%. (You can pretty much tell how much of a particular market’s sales activity consisted of speculator activity, by how much sales have dropped in that market).

House sales will not return to normal levels until the number of houses and the number of willing and able buyers is close to equal. Where will those buyers come from? Another wave of speculators? No, speculators only swarm to the scent of rising prices, and prices won’t rise until there are enough buyers to clear the market (and then some, to give sellers some market power). First-time buyers? Not with prices this high. There are far more half-million dollar houses out there, than there are people with six-figure incomes.

The ONLY way out of this, is for prices to drop enough for first-time buyers to afford the cheapest 1/3 of houses. The sooner we get to that point, the better everyone will be.

Comment by turnoutthelights
2006-10-19 14:50:28

Nice summation, but I would add one other point. Existing homeowners must first sell their home to buy another, though the media is full of last year’s double-mortgaged morons in trouble. This year and forward, continquency contracts are hinging one sell to another, and that fact should take a few multiples of 10% off of sales. Eyeball to eyeball, and who blinks first?

Comment by GetStucco
2006-10-19 15:00:36

This is the point which hung me up, too. It is fair enough to say that existing homeowners in bubble zones are probably the best qualified potential buyers around (what do they have to lose by trading, as the home they currently own will see declining prices as well as the one they want to buy). The trouble is that with all the incentives being used to mask the depth of discounting needed to move new homes, many who would like to move up will learn that they cannot sell their current home at anywhere near the price needed to raise a down payment, especially if they drank the “home equity ATM” koolaide to any degree.

Comment by Rental Watch
2006-10-19 15:19:46

I agree with that entirely. The urgency is gone from the market.

Since protecting yourself from more likely downside is obviously more important than grabbing less likely upside, people are not taking as much risk and being more careful with buying decisions across the board.

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Comment by GetStucco
2006-10-19 15:31:05

Rental Watch –

You bring to mind another reason to expect move-up buyers to pause, which is that trading up involves transactions costs, and without appreciation, those have to come out of pocket.

 
Comment by Rental Watch
2006-10-19 16:00:14

People tend to forget that the rule of thumb to break even on their home was to hold for three years because of the transaction costs.

 
Comment by vioviv
2006-10-19 18:22:59

For me, trading up was the plan last summer. After bidding on two houses, and really crunching the numbers in the process, it was the property tax basis that just threw everything out the window. Putting everything from my old house into the new house made sense to me (equity would vanish either way), but even then, the upgrade was going to increase my mortgage payment by 50%, which I could swing, but when you added in the property tax (in CA), my monthly housing nut suddenly DOUBLED. And that property tax payment is for frickin’ life.

So I sold, banked my cash, and now I don’t want to spend the cash. I’m renting for at least another year …

 
Comment by OC-Jerry
2006-10-20 17:25:03

California property taxes are approximately 1%. We bought in 1998 for 200k — that’s 2 grand a year or 166/mo. We sold in 2004 and were looking at 900k homes, but the property taxes would be 9k/yr or 750/mo FOREVER. The same house rents for $2400/mo. The break-even mortgage amount would be 2400-750=1650/mo. That’s not going to happen, so we rent and watch the piggy bank grow at 5.5% at eloan.com — that pays for rent. Property taxes are the real show-stopper for renters like me.

 
 
Comment by Joel B.
2006-10-19 15:44:26

Eh…I disagree or agree…not tottaly sure about what you’re saying honestly. My wife and I are in the relocation situation, and we’re moving from one Bubbly zone (Tracy) to another (IE). I’d be happy to make an exchange with someone I suppose, but the problem is selling our house while buying another. If you buy first to move, then you’re sitting on two houses (even with a contingency you’re start date is a set time you have to move by then somehow) which is the absolute worst spot to be in. So, we’re renting and renting. Weird, for sure, but it should work, we’re very happy with the prospective tenants, but it’ll basically put us in a holding pattern until we know what the market is going to do, the one thing that doesn’t work is “trading” because then you get to be the one holding the bag.

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2006-10-19 16:16:00

Renting should be done in the reverse order you mention. Sell your old home, rent yourself in new location. Strangely this is what my parents did when we moved when I was a kid. No one was crazy enough to carry two mortgages back in the olden days.

 
Comment by GetStucco
2006-10-20 09:12:20

“Strangely this is what my parents did when we moved when I was a kid. No one was crazy enough to carry two mortgages back in the olden days.”

Strangely this is what my kids parents are doing now when they are kids.

 
 
Comment by jim A
2006-10-20 03:57:22

Yes. But the smart ones who’ve been there a while are like homebuilders, they can affort to cut their asking price enough to sell. People trying to get out of a toxic mortgage that they got in 2004-2005 can’t.

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Comment by Chris
2006-10-20 09:22:26

I think some of the reality that is happening is hopefully causing people to rethink this idea that a small family needs a 3000 + sq. ft. home to live. So, upward home mobility may be a historical trend that may severely decrease due to this correction.

I live in a beautiful, wealthy older neighborhood in a 1,600 sq. ft. home with my wife and two little boys. We live fine and have a small mortgage, high savings, nice cars, and enjoy luxury products. Our home is just part of who we are, not everything. Plus my wife stays at home to watch the kids (her decision.) Hopefully, more and more people we understand these McMansions are unnecessary…and what we are finding out…unaffordable.

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Comment by Loonofficer
2006-10-19 15:32:38

And don’t forget the potential tax implications of those who currently enjoy prop. 13 taxes (no, it’s not a bash, just an observation).
For an empty nester, for example, even trading down to a smaller home would result in a tax assessment that would be a huge disincentive.

Comment by dreaming 08
2006-10-20 12:16:03

Not true, you can trnasfer your Prop 13 discount to another smaller property if you are 55 or older.

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Comment by Thomas
2006-10-19 15:36:29

Good catch re: trade ups. I’ll amend to say that purchases by existing homeowners will also slacken — but more slowly than the previous disappearances of first-time buyers and speculators.

The demand shock from the loss of 1/3 the buyer pool has to work its way through the system, which will take time.

 
 
Comment by ockurt
2006-10-19 14:52:26

nice post, Thomas.

 
Comment by Rental Watch
2006-10-19 15:16:22

As a general view of the market, brilliantly said.

And to add a bit, when banks get tougher on lending (and down payments are required again), we will overshoot on the downside, as homes are less affordable on a per dollar price basis than they were at the beginning of the boom when buyers didn’t need a down payment.

Comment by Loonofficer
2006-10-19 15:36:42

I pray for the day when 20% down is again the norm yet many lenders are still aggressively pushing 80/20 purchases…. when value increases are non-existent. I’m guessing 6-12 months from now they’ll no longer be offered.

Comment by Rental Watch
2006-10-19 16:05:10

Agree. Already, the secondary market for the 20% 2nd DOT is beginning to dry up. Once lenders are faced with keeping that paper themselves, they won’t make the loans.

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Comment by jim A
2006-10-20 04:01:51

I agree. I’m surprised that anyone is dumb enough to buy those seconds these days. It’s like buying stock in a company in bankrupcy proceedings. It might pay off but I wouldn’t want to bet on it.

