“A Little Bit Of An Overbuild” In California
The Monterey Herald reports from California. “Real estate in California moved in September like chilled molasses. For September, Monterey County reported 156 sales, less than 50 percent of the sales volume of September 2005. There were 2,437 homes on the market during September in Monterey County, up from 1,584 a year ago.”
“‘There’s 1,000 extra homes out there,’ said Monterey County Association of Realtors CEO Sandy Haney. ‘There’s too much competition. I think right now the market is at a stalemate. They’re saying it may have hit bottom or it’s close to it,’ said Haney. ‘Now, how long it stays there is the question.’”
Inside Bay Area. “The median value of new homes sold in the Bay Area dropped by 12.3 percent in September compared with a year ago in yet another sign of a housing market that is cooling rapidly both locally and nationally.”
“Contra Costa County saw the biggest price decline for new homes in the Bay Area, a 20.8 percent drop to $551,000. ‘There was a noticeable chunk of condo conversions. That could be part of it,’ said DataQuick spokesman Andrew LePage, adding that new-home builders lowering prices could also be a factor.”
“Scott Kucirek, Northern California general sales manager for Prudential California Realty, thinks that too much new-home inventory is the driving factor behind the price drop. Builders are reducing prices and offering incentives such as upgraded kitchens to draw in buyers.”
“‘They are in a crisis,’ Kucirek said. ‘We are seeing significant price reductions. … A lot of builders are publicly traded so they have to answer to Wall Street.’”
“In the Bay Area, new-home sales were off 22 percent in September compared with a year ago, according to DataQuick. ‘New-home sales are definitely down,’ said Cory Reid, president of Emeryville-based Fountainhead Mortgage. ‘My sense is that there is a little bit of an overbuild.’”
“At the same time, some buyers are apparently sitting on the sidelines waiting for prices to drop, he said.”
The San Francisco Chronicle. “Falling prices, sluggish sales and mortgages that let borrowers pile up debt faster than they can pay it off could put more Bay Area homeowners out of their houses this year than at any other time this decade.”
“By the end of September, 865 homeowners in the nine Bay Area counties had lost their homes through foreclosure sales, easily surpassing the 529 borrowers whose homes were repossessed all last year, according to the DataQuick.”
“About two-thirds of Bay Area homeowners have mortgages with payments that start at a low level and rise over time. ‘There is no time in modern history when we’ve had such aggressive underwriting,’ said Ken Rosen, at UC Berkeley. ‘We have a potential this time to see a much more serious problem than any time we’ve seen in the past.’”
The LA Times. “Last in vogue during Southern California’s previous real estate downturn in the early 1990s, auctions at new-home communities are gaining steam again as builders look for ways to move their merchandise quickly in a sluggish market.”
“An Irvine-based developer whose Aliso Viejo condos were auctioned was able to unload 30 units in one afternoon and avoid piling up losses on its 344-unit development that was still half complete. The auction in mid-October was ‘the first big event’ at a new-home community in the current real estate cycle, said Rhett Winchell, head of residential auctions at Beverly Hills-based Kennedy Wilson, which has been arranging auctions for 20 years.”
“But it won’t be the last, he said. ‘A lot of builders are considering it and a lot more are coming,’ he said.”
The Press Enterprise. “Clarence Noreikas, owner of Riverside Appliance, said most of the year business has been slow at Riverside Appliance compared to the previous few years. ‘We’re not getting the bodies through the door like we were before,’ he said. ‘There’s still people with money, but when they see something going negative they get negative, and they don’t want to buy.’”
“He attributed much of the decline to the cooling housing market.”
The Appeal Democrat. “Sales of local existing homes declined last month, continuing a trend that began about a year ago and could extend into next year, Yuba-Sutter real estate experts said Thursday. Although the median price also declined, the drop was not considered significant, they said.”
“‘There’s a lot more inventory to choose from. Consequently, they (buyers) are taking more time to (buy),’ said Shirley Henrikson, past president of the Sutter-Yuba Association of Realtors.”
“The number of homes sold in Yuba-Sutter dropped from 194 in September 2005 to 120 last month. The median dropped just slightly from $287,000 in 2005 to $282,304, according to numbers gathered by Henrikson.”
“Last year, 189 home sales occurred in September, with a median of $289,000 and 111 last month for $276,000, Lloyd Leighton said. Drops in the market occur when people stop buying, homeowners lower their prices. That causes buyers to wait further for possible better prices, which causes prices to drop further, he said. It’s a good time to buy a house, both Realtors said.”
‘Fresh mid-October stats from DataQuick suggest that this month will mark a full year that monthly sales counts will miss last year’s pace. Worse, if the current trends continue, this would be the fourth consecutive month where sales ran 30% or more below 2005. That would mark the first time such a deep year-to-year drop’s occurred since 1991.’
‘A couple weeks later, another friend who happens to be a real estate agent called me. ‘I think I have a scoop for you,’ he told me, his voice vibrating with gumshoe grit. He’d heard that a prominent East Bay company was training its agents to inflate properties by $50,000 to $150,000, then have sellers return the cash after the close of the deal. Unlike the arrangement with the developer, these deals were concealed from lenders by adding the cash-back arrangement onto an addendum apart from the purchase contract.’
‘A trade group representing California mortgage brokers says the best way to protect consumers from the risks associated with nontraditional loans is to license all loan originators — and not place new restrictions on the loans themselves. ‘We can do what’s right for consumers until we are blue in the face, but it’s not going to do any good unless the bad guys are stopped,’ said CAMB board member Ed Smith Jr.’
How did my friend hear about this practice? A local manager of a prominent real estate company had tipped off my friend’s broker over lunch. The manager, who had been shocked at the behavior, had then gone back and looked at his own agents’ files to see whether the practice ever happened in his own office. “The guy said he found so many in his own files in the past couple weeks, he didn’t want to look anymore,” my agent friend said.
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All the while th AG od Ca sits on his a$$ and does nothing. These guys had to know this crap was going on. If a bunch of schmucks on a blog like us can figure this out - why is no one doing anything about it??
“…the AG of CA…”
(typo’s - ugh)
Why would the AG draw the ire of other elected officials who are banking on the wonderful increase in prop taxes that this generates for the state?
What’s the point in stopping a practice if it benefits you?
The real person responsible for this is the state advisory committee who oversee the lenders.. the “Department of Corporations” (http://www.corp.ca.gov/).
Too bad they’ve been jumping on the bandwagon of ever-increasing housing prices and have been too busy to see the graft and predatory screwing of lenders. I guess it’s just consumers that need protecting.
Once pension funds fail over the crash in the MBS market, we’ll have the backlash to all of this. Then lending companies will flee Cali. When that happens, that’s the second downleg of the housing bust.
The guy wastes so much time trying to push 11 bullets into 10 round manazines he’s oblivious to the real world.
“That would mark the first time such a deep year-to-year drop’s occurred since 1991.”
2006 = 1991
2011 = 1996 (Recovery begins)
This bubble is at least 3 times as big as the one in the early 90’s. I’d say you’re looking at a recovery in 2021.
Like that handle…
“inflate properties by $50,000 to $150,000, then have sellers return the cash …”
What a bunch of crooks! But there is still one problem…Where are they going to find the buyers? I suppose there is still a few ignort buyers that pay too much for housing out there, but with all the press lately, I expect those stupid buyers are dwindling.
You not only need “buyers” but criminal “buyers” to participate in this fraud.
Here is a good example….Speaking of SMOKIN’ HOT MORTGAGE FRAUD, this could be a DOUBLE DOSE with two houses in one deal. Lincoln, CA (Sacramento area) JTS Estates at Lincoln Crossing. Originally, they were purchased by a Realtor/Flipper for $659,000 & and $665,000 in May 2006. She listed them for sale herself and they languished for months. JTS, the builder is dumping inventory at $200,000 under these prices and is having trouble selling their stuff on this street. SUDDENLY these two homes sold for $785,000 and $789,000. They closed with 80%/20% financing to the SAME BUYER. (How will he occuppy BOTH, or can he get 80/20 investor loans?)
It appears these are fraud, as the comps won’t support the sales in this market. Bigger houses are closing for $630,000. Are there kickbacks to the seller and buyer from the loan proceeds? Are the lenders (Long Beach Mortgage, and First Franklin) that deeply in the dark, or do they just look the other way.
Addresses: 1329 & 1323 Hillwood Loop, Lincoln, CA. They are still vacant 60 days later, and until a few days ago were relisted for sale on MLS and were “Pending” again at a HIIGHER PRICE! The same Realtor/Flipper owns 2 or 3 more houses on the same street with friends and relatives. Anyone want to do a cash out purchase? You get a house and $100,000. How does that sound? Oh wait, you also get a $785,000 mortgage…..but perhaps, when all is said an done, you’ll get a free place to live for 5-10 years…..in Folsom!
Anyone with knowledge of the local market can spot this kind of fraud with a quick glance at the MLS. It takes all of about 10 seconds to notice that the sales price has been inflated over the asking price (sometimes the agent goes back and INFLATES THE ASKING PRICE after the fact- but you can still find the old price), and that the sales price is completely out of whack with the entire neighborhood. It would not take much to stop this kind of nonsense, but apparently, no one has cared to. Maybe with documented price declines now on the record, the lenders will begin to “care”.