 
Comment by az_lender
2006-10-20 10:09:45

Dig it. Among my many notes is exactly one Second. At the time when I agreed to it, the home appraised at $324K, the first was for about half of that, and the second was under $30K. Even so I’m nervous about it.

 
 
 
 
Comment by diogenes
2006-10-19 15:21:33

Or…………for a Federal “affordability program” to grant buyers all kinds of write-offs and loan guarantees to get in the game.
Won’t happen? Don’t bank on it. I am doubtful myself, but every time I think the insanity of Govt. handouts to “special” groups will end, another program starts. Let call this “No new home-buyer left behind”.

 
Comment by Neil
2006-10-19 15:57:37

One nitpick:

One of my coworkers bought a flip recently.

Speculators are not yet 100% out of the market. I can’t believe it either… but they’re there.

You can pretty much tell how much of a particular market’s sales activity consisted of speculator activity, by how much sales have dropped in that market

I like this… I hope its true. Where I want to buy has dropped from 60 to 150 sales/month down to 20. Oh… I really hope this indicates the level of speculator activity. ;)

Neil

 
 
Comment by Catherine
2006-10-19 14:33:05

Reading the comments above about the higher end markets selling out and moving to the sticks for “better” quality of life and cheaper prices - I’ve seen LOTS of this, in my area of AZ…LOTS of LA and Bay area freeway refugees giddy about being able to buy huge homes, then signing up for pottery class at the local junior college. But now I’m seeing an exodus of these same people who can’t stand the lack of restaurants, culture, and dang it, the people just aren’t “cool” enough. They want to go “home”. After a year. They weren’t flippers…they really wanted to stay, but now they want to sell in this market. Some have already packed up and left big empty houses. A few of the wealthier ones can carry on with paying for an empty house for a year or so..but that’s about all. And they also left a big inventory of “businesses” (salons, decorating stores, boutiques, etc.) that they started once they got here, after “retiring” from their salaried job back in the ‘hood when they hit the jackpot selling their home in 04 or 05.

Comment by Arizona Slim
2006-10-19 14:47:56

Catherine, are you talking about Tucson? Sure sounds a lot like it!

 
Comment by turnoutthelights
2006-10-19 14:54:29

To echo slim, are you talking about Tracy/Patterson/Modesto area of CA? Sure sounds like it.

Comment by Catherine
2006-10-19 15:26:30

Prescott, AZ…but the scenario is much the same all over…
wonder what these people are doing back in their ol’ neighborhood? Got the job back? Renting? Bought another house at 05-06 prices? There’s gotta be a lot of financial fall out from these nomads.

Comment by Ozarkian from Saratoga, CA
2006-10-19 16:10:03

Catherine,

How are the real estate firms doing in Prescott? I visited there about 10 years ago and considered buying some land. I haven’t been there since but I’ve heard that real estate agents and brokers are all over the place. Are any of them feeling the pinch? Closing up? Just curious.

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Comment by imploder
2006-10-19 16:13:01

Yea, I think you have really hit on something with this. I don’t know how many peoples daydreams I’ve listened to along those lines over the last 3 years, cause in their hearts, they knew the price aberrations wouldn’t last. I’m sure many did this, only to find they weren’t really as ready for a slower pace as they thought.

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Comment by Joel B.
2006-10-19 15:51:51

I’ll admit, I’m biased about Tracy, but my wife and I wouldn’t be leaving were it not for the new job, and I love the town, even if the commute is long. Some places (like Mountain House) there’s very little community, but I have great affection for Tracy. FWIW, I also don’t know many people “leaving” Tracy, there’s a lot of flipping in Mountain House, and people exodusing from there, but why shouldn’t they, there’s no community there. (I’m also leaving Tracy for an area much like Tracy in SoCal.

 
 
Comment by txchick57
2006-10-19 16:14:33

Ditto in Texas. They come here and build some of the most enormous eyesores you’ve ever seen. When they want to go back (and they will), there will be nobody to sell these monstrosities to.

 
Comment by cactus
2006-10-19 18:36:18

” once you leave Cali you can’t come back”

Come-on everybody knows this one……. Its like a Mantra there.

Comment by imploder
2006-10-19 20:09:23

Use to hear that in the late 80’s… and then?……. Hell after the earthquake everyone was leaving, nobody would COME BACK. It’s a horsesh#t statement to say the least.

 
Comment by Melissa
2006-10-20 03:33:14

You can come back! I’m a native Californian, I left and came back, left again and there’s a good chance that we will be back within a year.

Comment by cactus
2006-10-20 11:22:57

I think it can be done as well- moving back that is. Just don’t tie up your RE money in a big white Elephant House somewere in the US that won’t sell to the locals when you’re ready to move back. Cali has its own special RE as an investment way to keep up with inflation. I’m thinking alot of investors who left Cali and bought big will find this out the hard way and be stuck. we’ll see?

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Comment by Claire
2006-10-19 14:38:23

You know I almost think housing is like Deal or No Deal - but takes longer to play. Most people end up losing everything or accepting a much lower offer than the orginal ones, coz they’re greedy and think they can get more, only to realize too late that all the big amounts of money are gone.

Comment by Claire
2006-10-19 14:39:14

Sorry, meant to post this on the “other bits” thread!

 
Comment by mrktMaven FL
2006-10-19 14:58:44

Yes, these GFs will soon be labeled GGFs b/c they refused to sell at 10% from the top; instead they will ride the market down 30-40% then make irrational sales.

 
 
Comment by damon botsford
2006-10-19 14:38:35

“California’s median home price will drop 2 percent next year while sales slide another 7 percent as the housing market continues to soften, real estate economists said Wednesday”

I might have to frame this one on my wall. Thanks for the laugh!

Comment by bubblesitter
2006-10-20 09:13:22

Yes, this is almost as good as that recent Moody’s study that boldly predicted peak-to-trough declines of 15 and 16% - in areas that have already seen y-o-y drops of 8-10%.

Optimistic, much?

 
 
Comment by Awaiting bubble rubble
2006-10-19 14:42:03

“‘We use to have all these different reasons why people put up their houses for rent. Now it’s, ‘I can’t sell my house,’ she said. ‘These are people who have moved to other cities and other states. They’re stressing.’”

My babysitter is looking for a room to rent in the Thousand Oaks area. Today she told me she went to look at one in Simi Valley and it turned out to be some Realtor who bought a bunch of houses and is trying to rent them out “like boarding houses,” and was even trying to convert the family room into a rented bedroom in the house she showed my babysitter. I suspect these people are flippers in trouble. My sitter also said her friend in San Fancisco had found the same thing, that people were trying to rent out single family houses bedroom by bedroom “like boarding houses.” My sitter was not interested in living like that and wondered why anybody would be.

Comment by turnoutthelights
2006-10-19 14:59:13

The Central Valley is starting to show a lot of these. Newspaper ads with 5/3’s in new neighborhoods asking $500 a room. The word here is screwed.

Comment by imploder
2006-10-19 16:17:28

If you were that guy (owner) you probably have trouble holding food down at this point.

 
Comment by BanteringBear
2006-10-19 16:55:48

I’ve seen the $ per room thing here in Seattle too.