Deb, i haven’t noticed a 20% workforce cut yet in any major RE brokerages round LA. Is it still in the works? Countrywide did cut more on the banking side.
If it’s an older neighborhood with wider variety of homes, fewer sales (not a new subdivision) and instead of listing at $1.0MM, they decide to list at $1.1MM, it is harder to track. They sell at $1.1MM, with the $100k kickback.
You can’t track that fraud.
Lets not forget fake multiple bids which are never documented, cannot be confirmed yet so many overpaid with full disclosure.
Long time trick (fraud) of the trade here. Provide the original purchase contract to the lender, then hide the addendums for a variety of reasons (any of which would kill the deal). I’ll tell you, if any securities agent pulled the kind of crap that goes on regularly in my biz they’d be toast. This is just tip-of-the-iceberg here, it goes a lot deeper.
nnvmtgbrkr - you’ve always got some good info into what’s really going on in RE. I’d love to hear some of the other stuff (”it goes a lot deeper”) that you’ve heard about.
Your real estate friend should turn this real estate company in . The agents know that this is fraud and it also will mess up the comps for taxes . This is really low that a office would be training it’s agents to do this and the broker should go to jail .
You know it’s more than the Broker and agents in on this one Wiz
Yeah yeah, mortgage BROKERS want to license LOAN ORIGINATORS. Swell, as long as they don’t make us REAL LENDERS get a license. “Securitizing” maybe should require a license, why should I have a license to write a note I am actually going to keep?
I just sent below remark
Most people with half a brain know what comes out of David Lereah’s mouth is basically BS. When is NAR going to get it too?
Join me if you want.
http://www.realtor.org/Icreqonl.nsf/Feedback?OpenForm
NAR does get it. That’s what he’s getting paid for.
“Drops in the market occur when people stop buying, homeowners lower their prices. That causes buyers to wait further for possible better prices, which causes prices to drop further, he said. It’s a good time to buy a house, both Realtors said.” ….yada, yada, yada.
Enough already. It is a terrible time to buy a house. The only less intelligent thing you could do is buy a house 12 months ago. The best time to buy a house will be in 24 months. Rent, save, watch the market drop. You have NOTHING to lose. Do you think the market is suddenly going to turn around, appreciate 20% in a month and leave you in the dust….NOT!! After the we hit bottom, it will take years for appreciation to kick in again. In fact, unless you pay maximum taxes, it may not even make sense to buy vs. rent, until we begin to see a litte appreciation again.
Haven’t you heard the news? This time is different — every other bust in the history of US real estate took 7+ years to play out, but this time, prices are going to go through the roof after a short, painless correction that will end some time in 2007. This is what David Lereah, Leslie Appleton-Young and Chris Thornberg said, and so far their predictions have been 100% accurate…
“prices are going to go through the roof”
They will once Ben gets his Helicopter warmed up.
Of course you may need a wheelbarrow to by a loaf of bread but that discussion will be for future blogs
Which is why there’s a “Money & Metals” blog. Ben (Jones) is so far ahead of the curve it’s scary.
Well, it is scary. You can be too far ahead of the curve… calling the housing bubble in 2002 for example.
Gold may drop before it goes up… and that is said as someone who is invested there.
Gold and stocks live in parallel worlds, so far as intervention is concerned. Everyone knows things are not good when gold is soaring and stocks are crashing, so there is a natural policy bias that favors measures to keep stocks going up and gold staying flat or dropping.
Are you alluding to illegal manipulation/intervention by our gov’t in an attempt to show a tame inflation rate? Hmmm.
Auger-inn
Just wanted to let you know that your posts were fu*kin Funny! You are a legend and you rock! We are not worthy!, We are not Worthy!……
This topic has already been beaten to death on Mish’s blog. Inflation will not save housing, because wages won’t keep up. They’re not keeping up right now.
Bernanke knows this full well and if the US does get more inflation, it will be to shaft foreign bondholders, not save FB’s.
I agree, although what is the liklihood of them shafting foreign bondholders given current circumstances?? I say not likely which means that rates may not go down any time soon.
don’t worry you’ll get inflation all right. Ben’s cure for all evils is inflation. After all it worked for big Al.
The problem is the inflation card is arleady in play (put on the table in ‘96). Ben thinks he can pull the same trick twice but will fail miserably. He doesn’t have the credibility or the skill to fool people twice.
I don’t know about you guys, but I’m starting to smell panic in the air. Fx markets are looking strange this week (very strange “Step up” pattern). I think people are looking around for their nearest exit sign.
Wages will stay flat. There are two huge wage job sinks: China and India, a third is eastern Europe (10 years for Poland, Romania, Bulgaria, etc to improve their English skills- Russia has too many problems…but don’t discount them) that will be completing with the USA high pay knowledge workers. On the highly sticky jobs that are hard to outsource - 15 MM illegals are here to bid wages down. A house/home has become a personal ATM. How this comes to end and a home once again become a place to hang your hat I believe will be very painful for individuals and the USA economy. The canard - God’s not making more land - ask Hong Kong go vertical.
SF renter
Illegal Aliens, along with job exportation to China and India, are the final, financial “checkmate” on US wage earners. The middle class is toast. Attempting to regulate the border is immoral as the border is “imaginary” …. at least that’s what’s others have posted.
OK…..fine doesn’t matter to me, I already got mine. What about everyone else legally living in the US?
Can you say $4 per hour?
Yea, if you watch the talking heads on T.V. a buzzword that hasn’t really picked up steam is “retrain”. I’m getting emails from guys in India who want to process loans for me at 1/6 of what it cost me here. Architects(sp?) are sending work out to mexico and getting work down at 1/3 of what it costs here $4 bucks an hr try $4 pesos
Ben’s helicopter is going to run into a lot of headwind when foreign bond market investors catch a whiff of inflation, despite all the “inflation targeting” rhetoric. But maybe this is no big deal, provided that “someone” can “somehow” keep a lid on the long bond yield.
Genesis says, ‘7 years of feast, then 7years of famine’. No different this time.
OT, I need a kind soul out there to post the Dataquick numbers for Ventura County for me. I can’t load the page for some reason and I really need that info. I am trying to convince my girlfriends parents NOT to buy an investment property right now.
Please help. I don’t need the link, I have that. I just need the numbers, the chart won’t load for some reason.
Thanks.
Here you go (may need some formatting):
Ventura County 810 $598,500 $605,000 -1.07%
CAMARILLO 97 $620,000 $659,500 -5.99%
FILLMORE 8 $457,500 $550,000 -16.82%
MOORPARK 48 $635,250 $594,500 6.85%
NEWBURY PARK 40 $727,500 $640,500 13.58%
OAK PARK 14 $755,000 $712,000 6.04%
OAK VIEW 5 $573,000 $639,500 -10.40%
OJAI 19 $635,000 $589,750 7.67%
OXNARD 126 $591,000 $592,000 -0.17%
PORT HUENEME 33 $432,000 $432,500 -0.12%
SANTA PAULA 14 $463,000 $461,500 0.33%
SIMI VALLEY 190 $555,250 $584,000 -4.92%
THOUSAND OAKS 81 $713,500 $660,000 8.11%
VENTURA 111 $549,000 $599,000 -8.35%
WESTLAKE VILLAGE 16 $847,500 $1,206,000 -29.73%
Thanks, Chris. Can you please post a link where you found these? I’m having trouble getting the ziplat tables. Maybe everybody is tracking their hourly depreciation from their cubicles or something.
you are fantastic, thanks so much. this should do the trick.
Tooting my own horn here a little…From today’s OC Register, a letter from yours truly pointing out something that should have been blindingly obvious to the reporter:
“Unwarranted optimism
The article, “U.S. housing prices sink 2.5 percent” [Marketplace, Oct. 26], contained this gem of logic: “But national [Realtors]association officials insist that the decline will be short-lived, noting that the price decline comes on the heels of one of the biggest housing booms on record.”
Doesn’t what the Realtors are noting support the opposite conclusion? What are the odds of “one of the biggest housing booms on record” being followed by the shortest-lasting correction? Until recently, the boom of the late ’80s was “one of the biggest housing booms on record.” It took years for the subsequent correction to run its course.”
Nice work, keep up the fight!
Thomas,
Keep up the great work! We need to win over the hearts and minds of the American people…
Yeah, we should all start writing to MSM not just to each other.
Don’t worry, what we post here shows up regularly in the MSM…
“‘They are in a crisis,’ Kucirek said. ‘We are seeing significant price reductions. … A lot of builders are publicly traded so they have to answer to Wall Street.’”
No need to answer to anyone — builder stocks always go up.
Not today baby!!!!!!
Time to buy the dip. I know their prices have dropped by 2%+, but this has happened on a regular basis for months on end punctuated by inexplicable euphoric runups on bad news.
Another bear capitulates.
I am into Pulte Put options for Jan, 2008. Going back 5 years with charts, graphs, research…this HB stock is got to explode. Plus, my personal dealings with this sleeze bag company make it all the sweeter. I believe book their year end Nov 30, 2006, and the next 90 days for all home sellers is the worst part of the entire year. It’s been mind game where the numbers show trouble and the stock goes up. The Trend is Your Friend” No amount of spin is going to save these guys this time. I expect BK from one of them soon, and that will be the final nail in the coffin.