 
 
Comment by JWM in SD
2006-10-19 15:15:38

It’s really pathetic isn’t it? Stupid, really stupid.

 
Comment by Rental Watch
2006-10-19 15:23:37

$500 per month to live might look pretty attractive to a junior college student, or a carpenter who hasn’t pounded a single nail in 3 months, or a divorcee who is having issues with cash flow. These rooms will lease up, and it will have a dampening effect on rents in some of these markets.

Comment by bubble buttt
2006-10-19 15:46:53

…. and a dampening effect on the prices of surrounding homes as well. There goes the neighborhood, if you have several parked cars on the street and all the neighbors know what is going on.

Usually brings in a criminal element as well.

Comment by imploder
2006-10-19 16:22:37

Note to Landlord: Come back in 9 months and review state of once “unlived-in” investment. Go home. Cry……….

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Comment by DAVID
2006-10-19 15:50:43

Yeah and then they rent to one who is a freak and somebody gets raped or murdered. Who would want to live with a bunch of people they do not know. Realtor’s are a bunch of whores.

Comment by imploder
2006-10-19 16:27:10

No problem. Will be RENTING to other Realtors………
Fitting in perfectly.

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Comment by Dr.Strangelove
2006-10-19 19:12:12

“Yeah and then they rent to one who is a freak and somebody gets raped or murdered. ”

I don’t know if I’d think on it that extreme, but things can get pretty hairy. Sleazy renters can trash a place quick. I remember a high school buddy of mine that worked for a carpet cleaning company. He saw it all. Said there was a gradation of boxes to mark on the carpet cleaning form…soiled, very soiled and IMPACTED. Good lord–if the carpet’s impacted, just think how sexy the rest of that “investment” looks.

DOC

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Comment by DAVID
2006-10-19 19:54:31

The situiation is odd to me, think about it, a bunch of strangers come together by means of a landlord and rent rooms in a single family residence. None of the renters know each other. I mean what the hell is that, how can they just rent out rooms in a house to a bunch of people who do not know each other. That is nuts. It seems I hear on the news about ever other month a school system hiring some teacher with a criminal record. What’s to stop some sleazy landlord flipper in need of cash from renting out a room to some guy who just got out of prison.

 
Comment by imploder
2006-10-19 20:19:39

Some house holders will hook up with coyote’s and fill their places with recent arrivals. They (the illegals) will pay and be cool. 2 to a room…..make the mortgage easy. Hey, I’ve seen it in solidly middle class areas of the San Fernando Valley….. Prepare for a whole new kind of living in some of these newly minted “estate tracts” …

 
Comment by jmunnie
2006-10-20 05:15:21

Aren’t there laws regulating whether single-family homes can be rented out as boarding houses? (e.g., parking on street, water use, city services such as trash pick-up)

 
 
 
Comment by 4shzl
2006-10-19 17:16:33

This has been going on for years where I live (Santa Barbara) — someone gets a divorce, has to buy their spouse out, winds up with a mortgage they can’t afford, and winds up renting out rooms — usually to city college or UCSB students. My idea of hell on earth. And now, in a year or so, they’ll be upside down on the property. But hey, they own a house in SB where Oprah lives. etc, etc. Beyond pathetic . . .

 
 
Comment by Mo Money
2006-10-19 15:23:44

That’s the kind of Realtor who is going to drive down property values for everyone when the house has constant traffic, noise, police calls and too many cars parked around it. If I was a neighbor I’d have the zoning board on their ass.

Comment by imploder
2006-10-19 16:34:54

Cars will all be dented BMW’s, and Hummers with For sale signs in window. All will have freshly torn off magnet door signs.

 
 
Comment by johnfromia
2006-10-19 15:57:58

As a renter, why would you want to move into a situation like that where it’s pretty obvious the owner is headed for foreclosure? The bank doesn’t want to be their landlord so they could be moving awful soon.

Comment by Rental Watch
2006-10-19 16:11:13

Because it takes time to foreclose (especially if a FB can hold on that much more with a house full of renters at $500 a pop), and to rent an apartment could be 60-100% more per month. You’d be amazed at how frequently some apartment renters will move in order to get a better deal.

This is especially the case if all you have is a few pots and pans and one bedroom full of furniture.

 
Comment by jim A
2006-10-20 04:09:59

Well a dishonest person could move in and never pay rent. It takes awhile to be evicted, especially if you’re paying part of the rent and are willing to go to court when summoned and plead with the judge. In a world of idiot flippers trying to rent out rooms in SFHs, you could probably do this in serial fashion, over and over again. But it would be wrong.

 
 
Comment by jp
2006-10-19 17:05:42

One more reason why rents are going to drop. These boarding houses are sucking out the supply of renters.

Comment by Sammy Schadenfreude
2006-10-19 18:09:21

Good point JP. All the bubble doubters who claim rising rents will make home-buying more attractive, fail to account for two things: The huge potential population of FBs who can only pay for cheap accomodations, and the huge, unused capacity of existing homes to house said FBs. How many youthful FBs will be forced to move back in with Mom and Dad, or into the basements of friends and siblings?

Comment by Auction Heaven in '07
2006-10-19 19:09:10

Funny y’all should mention this little scam.

Been happening here in good old Huntington Beach, CA.

You know those big McMansions on PCH overlooking the cliffs?

Some of them monsters are being RENTED BEDROOM BY BEDROOM, just like y’all been talkin’ bout.

I like the ‘call the city’ approach to ending the problem.

In fact, I just might do that myself!

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Comment by imploder
2006-10-19 22:23:39

Chappelle will answer: …. We got the taxes….I’m riache BE@ch

 
 
Comment by JTZ
2006-10-19 20:57:22

There’s a bubble. Rent increases mean there’s good paying work. It doesn’t negate a bubble.

The 90’s housing slump in CA was a bubble coinciding with serious job loss and recession. The current growth in jobs (in Northern CA at least) will mitigate the severity of the housing slump. Everyone is going to be paying more for this basic expense but renting is still the better deal.

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Comment by cactus
2006-10-19 18:44:47

How nice 10 cars to a house. Just park them up and down the street never mind if you block the neighbors driveway in the morning or block access to trash pick-up, the neighbors will understand.

Comment by imploder
2006-10-19 20:57:10

Already a reality in many parts of LA…..

 
 
Comment by CArefugee
2006-10-20 07:48:01

Dont’ zoning law protect against this if the area is zoned R-1?

 
 
Comment by IEFencesitter
2006-10-19 14:42:24

Next door neighbor (retiree/RE agent) in Rancho Cucamonga still sits in his empty house every weekend with “Open House” plastered all over the block. Nothing but crickets after one year and 3 price reductions. 720k down to 688k. A whole year of carrying two mortgages, property tax bills, upkeep, but still holding out for his wishing price and his commission.

Comment by mrktMaven FL
2006-10-19 15:01:10

Moron!

Comment by DAVID
2006-10-19 15:46:53

Is he sitting there with a whiskey bottle at least? Probably the cheap stuff, having two mortgage payments and all.