If you are going to play the option card, I would be all over KB Homes. Especially since they haven’t filed their quarterly report due to stock options. I’m going to wonder if they are going to claim a decrease in revenue and blame it on incorrectly issued options instead of what it really is….a slowing of sales in their primary product.
“‘There’s too much competition. I think right now the market is at a stalemate. They’re saying it may have hit bottom or it’s close to it,’ said Haney. ‘Now, how long it stays there is the question.’”
Stalemate? Not. More like the sellers are close to tipping over their kings…
I had to read that guy’s quote twice to make sure I read it correctly.
A thousand extra houses hit the market and that means it’s the bottom? Like what , we just stay the course now , price wise, for a year or so until it’s all cleaned up and hope no other FB’s list additional sh*tboxes in the meantime? For the love of God , why do they even ask these idiots for a quote? Can they possible be that obtuse? And these are the people who are supposed to have a finger on the pulse of real estate. Reading all these soundbites makes me realize that the economy will get far worse than origianally expected. There is just no conceivable way that these hammerheads could possibly do anythying else for a living! I mean maybe sell mattresses and stuff , but how many of them are needed? It’s downright frightening.
Agreed. It sounded so contorted that I went to the source story to check. Please feel free to explain to Sandy why having 15 months supply going into the holiday season DOESN’T mean Christmas bonus…. ceo@mcar.com
“About two-thirds of Bay Area homeowners have mortgages with payments that start at a low level and rise over time. ‘There is no time in modern history when we’ve had such aggressive underwriting,’ said Ken Rosen, at UC Berkeley. ‘We have a potential this time to see a much more serious problem than any time we’ve seen in the past.’”
Two thirds of Bay Area loans are suicide notes? Uh-oh…
Can you say rate cut? And a massive campaign already being formulated imo to do whatever it takes to get the FB’s into fixed rate products. Relax standards even further. Fix the rate but extend the term , extend some options and grace periods. A whole new breed of loan even. Just get these idiots into the fixed rates and the house induced serfdon they deserve. 2/3 of the Bay area in toxic loans, never mind FL AZ LV etc etc? There is no way they can continue to raise rates. Inflation numbers will simply have to be massaged for a while. I don’t envy the Bernanke for the sh*t-house that Al threw in his lap.
Can’t raise rates without the housing market crashing. Can’t lower rates without the dollar tanking and inflation running away!
What to do? What to do?
Hint: GOV’s like inflation.
but they like foreign bondholders even more…
Alot of the suicide loans are tied to the LIBOR. Apparently lenders didn’t exactly trust that the FED would raise rates long term.
Josh
Doesn’t work if you can’t get anybody to buy the paper. Banks are undercapitalized and can’t hold the loans on their books. In a capital crisis, rates go UP, not DOWN, to compensate bondholders for risk.
Right, which is the why the Fed will not be able to use the printing presss to bailout the FBs and their enablers the Mortgage Industry.
Unless “someone” can “somehow” figure out how to keep the lid on long-term T-bond rates. (Didn’t I read something recently in the WSJ about an investigation into the big Wall Street bond traders to figure out who is doing funny things in the T-bond market? I sure hope they catch the bad guy…)
I smell an opportunity:
1.) Stand on the Golden Gate bridge and ask the jumpers “Can I have your shoes and watch?”
2.) Sell the merchandise to tourists
3.) Profits!
I always ask if I can have their stereo.
gees guys, these are FBs. They have Ipods, Cell phones, PDAs Thumbdrives, designer watches and all kinds of other great bling bling.
You could probably start up a gift shop with all the crap people carry these days. Although you may have trouble selling the stuff as everone in CA will already be in the line waiting for a spot on the bridge.
Can one of the brilliant minds here start a chart. One axis would be numbers of jumpers, the other axis would be foreclosures, defaults, inventory, declining prices. Endless possibilities.
Don’t laugh, but today is the first day I am seeing this blog on my very own computer. Using the money I saved by not participating in the housing crash.
And that’s on primary residences. Don’t forget that the bay area is full of mini-Trumps who all own stucco in Sacto, Phoenix, Vegas, etc. But I’m sure THOSE properties were financed with 20% down and are cash-flow positive. BWAHAHA!!
I’m skeptical that 2/3 of all homes in the bay area mortgages are ARM or worse.
BTW CNN listed top 10 worse markets to own a home: baksersfield, fresno, modesto, sacramento, stockton and nearby Reno made the list.
Wow that’s a whole lotta armpits & a$$holes in one list.
I am skeptical too. The number should be closer to 90%. Last quoted number was 80%, and the median price was 725K.
Do you even know who Ken Rosen is? Because I personally would put a lot more weight on his ballpark estimate than your kneejerk opinion.
(responding to SFer, not Ken Best…)
Oops — I meant JTZ, not SFer (need more coffee…)
It’s not disrespectful to question a single sentence. It’s not knee jerk either. It is common sense to question a stat. that it bears no resemblance to personal experience.
Of the many bay area home owners I know with mortgages, none who bought prior to 2000 have ARMs. Only recent buyers have ARMs and they are not 2/3 of the current mortgage holders.
The only way I can get to 2/3 is if the figure includes those with some balance on a home equity line of credit.
In my circle of friends, buyers prior to 2001 don’t. They all locked in 30-yr or 15-yr.
2/3 of which how many BK.
Shit up to a third of Bay area crap foreclosed!!!!
Can you guys imagine how it will lood with 1/4 of all Bay area homes owned by who? Yes, I know the mort. holders, but who will retail these? In the 90’s it was the banks outside the courthouse and to a more limited extent the Gov. foreclosures for taxes, etc..
I see quite a business of auctioning these from pile of crap documentation to cash in the account of the title holder. It will cost money too look at these bad loans and act on them, won’t these bondholders jointly open up large operations to get rid of this property?
No Way.
I saw the same article today but think that claim in the paper was mistaken. Probably the author meant to write 2/3 of homes sold over the last X years. Where X is less than 5.
Think about it. Do 2/3 of all the home owners you know fit this description? Not in along shot for all the home owners I know or myself. Not on my block and not at work.
What makes you think the home owners you know or yourself constitute anything like a representative sample?
I said I’m skeptical. Why wouldn’t anyone be skeptical of such a significant stat appearing only once and in a single sentence?
I’m betting that a qualifier was left off, like 2/3 of loans in the last X years.
I’m surprised at how readily this 2/3 figure appearling in a newspaper article is believed, no make that embraced.
I think that 2/3 figure is fuzzy math. You’re probably right in that it’s 2/3 of purchases over the last x years likely 5 years. But the real ugly number is that it’s probably over 80% of purchases in the last 3 years.
Have a friend here in CA that just bought a 3 bed condo to expand his growing family into, they’re squeezed into a 2 bed just now. Unfortunately he’s not sold the old place before buying the new one, so he’s going to have 2 mortgages to pay until someone takes it off his hands, and it’s the wrong time of year to be selling. I’m worried he’s going to be one of the ‘innocent victims’ in this whole thing - he’s just looking for a place for his family to live in, not to become a millionaire overnight. There’s going to be a lot of them caught up in the downturn, alongside all the ‘Caseys’ that deserve everything they have coming.
Also - Does anyone have any solid info or suggested reading on how to go about purchasing foreclosures, pre-foreclosures, bank reposessed properties etc? I’m not thinking about for now, but rather getting myself up-to-speed on all the ‘gotchas’ for when this becomes worth considering in a couple of years’ time. It seems to be a real minefield rigged towards the pros and the connected from what I gather.
Purchasing foreclosures, in a marketing where inventory is going up, rather than down, and most of the inventory has been sitting around taking up space for months and months…
…is not a good idea.
Wait for the overpriced home of your choice to 1) Get Foreclosed 2) Go to Auction 3) Not Sell at Auction 4) Go Back to the MLS as a REO owned by the bank 5) Let the bank cut the price until it sells, since the bank does not have HELOC’s or Pride or Neighbors.
In a nutshell, that’s your best strategy.
And yes, it requires patience.
market=marketing.
Eef eye cud onlee speel.
I have no intention of catching a falling knife. I won’t be buying for a while - I’m staying in my nice reasonably priced rental that’s a 10 minute walk from work, restaurants, bookshops, a supermarket and a theatre, and saving my cash. I’m prepared to wait 3, 4, 5 years if that’s what it takes. I bought last time at the bottom of the bust in 95, and that’s now a nice positive cashflow rental apartment for me - I’ll be aiming to do that again, no matter how long it takes.
Thanks for the comments
“I have no intention of catching a falling knife. I won’t be buying for a while - I’m staying in my nice reasonably priced rental that’s a 10 minute walk from work, restaurants, bookshops, a supermarket and a theatre, and saving my cash.”
Sarcasm on.
But you’re renting–you’re throwing your money away. You should have your own place and an hour commute each way. Renting is very uncertain–you are completely unanchored–you could lose your house at any time. It’s a buyers market, you should get in now while this temporary dip is happening.
Sarcasm off.
Sounds like life is good. Patience pays.
Yeah, sounds like a good plan. Now, we just some of the rest of you to go out there and buy some houses to knock down those all-important comps. Go get started. We non-knife-catchers thank you in advance for your noble sacrifice.
“Sarcasm on.
–snipped–
Sarcasm off.”
Hey, this is the 21st century!