Comment by Pen
2006-10-19 15:54:04

“having two mortgage payments and all.”

as though one mortgage payment isn’t scary enough

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Comment by Neil
2006-10-19 16:10:09

I bet it started out as premium single malt. He was happy knowing that 15% was “in the bag” and riches were his. Ahhh, the good days; smiling while sneaking a little extra into his coffee. Schmoozing potential buyers with a kick in their “coffee” too. This was back when the open house generated much more traffic and he had the cash to pay for the lawn service.

But as the traffic faded, so did the quantity of whiskey. Having two mortgages was definately crimping into his lifestyle and if he was going to “postpone” that vacation, we’ll he deserved an extra dosage of his “medicine,” even if it was now blended. But he would sell soon and that knowledge always generated a smile. In the supermarket, as he refreshed his supply, the realtor got into an argument with this punk who mumbled something about “alligators” and the fool was proud of the fact he wasn’t going to buy for a year or two… Well if the idiot wanted to forfit his fortune in appreciation, that was his problem. That night he finished half a bottle in one sitting. He went to sleep slurring “real estate only goes up.”

Now, no one returns his calls. While he would swear he put up the open house signs straight, people comment on how they’re twisted. The staging furniture was long ago sold off; he sits lonely on a stolen milk crate. Thankfully an old buddy taught him how to make whisky and gin in the tub. Its really not that bad once you get used to it. Why the wife thinks he’s overdrinking he doesn’t understand. Now why won’t the stupid buyers get off the fence!

;)

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Comment by mrktMaven FL
2006-10-19 17:06:21

I’ll drink to that…

 
Comment by DAVID
2006-10-19 17:30:18

Neil too funny!!! LMFAO. I am in tears.

 
 
 
Comment by imploder
2006-10-19 16:32:22

No Realist.

Knows better. Does so to have quiet place to drink. Tired of Wife’s “I Love Lucy” re-runs….. and wife.

Cheaper than building Man Room.

Comment by Wickedheart
2006-10-19 19:29:11

“Cheaper than building Man Room.”

Are you talkin’ bout a real man room or an HGTV designer man room?

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Comment by imploder
2006-10-19 21:07:40

What’s HGTV, “Wikki-Heart”?

 
Comment by imploder
2006-10-19 23:50:01

Referring to the : deaths of “Boomers” count..

Misguided

are not your parents and grandparents on the clock? Luckly, you hate them…. understandable. Luckly, you ….YOU are not on the boomer “Death Clock”

make no mistake about it: you win

 
 
 
 
Comment by mugsy
2006-10-19 16:25:55

688K in RC? What the hell has happened out there??????

Comment by imploder
2006-10-19 16:40:16

Cucamonga hot spot. Well worth money for privilege of 2 hour drive to get to that place known as “somewhere”

 
Comment by IEFencesitter
2006-10-20 07:16:02

That’s a “newer” cookie-cutter, small-lot home near the new “Vicotria Gardens” mall. Place turned “upscale” overnight, but somehow all those big trucks look out of place parked outside of Bebe and Coach stores. The really nice areas above the 210 freeway are in the 950 range (bought for 425k in 2004). And no significant price drops yet in these “upscale” areas.

 
 
 
Comment by Pen
2006-10-19 14:45:34

“Negative amortization and interest-only loans have the highest default rates, nearly double the rate of traditional loans, Cutts said. ‘They are performing much worse,’ she said. The number of people falling behind on loans opened in the first six months of 2006 has increased nearly sixfold compared to the same period in 2004 and 2005.”

Of course they are. The last of the buyers were probably the absolute bottom of the barrel (credit quality-wise) I bet and they had to take the biggest and most aggressive loans, because they bought at the very peak. They went for the most exotic loans, because real estate never goes down and incomes double every year or so..right folks?

“‘There is something going on with the ‘06 vintage,’ said Mark Carrington, product manager for First American. ‘The ‘06 vintage, compared to loans of the same period from previous years, are performing much worse.’”

As I wrote above, of course there is somethign about these late 2005 and 2006 loans…after the R/E and Mtge brokers squeezed every last good buyer for all they were worth through 2003 and 2004, all that was left were those that never (ever) should have been “qualified” for a mtge. These were all the people that got out bid, out pre-qualified, etc., during the years leading up to 05/06. Also, they didn’t get the benefit of any increase in home equity what-so-ever.

Comment by Pete
2006-10-19 14:52:00

Are we talking about borrowers, or bottles of wine here? I know its California, but wow that’s really stupid.

Comment by ockurt
2006-10-19 14:57:01

Not really. The ‘06 Vintage is toxic, rather lifeless, and leaves a bad taste in the mouth!

Not worth the price!

Comment by bottomfisherman
2006-10-19 17:12:59

The ‘06 vintage will be selling for less than two buck chuck. Way to much fungus and rot on the vine. Best used to make cheap vinegar.

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Comment by 4shzl
2006-10-19 17:31:30

I seem to remember a song about “stamping out the vintage where the grapes of wrath are stored.” Hmmmmm. Didn’t someone write a book with a title like that, too? Maybe it’s time for an update: the Joad Family Redux — dispossessed former property owners from the Golden State migrating great distances in hopes of finding a better life . . .

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Comment by foreclose_me
2006-10-19 20:38:52

That’s the Battle Hymn of the Republic.

 
Comment by jim A
2006-10-20 04:14:26

hehehe “Terrible swift sword.”

 
 
 
Comment by bluto
2006-10-19 17:20:03

Lots of debt investors speak of vintages because credit tends to move in waves and especially mortgages (with their American call option) tend to prepay at similar times.

 
 
Comment by diogenes
2006-10-19 15:30:22

I was going to comment on this little tid-bit if no one else did.
It seems Mr. Carrington is a total idiot. He can’t believe that with prices well beyond affordability and toxic loans to bridge the gap that the loans aren’t performing well???
The prices are falling you moron! Do you think they want to throw good money after bad??? NO, they are not real smart, but even these dummies can see they are not going to get a free 100k-200k for holding the note.
They are going to WALK>………..here are the keys. Have a nice day.

 
Comment by mrktMaven FL
2006-10-19 15:50:36

Two points: (1) Without exception, only the most gullible amongst us bought homes in 2005/2006. (2) With exceptions, only the most gullible amongst us loaned ‘em the money to buy said homes.

Comment by Bill in Carolina
2006-10-19 17:20:31

How about if the home you bought was a foreclosure. $70 a finished square foot, backing to the golf course in a gated community. Lake and marina less than a mile away. New house built next door sold for double earlier this year. Larger 6 year old house next door on other side just sold for triple.

Sorry, but there ARE exceptions.

 
 
 
Comment by upper_hand
2006-10-19 14:47:29

Buyers have the upper hand now. It feels good. I recently went to look at some new homes from tollbrothers. I remember in years past going to the new home places. They had the attitude that they are in control and can charge the price they want with no questions asked. Not anymore and revenge is sweet. The feeling is totally opposite now. It’s fun to be back in control of the process! Can’t wait for prices to continue to tank. Burst bubble burst!

 
Comment by GetStucco
2006-10-19 14:50:46

“That glut could have a particularly strong effect in Riverside County, driving down median prices here more than 2 percent expected statewide, Appleton said. Empty new houses are particularly common in areas with lots of new construction, such as Riverside County, Appleton said.”