…
“Does anyone have any solid info or suggested reading on how to go about purchasing foreclosures, pre-foreclosures, bank reposessed properties”
MadJack….I first entered the market in the mid 1990’s buying an reo duplex in Los Angeles. I have a hunch that you are not old enough to remember that. Coming out of the most obsurd price runup in history, i know it’s hard to imagine bank foreclosures sitting on the market with no offers, but it will happen. it’s not that much of an “insider” deal once we’ve hit bottom. cash will be king in a few years and you will get the deal you want…foreclosure or not. as far as your friend is concerned, what happened to common sense? he made a very foolish decision to purchase before selling. he should have sold (provided he could) and then rented a larger place until this mess shakes out.
good luck.
I’m 34, and I bought in 95 after watching the last big downturn while in university, so I do remember it, but you’d only have to go a couple of years younger than me to have it not register at all.
What’s funny about that is that people are actually jumping at anything that has that label on it right now. Why would someone want to be buying preforeclosures/ foreclosures at this stage of the game? The army has already hit the street and cruising daily for anything that has a piece of grass out of place.
“Unfortunately he’s not sold the old place before buying the new one, so he’s going to have 2 mortgages to pay …I’m worried he’s going to be one of the ‘innocent victims’ in this whole thing”
Is his 2BR house listed for a dime more than he paid for it (or to be fair, adjusted for inflation-adjusted historic returns)? If so, greed, not stupidity, is preventing him from selling his first home.
No offense to your friend, but I’m so tired of hearing these tales of woe. Boo-hoo, someone thought that their $250K house that they bought in 1997 would sell for $1M today (what their neighbors sold for last year). Now they have it listed at $850K and are threatening to rent it out because they refuse to GIVE it away.
He hasn’t put it on the market yet. Part of the problem will be that now he’s bought the 3 bed, he’s tied to a price he ‘has’ to sell for, rather than what it will get.
He’s a good guy, but tends to believe the mainstream propaganda fed to him (like most of the US), so my protestations of a dead market sound ridiculous to him. He’s heard me say for at least 2 years that real estate is overpriced, but has watched the prices continue to go up. Like smart people before him (Newton?) he’s capitulated at just the wrong moment - mostly driven by his growing family.
He didn’t get in this to get rich quick. He believes the mantra of the market and hard work will see you right in the end, and get you the American dream. He saves, doesn’t live a profligate lifestyle, and tries to raise his kids well. He’s not one of the ‘I won’t give it away’ types. At least not yet.
Some people deserve the scorn and what they have coming to them. He isn’t one of them.
“…so my protestations of a dead market sound ridiculous to him.”
Does he watch tv, know how to read or own a computer? How anyone could not proceed cautiously at this point is beyond me.
TV is still usually pretty upbeat - it’s only been in the last 6 weeks or so that gloomy stories are hitting the headlines repeatedly. And when you’ve got three young kids and a full time job plus a part time job, it’s hard to spend the time it takes to locate and read every blog opinion out there. Given the choice between sleep and blogs, it’s a pretty easy choice after 12+ hours of work.
Remember, despite the number of blogs out there, bulls still outnumber bears, particularly when you have the anecdotal evidence of all the people around you saying ‘my house went up 100k last year’ (yes, I know many of them will be/are in trouble but that’s not what it looks like on the surface). It’s only been in the last few weeks I find support in large groups as to the situation in the housing market - for about two years I was the ‘disgruntled renter who is bitter he missed out’.
Most people around scream ‘buy!’ and the SUVs in the driveway say they’re right.
“He’s a good guy, but tends to believe the mainstream propaganda fed to him (like most of the US), so my protestations of a dead market sound ridiculous to him. ”
Same sad story here. Tried to talk a bud of mine out of buying a SFR with his “gotta get it now” fiance’ in 05′. Now they’re stuck in an overpriced house here in the central valley (CA.). They bought thinking the equity’s going to go through the roof, and now it’s looking dicey. It’ll be hard to watch em’ lose faith over time as things turn uglier.
DOC
I think that’ll be a common story. I wonder how many divorces will be the result of this downturn?
“I wonder how many divorces will be the result of this downturn?”
Plenty, and it’ll be all [his] fault too!
not to sound harsh, but “innocent victim” = the guy walking down the sidewalk that gets run over by someone on a cell phone. He may be nice, not angling to get rich, but in that case he falls in the Homer category –” DOH!” . We all occasionally screw up. The hope is that being a DOH will teach him a lesson without costing him both places to BK.
Wait a second! You said “…unfortunately he’s not sold the old place before buying the new one”. You did not mention that he hasn’t even put it on the market yet, LOL.
And with two jobs and a family to support? He may be nice, but he isn’t very smart. Save your money paying for listings of foreclosures. Just buy his….
“wrong time of year to be selling” … well, it is indeed the wrong time of THIS year. But a better time than any time NEXT year. Have them try a no-reserve auction.