How did they make up that 2% figure? Is someone actually predicting this, or did it just come out of somebody’s @zz?

Comment by Auction Heaven in '07
2006-10-19 19:46:16

It’s a figure based on old data.

Kinda like predicting Fall will come, when it’s almost November.

Comment by imploder
2006-10-19 23:56:05

fall will come, when it’s almost novemeber…. I win!

 
 
 
Comment by sf_renter
2006-10-19 14:53:01

I’ve posted before, even if someone can afford a mortgage for a home in California, with Prop 13 the increase in property tax after it is sold is a killer. I have co-workers that pay over $12K on their property tax, for more than an hour commute to downtown SF. I have 10 minute walk to work - their property tax cost is over half my yearly rent. Keep your money in the Bank earn some interest for the future. Rent and enjoy your money and time and watch from the sidelines has the housing market does it dot.com impersonation. Buying a home in California is a fool’s adventure.

Comment by sf_renter
2006-10-19 14:57:45

Sorry to reply to my own comment, I forgot to add. Everyone @ my office I talk to wants to move or retire outside of California. They bought (have) homes they don’t even want to stay living in. What does that say for the California dream?

Comment by JTZ
2006-10-19 15:55:55

1) California is for the young.
2) The grass is always greener.
3) Earn and save in a high cost area and retire to low cost area.

 
 
Comment by JTZ
2006-10-19 15:50:58

SF renter also has rent control protection. If the rental market heats up (looks like it is) I believe a rent increase is capped at 4% per year. This policy favors longer term commitments which stabilze a community and favor long time renters.

Also, walking and taking a bus means not operating a car @$0.45 per mile. One can also car share in SF which I am told works very well so no need to own one. That’s a huge savings over a long distance commuter. Walking also has health benefits.

It sounds good and which is why the paper said SF has fewer available units listed now than were listed during the internet gold-rush. 10 listed units a day that sell out as opposed to 2 a day.

One would probably want to hire someone to find a good rental place in the SF market.

Outside of SF, there is no rent control, with highest increases +17% in job happy MountainView, CA. Rents are up all over the Bay Area 8-10% which indicates good jobs are available and the economy is holding - for now.

So as long as these new jobs hold out, rents will continue to increase until new construction kicks in. Rent increases are a caused by high home prices limiting inventory (condo development favored over apt. construction) and a good economy.

In this locality (not Sacramento, not Central Valley not Santa Rosa or Salinas) home prices will not crash to some 1990’s level. There are too many potential buyers. My guess is prices will retreat but not below what I consider the floor, that is prices at the peak in 2001 (still significantly lower) when there was a slight depression in home prices before the low interest rate boom took off.

BTW 12k property taxes @1.144% means the property is assessed for about a million dollars or more than the median home price.

Comment by MadJock
2006-10-19 17:11:40

I live (rent) in Mountain View - late last year and early this year rents were up slightly (5-10%), but have already lost that and are back to where they were a year ago.

I still don’t see this hiring and rising wages boom people have been talking about. Wage inflation has been low, and it was only earlier this year that the rate of jobs added went positive since 2001 (yes, the bay area has been losing jobs since then). Funnily enough the local papers all had ‘Is the boom back?’ as a headline at that point. Wow - way to celebrate ‘we’re not losing any more jobs!’

Anecdotally, the number of Open House signs is way up in the last few weeks. For a while I’d notice a lot in San Jose and other areas while few around here, now MV has caught up. The 3/1 house near me at $790k that has been on the market since April 05 is still empty.

 
Comment by SF_renter
2006-10-19 19:22:16

Actually one home is $975K was an upgraded model home east bay. Another is $1.8 MM SF Sea Cliff area. 3rd $875 K plus $100 K SF home for a fix and flip. 4th $850K south of SF commutes by train - cashed out both her and 401Ks to buy and $200K remodel. 5th. Walnut creek $500 K bought 3 years ago - cashed out wife 401k. When I ask how are paying back your 401K loans and mortgage. All I get back is silence and sad eyes. Rent - don’t buy in California. No personal dreams here only work and paying the state gov its utiopian dreams.

Comment by JTZ
2006-10-19 21:08:31

Ouch!! 200k remodel?
Renting in SF is as sane as it gets. If you think you paid too much to get a good apt, wait a few years. Rent control makes it a safer bet than any other locality.

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Comment by lalaland
2006-10-20 09:49:17

Rent control applies to many inner Bay Area cities.

 
 
Comment by jim A
2006-10-20 04:22:22

Well back in ‘99 borrowing against my 401(k) ballance turned out to be a very good move for me. ~40k at 4.875% for 15 years and I was paying the interest to myself. It didn’t count as a second mortgage since it was secured by the money in my 401(k), not the house. Of course in ‘03 I refinanced and put the money back, after the stock market tanked. It is better to be lucky than good.

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Comment by Pen
2006-10-19 15:00:38

” ‘She would sell her house in the Sacramento area for a bundle, move to a quiet part of Nevada and buy a cheaper house — and fund her nest egg with the leftover money.’ ”

I’ve been meaning to post about something related to this…

If say prices in one part of the country, let’s say Elsewhere, USA…fall further and faster than say, Boston, MA..could this possibly cause those bordering on retirement to pull their retirement forward?

It seems to me that, if someone is say 5 years or so away from retirement and can sell their Boston home, take the 1/2 million +/- in equity and buy something decent in Elsewhere for $200K, then they are pretty much free to do it.

I know this is somewhat the equity locust model, but I am thinking of it from a slightly different perspective. Mostly, from the “better get while the gettin’s good”.

So far, here in Boston, days on market are up, sales are down, but prices haven’t really abated much. If a seller was aggressive, they could still sell, buy in Elsewhere..and well, you know the rest…

Comment by turnoutthelights
2006-10-19 15:08:29

Reading the post above I would guess that after a few years, they would stop thinking Elsewhere and start looking for Whereelse.

 
Comment by jag
2006-10-19 15:56:52

Sale prices are down from peak in Boston, for certain. Asking prices may be stuck but I’ve tracked my neighborhood for a couple of years. Sale prices have declined from an average of 25-35% over assessment in 2005 to 0-5% above assessment.
The condo auction a couple of weeks back crossed at prices 30% or more below their original asking prices.
Asking prices are (stupidly) not moving down…yet. They’ll gather steam soon I suspect.

Comment by Pen
2006-10-19 16:30:01

Hi Jag,

I have to respectfully disagree with you (sort of). Sales prices may be down, but they are not down all that much (about 5% down from peak, from my vantage point). I do agree though, that things are selling much closer to assessment these days, but the assessment numbers are hard to use, as they seem to be all over the place.

That condo auction was a farse. Most of those units are not very appealing and the location is crappy. Financial District or not. When they start auctioning units in the Back Bay or on Beacon Hill, then we will know things are bad.

Contrary to what you see, I see many large reductions in asking prices, but the properties I see them on were WAY over-priced to begin with and still are.

I agree that they should gather steam soon, but we will have to wait and see.

What surprises me the most, is that more real estate agencies are not closing up or canceling listings. I would have thought that by now, they would either “force” huge reductions or drop the listings.

Maybe it is still too soon

 
 
Comment by Neil
2006-10-19 16:27:15

If say prices in one part of the country, let’s say Elsewhere, USA…fall further and faster than say, Boston, MA..could this possibly cause those bordering on retirement to pull their retirement forward?

I’m seeing it at my work. There are some smart people who know now is the time to get OUT!

Most importantly, construction costs are starting to drop. Ok, asphalt and concrete are still high, but lumber is sinking like a stone! We have guys planning to sell now, rent for 12 to 20 months and then retire. They’ll buy raw land and build.

This has only started…
Neil

 
 
Comment by AngelaintheIE
2006-10-19 15:27:44

This is the first actually price cut in the IE that I have seen. Still fairly small.

http://www.beazerupdates.com/ebroadcasts/6BZO007/

Angela

Comment by Desert Dweller
2006-10-19 17:04:23

Man, that one in Beaumont looks tempting! - mid 400’s, what a steal. :)

 
 
Comment by GetStucco
2006-10-19 15:28:42

“‘There is something going on with the ‘06 vintage,’ said Mark Carrington, product manager for First American. ‘The ‘06 vintage, compared to loans of the same period from previous years, are performing much worse.’”

Ha - HaHa — HaHaHaHaHaHAHA!

It couldn’t be that prices were pushed to the moon by 2006, thanks to liar and suicide loans, lax underwriting, relentless cheerleading (”real estate always goes up”), fraudulent appraisals, and vanishing risk premiums on CMOs used to seperate lenders from the risk of bad loans? Ya don’t suppose?

Comment by Pen
2006-10-19 15:36:39

C/mon now GS…you know that the pizza boy really makes $150k and that bartenders are making $200k..

 
 
Comment by DAVID
2006-10-19 15:34:30

There are a ton of homes for rent in the Sacramento area. I see the signs all the time. They stay vacant for months and finally they get a tenant. This is how it was in 1991, a ton of rentals came on the market and the rents decreased. Stayed that way for four years or so. The only thing different this time is that the rent will not cover the mortgage payment. At least in 1991 the rent came close to covering the mortgage payment. That is another reason why this market will be worse than the last slow down. Sacramento is in for years of housing pain.

Comment by DAVID
2006-10-19 15:57:04

Yeah, the renting a house room by room thing has been in Sacto for awhile. How are the neighbors going to feel when they have eight cars parked in front of one house. Here is one in Elk Grove, which is in Sacramento County.

http://sacramento.craigslist.org/roo/222948530.html

Comment by Recovering Homeowner
2006-10-19 16:46:09

From the Sacto CL ad:

3. Two adjacent rooms perfect for someone that needs privacy for entertaiment space. Complete with closets and ceiling fans with light.

WTF? “Privacy for entertainment space?” I can understand wanting an extra room for an office, but this sounds like the renter should be running hookers out of the spare bedroom.

Either that, or the renter is gonna be paying top dollar for an extra room for his plasma TV and GameBoy.

Comment by Mole Man
2006-10-19 19:55:40

You should read Stand On Zanzibar by John Brunner. For many people all they have nowadays is the space they go home to, so having a secondary private room to retreat into can be critical for sanity. This is one of the signs that density and crowding is reaching extreme levels.

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Comment by jim A
2006-10-20 04:26:25

More of a Shockwave Rider man myself.

 
 
 
 
 
Comment by tom stone
2006-10-19 15:37:36

here in sonoma county rents are up,but with all the new condo’s,townhomes and sfr’s nearing completion i think they will drop,there are hundreds of condo’ nearing completion in santa rosa alone,and i would not be at all surprised if they ended up as apartment buildings,they will be completed in early february,and i somehow doubt we will get much of a dead cat bounce,the cat has been dead for a while already,and smells awful.

Comment by Pen
2006-10-19 15:41:47

over building of condos always seems to be the final act and always seems to be the pin that pricks the bubble..

 
 
Comment by Stuckee
2006-10-19 15:42:17

“now they’re stuck with the house”

From the old Amos & Andy show (I know some of you are too young to know about this)

“this here Andy is a stucco house, and you are the stuckee!”

Comment by 4shzl
2006-10-19 18:27:35

Wonderful line. Used to love this show when it was on TV. Too young for the radio version, but I went to high school with Freeman Gosdaen’s son. Small world.

 
 
Comment by goleta
2006-10-19 16:04:17

I no longer subscribe to Santa Barbara Newspress to see the whole article, but here is the most gloomy outline I’ve ever seen:

“The prices of some homes on the South Coast may have fallen by 10 percent from the highs of a year ago, a top Santa Barbara realtor estimated Wednesday, warning that he is seeing the first rise in foreclosures in nearly a decade. Speaking to an audience of several hundred homeowners at the second annual Williams Systems Real Estate Conference, the firm’s president, Scott Williams, painted the most pessimistic picture of the local housing market to date.”

Comment by 4shzl
2006-10-19 18:35:03

No, no! Not possible — not here in Santa BlahBlah. Oprah would never stand for it. LOL.

Fudedabout RE for a moment. Do you think maybe we could actually get a local newspaper that wasn’t a total embarasssment? Weird Wendy McCaw, our local demi-billionaire-by-virtue-of-divorce has turned the NewsPress into a total joke.

 
 
Comment by jag
2006-10-19 16:04:51

‘I attribute a lot of the foreclosure activity to really bad planning,’ Jeffry said. ‘They were more than likely in limited documentation loans and didn’t have to provide proof of income, and then stretched themselves beyond their means.’”

Don’t you love that; “bad planning”. So you got buyers to use a no-doc loan because you knew they couldn’t afford the place, you knew they were “stretching themselves” and could only qualify if they lied….and they’re guilty of “bad planning”?

“Jeffry, a mortgage specialist”……..maybe he didn’t put these people in these situations but, seriously, how much “planning” is involved when people clearly without the means of buying something are given the credit to do so?

Comment by jim A
2006-10-20 04:31:12

Which brings us to the crux of the matter. There will always be people willing to borrow their way to the poorhouse. The only way to stop this is to have bankrupcy laws that punish the people lending them money.

 
 
Comment by jd
2006-10-19 16:24:18

“Real estate investor David Russian has had a house for sale in Oak View for nearly six months, much longer than what he had budgeted. He said his current asking price of $589,000 for the four-bedroom, two-bath home might have sparked an immediate sale if that is what he had asked at the beginning. But he lowered the price in step with the market. Now, he is hoping to break even on his investment.”

Note the …”But he lowered the price in step with the market.”… part.

It sounds like the classic chasing-the-market-down” routine.

Add in the carrying costs, and his house is a real drag now.

 
Comment by damon botsford
2006-10-19 16:24:28

Anybody have the scoop on Santa Barbara? SBAR’s been pretty quiet lately. It’s gotta be really ugly.

Comment by rent2home
2006-10-19 17:01:05

FYI, Posted on the Bit bucket area.
=============================
Comment by Santa Bubblicious
2006-10-19 08:19:45
Finally: A Santa Barbara realtor actually acknowledging a drop in prices!

Sorry for the long post, the Santa Barbara News-Suppress is subscription only for many articles:

Realtor: Market forecast gloomy

VLADIMIR KOGAN, NEWS-PRESS STAFF WRITER

October 19, 2006 7:15 AM

The prices of some homes on the South Coast may have fallen by 10 percent from the highs of a year ago, a top Santa Barbara realtor estimated Wednesday, warning that he is seeing the first rise in foreclosures in nearly a decade.

Speaking to an audience of several hundred homeowners at the second annual Williams Systems Real Estate Conference, the firm’s president, Scott Williams, painted the most pessimistic picture of the local housing market to date.

“Whatever the future holds, the present doesn’t look good,” he said.

Mr. Williams’ analysis, which compared homes sold this year to what he described as identical properties that closed escrow in 2005, has found that the prices of condominiums and single-family dwellings have posted a dramatic slump, though the prices of “luxury” homes — those costing more than $3 million — are continuing to rise at a healthy 6 percent annual rate.

For example, though a two-bedroom home on San Clemente Street sold for nearly $1.1 million in March, an nearly identical property fetched only $960,000 in August, according to Mr. Williams, representing an annualized drop of 10 percent.

However, he admitted that there is no way to know whether his numbers, which show a much more pronounced dip than many other recently released figures, are indicative of statistical anomalies instead of larger trends.

Statisticians normally aggregate data for time-series comparisons because direct comparisons of individual transaction data often can be misleading.

Sales figures published earlier this week by the Santa Barbara Association of Realtors, based on the value of all area homes sold in September, put the price of a median home at $1.2 million, or down 5 percent from last year. Prices of condos were up slightly from a year ago, the association said.

And a respected statewide survey by La Jolla-based DataQuick Information Systems, published Tuesday, concluded that median prices across California grew a modest 2.4 percent in the year ending in September, though Mr. Williams warns that this gain “is in the process of being erased.”

Overall, however, Mr. Williams called the long-term prospects for the market positive, explaining that Santa Barbara is faring far better in the current slowdown than some other hard-hit areas, including Florida and Massachusetts.

“There is pain, but (my wife) and I continue to sell a home every two weeks,” he said. “Expect the rate of decline to moderate, plateau and reverse. I would contend that the values you’re seeing now are the bargain in this particular marketplace.”

That sentiment was echoed last week by the National Association of Realtors, which said that home sales are “showing signs of life.”

“Many potential home buyers who have been taking a wait-and-see attitude or taking their time and being methodical in the search process are being enticed by lower home prices,” said David Lereah, the association’s chief economist. “Given a positive economic backdrop of lower interest rates and job creation, we expect sales activity to pick up early next year.”

The future real estate trends, economists say, may carry the rest of the economy with them. Earlier this month, Federal Reserve Chairman Ben Bernanke predicted a “substantial correction” in the housing market, warning that it could take an entire percentage point off economic growth in 2006.

Comment by damon botsford
2006-10-19 17:20:18

Hey thanks! My bad for not checking bit bucket area. It’s funny that they don’t reveal the latest Dataquick numbers for the City of Santa Barbara in that article, because they’re shocking!

 
Comment by 4shzl
2006-10-19 18:48:10

Oh yeah — those luxury homes in SB only go up. I heard this rap in the late 80s too — and then the speculators in Montecito wound up taking 50% haircuts on the over-priced white elephants they couldn’t afford to carry when the market tanked. There is absolutely no gainful employment in this town that will support the prices here — it’s a second home market: BYOI (bring your own income) if you move here. But this clown Williams “would contend that the values you’re seeing now are the bargain in this particular marketplace.”

If you believe this, I have a treasure map I’d like to sell you . . .

 
 
 
Comment by ChillintheOC
2006-10-19 17:28:49

Dude said….Believe me, they’ve been buying. This is a little understood part of this bubble. Any illegal alien can apply for a TIN (taxpayer ID number) and presto-chango they have a credit score.
——————————————————————————-
I’m sure some illegals have been buying, but most aren’t that stupid! Buying overpriced homes is a uniquely American past time.

Comment by lainvestorgirl
2006-10-19 17:55:02

Don’t kid yourself, it’s happening all over LA, illegals/immigrants are buying RE like crazy.

Comment by cactus
2006-10-19 18:49:09

you bet they are, and they will move the family in with them to help pay the Mortgage….. all 15 of them.

 
Comment by peter m
2006-10-19 21:49:54

You are right on, LAinvestergirl! You only have to scan the Scal dataquick sales figures and see the no of sales in the $350,000-$500,000 range throughout LA/palmcaster/IE regions, which would indicate that homes in these ranges moving(selling). If you check out the cities and communities where thse prices ranges are, they are in heavy immigrant communities such as scentral LA,compton,southgate, la Puente, Norwalk,south whittier,wlimington,Pacoima, San fernando, San Bernardino city, ect. Palmcaster and IE is seeing lots of purchases by immigrants from LA.
With the lower lending standards it would be very easy for a Hispanic immigrant family to purchase an older fixer for $350,000 in Compton for instance, and move in ton’s of relatives/extended family members, who could all contribute toward making the Mortgage payment. Just down the street from where i live there is a large immigrant family who occupy/own a duplex with a long double driveway which has as many as 8 cars/trucks parked inside, as well as half-dozen more vehicles parked out in the street.
The immigrant Hspanics(and asian immigrants as well) are very comfortable having several families/cousins/extended family members spread over three generations all living together. This is very common practice in Mexico and Central america, as well as Asia.
Note:I am a strong proponent of greater enforcement of US illegal-immigration laws and securing the borders.

 
Comment by imploder
2006-10-20 08:29:10

Yep, true.

 
 
Comment by Graspeer
2006-10-19 17:55:58

A problem is that the RE industry was betting on those illegals to buy, they generally don’t come out and say it but instead talk about an increase in demographics but that is what they were counting on. Unfortunately the people hiring these illegals are counting on them being low wage so its hard to connect low wage workers with high housing prices.

Just like the RE was counting on the Boomers so that every developer thought they would get the same limited amount of Boomers to buy their McMansions so to did every owner of a “fix it upper” thought that illegals would buy, but they are running into the problem that the number of illegals who can pay inflated prices is even smaller then the number of Boomers who can pay inflated prices.

Trying to have massive home price increases in the face of a world economy which thinks the pushing down most peoples wages is the road to wealth also does not make much sense either.

Comment by 4shzl
2006-10-19 18:54:35

Yup. Alien buyers — they’ll save us. Maybe I’ll start a REIC in Roswell, or develop a tract near Area 51 in NV. X-Files Investment Opportunities. (cue the Twilight Zone music)

Comment by lainvestorgirl
2006-10-19 19:10:06

I wouldn’t write those people off so easily. They work their ass-s off, they’ll do whatever they have to to pay that mortgage. I think a lot of them are going to hang onto their properties just fine.

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Comment by nnvmtgbrkr
2006-10-19 21:18:55

“I think a lot of them are going to hang onto their properties just fine.”

…and end up with what?….an interest only loan with a balance of 550K on a home that’s worth 375K in three years? I believe in deiligence, hard work, and all that crap, but that’s just plain stupidity!

 
 
Comment by Lip
2006-10-19 20:22:50

Roswell, now there’s a hot spot for real estate. It’s actually a nice little agricultural/air force/college town. Kind of like Yuba City in NoCal.

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Comment by IEFencesitter
2006-10-20 08:21:36

The last of the stupid FB’s are mostly illegals, and some are good ‘ol Americans. I rent in an upscale “white” neighborhood with good schools. A house down the block that sat on the market for 6 months finally sold recently at 5k under asking price. Drove by a few days later and saw typical illegal gardeners planting flowers, etc. After a few more drive-bys, realized these were the BUYERS! All 10 of them and their 5 cars. Happy as clams. And don’t forget your average American yuppie couple who has baby-boomer elderly retired Mom or Dad move in to qualify for the mortgage. I have seen several of thos scenarios also. Stupid people do what it takes to get in to RE at any cost.

Comment by CArefugee
2006-10-20 10:21:18

Like I’ve asked before, how come local zoning laws don’t prohibit extended families, or more than one family, cramming into one house? If local communities don’t enforce their zoning laws, it doesn’t augur well for SoCal.

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Comment by nm
2006-10-19 17:48:39

A major domestic concrete supplier today lowered their earnings estimates due to lower than expected demand for concrete. Timber prices are at the same level as 10-years ago (approximately) and falling.

Give me one good reason to gift a buyer of 4 years ago with a ‘dub’ on their house?

Oh, and if you don’t check housingtracker.net regularly, this past week’s inventory and price adjustments were ‘brutal’ in most parts of the country.

This thing seems to be picking up steam as we head into winter.

2006-10-19 18:51:29

You’d think we’d start seeing inventory fall due to withdrawals from the market for Winter. The REIC is already gathering steam for it’s Spring Selling Season 07 propaganda campaign.

Comment by nm
2006-10-19 19:56:30

Yes, you would.

I think it’s going to be a very interesting first quarter. You should have seen the evening news report here in LA tonight. They were showing the late payment stats by county (orange, riverside, etc), and it was fantastic. FB investors are getting dismantled, it’s only going to get worse(better?).They interviewed a guy who works for a credit consulting company and he was talking about people maxing out their HELOCs to pay off their credit cards, then a continuation of the CC spending. The news lady said something like ‘what about all those people using equity to buy Hummers’. It was awesome. I figure that news report alone was worth another 1% reduction in LA prices. LOL

 
 
 
Comment by GetStucco
2006-10-19 20:13:12

“That’s because the glut of new homes is larger, she said; many builders have been unable to find enough buyers to fill entire tracts.”

No problemo — drop the price, and they will fill up over night!

 
Comment by GetStucco
2006-10-19 20:15:41

“The number of Californians who are significantly behind on their mortgage payments and at risk of losing their homes to foreclosure more than doubled in the three months ended Sept. 30. ‘We were putting buyers in homes with loans they could not afford to sustain over the long haul,’ said Bob Casagrand, a San Diego real estate agent.”

Were? Check out p. D1 of today’s WSJ: “More Home Loans Go Sour / Though New Data Show Rising Delinquencies, Lenders Continue to Loosen Mortgage Standards”

WHEN WILL THE MADNESS END?

 
Comment by lainvestorgirl
2006-10-19 21:35:49

What’s the deal with this: I go on Loopnet.com, do a search for California, 4 units +, using the search terms “motivated” or “reduced”. Pages and pages of listings come up, some with all caps claiming that the seller is “highly motivated”, “very anxious”, “will consider all offers”, etc., but the prices on these properties are still outrageously high. 950K for a 4-plex in Northridge?! 875K for a triplex making 42K per year?! If this is motivated, I would hate (love) to see what really desperate looks like.

Comment by imploder
2006-10-19 22:00:45

Just My small minded advice. Stop thinking about investing….. It ain’t gonna be suitably profitable for min. 3 years. Unless you got some real chumps on the line….

Comment by lainvestorgirl
2006-10-19 22:14:13

I agree, but I have to keep up with what’s listed. It’s my addiction.

Comment by JWM in SD
2006-10-20 06:00:04

Great, then keep your addiction to your self. No one else cares.

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Comment by lainvestorgirl
2006-10-20 08:31:38

I see, you are only interested in collecting articles on how RE is crashing, and gloating over all these supposed FBs, not in looking at actual list prices of actual properties, prices that are still sky-high and don’t mesh with the reality you want to see. No problem.

 
Comment by lalaland
2006-10-20 10:01:32

Lainvestor, you are missing the point. You always talk about commercial properties (i.e. Loopnet.com only lists commercial real estate, not residential.) It’s not what most people come here to discuss. Hence, the above annoyance.

 
Comment by lainvestorgirl
2006-10-20 11:55:01

Whatever. No one on here is ever going to buy anything, most are just professional whiners.

 
Comment by JWM in SD
2006-10-21 14:35:55

Ah, I see your true colors come out. Go freaking buy something already stop your whining about overpriced apartment buildings. It’s out place here.

 
Comment by JWM in SD
2006-10-21 14:46:04

“not in looking at actual list prices ” I don’t care about actual LIST prices. I care about what they sold at which reflect the current reality. As far as prices not dropping yet, volume precedes price always in markets. What’s happened to the volume of sales in SoCal in the last several months??? Of course, you wouldn’t understand that implication because you only know “real estate” markets. Like I said before, there are other invests available right now that are much less risky than real estate.

 
 
 
 
 
Comment by Rickoshay100
2006-10-19 22:17:02

I ran David Russian’s name on a website that allows the user to locate all the property that the person owns in a particular county…. the results showed that David and his wife own 6 properties in Ventura County: 1 was purchased in 2004, all cash, 3 were bought in 2005 and 2 were purchased in 2006.

 
Comment by rootvg
2006-10-20 06:48:59

You all seem to be missing something, or maybe I haven’t read the threads deeply enough.

It looks as though we’re gonna have some big changes in who controls Congress. If we end up with Speaker Pelosi and a Democratic-controlled US Senate, I would think we’re looking at some kind of tax increase and/or a continual uptrend in interest rates…

…but what do I know?

My gut tells me there’s one hell of a recession building. Detroit and the Rust Belt in general are in very deep trouble. A friend of mine in Cleveland who owns a construction company called me the other night and was almost in tears. He “shoots” stone into the footer of new homes…his business is down thirty percent.

I don’t like what I see. I don’t like it at all.

Comment by weinerdog43
2006-10-20 07:35:45

“I don’t like what I see. I don’t like it at all.”

On the contrary, I love what I see…the end of this real estate/credit bubble. We’ll finally have a Congress that MIGHT do its job, namely oversight. We’ll hopefully also see an end to spending more than we earn. So if a recession is in the works, let’s get it on and be done with it.

 
 
Comment by az_lender
2006-10-20 10:24:49

“Broker Bob Riggs said sales activity is getting a boost from … an increasing number of buyers willing to lower their sales price”

Hey Bob, we BUYERS have ALWAYS been willing to lower prices!

 
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