Here in Silicon Valley, Santa Clara County y-o-y volume is negative for the 22nd straight month (since December, 2004) and 25th out of the last 26. (Putting the volume peak at August, 2004.)
For more stats, check out: http://www.viewfromsiliconvalley.com/id273.html
To keep up with, “What’s Really Happening,” in Silicon Valley, please visit,
http://www.viewfromsiliconvalley.com
Thanks!
Does anyone know the methodology used to calculate “months supply” of homes? Does it use the current inventory along with recent rate of home purchases? If yes, the “months supply” is likely grossly understated. (Since number of homes purchased per month is likely to consider its slide from record highs.)
I believe the way its usually done is to divide current inventory on the market by the average number of sales over the past year (to help wrinkle out seasonal affects). So yeah, per month rates are probably inflated quite a bit because the slowdown didn’t start in most areas until some time in 2006 (although 2005 marked the beginning of the end in places like Colorado).
Furthermore, the number of houses on the market is almost certainly understated because a good number of people want to sell, but are hoping that things will improve next spring. That’s when the real glut is going to send prices down. Once foreclosures hit in full force and banks are trying to clear properties from their books, there will be a 3 or 4 month stretch in which prices in some markets will start descending 5-10% per month. That’s going to happen sometime in mid/late-2007 or early 2008 at the latest, IMHO. And that will be the time to buy, as prices will probably stagnate until 2010-12.
Even better is that the treat the homes pulled from the market the same as a sale to keep the number artificially low.
When in reality most pulled listings will reappear at a magical time in the future when the “owner” thinks he will get his wishing price.
Not to mention sales that are counted in this month’s numbers, but are destined to be cancelled–tending to overstate sales.
When the avg YOY sales number includes the months when the drop off the cliff started and excludes the way earlier months where sales were still OK AND the inventory run up lookout below.
Mathematically there should be a period sometime in the spring where the months supply skyrockets. This time period should also coincide with a bunch more inventory hitting the numerator when people try again this spring.
Unfortunately just before this happens NAR, CAR and the rest will stop publishing the months supply and try to come up with a bogus reason why, just watch they’ll start hinting at reasons to do this soon.
I want to know everyone’s prediction for when the months supply number published by CAR/NAR etc will exceed 12 months. (My prediction: Never, see above).
I want to know everyone’s prediction for when the months supply number published by CAR/NAR etc will exceed 12 months. (My prediction: Never, see above).
I think that it might happen for SFH, but almost certainly will in many markets for condos. 2007 is going to be remembered as the year of foreclosure across the country. Its going to be a level not seen since the Great Depression, possibly even worse. Tens of thousands of homes will be REO properties that all hit the market around the same time and banks (or whatever entities own the mortgage) will want to clear them for the books ASAP. But it will take at least one quarter or so of slow sales before REOs are reduced in price to a point where a large number of people are willing/able to buy them.
Condos are going to get beyond ugly. In quite a few markets, inventories that build up could be measured in years, not months. In some ways, 2007 sadly might be a “good” year for a major hurricane to hit Florida (or an earthquake/flood in CA) that destroys massive amounts of homes (hopefully most of them vacant).
You’re right, it won’t. They highlight DOM, not months inventory. DOM they can (do) screw with relentlessly. No point in recapping what’s been so diligently identified here many times before.
Now, if you wanna talk about when the Months Supply > 12 (maybe using a 12mo trailing sales average), I’d guess at Nov ‘07. Anyone else?
“It was a little scary because it went so fast,” said Kern, whose winning bid was $394,000. “This was such a great opportunity to get a good deal.”
Question for you Californians: From the LA Times article someone paid the above amount for a condo at auction. Is this really a good deal? Am I wrong to assume the ‘crazy bidding’ we witnessed yesteryear left the living room and now resides in the ‘auction room?’
Lot of auctions in the news lately.
it’s a crap deal. 30 knife catchers…30 more FB’s. Did you read where the investors from L.A. fell flat on their face with their “big san diego county auction.” i love it.
From same article in LA Times……Deja vu all over again… I could of sworn the mantra was the builders would not over build, like they did in the 90’s? Now it’s a “chief earmark” ? ……Uh, huh Right…..
“These auctions are well suited for developers of new-home communities because a surge in unsold new-home inventories is one of the chief earmarks of the current housing slowdown. The supply of unsold homes in all stages of construction has tripled in the last year, data show.”
It is a horrible price. In 2001 You could buy an 1800 sq ft house in Fountain Valley with great schools and a nice community, for the exact same price. Add higher property taxes, 1.25% of purchase price, and association to that and you are totally ******! Let’s not even talk about the fact that those condos were apartment conversions. The idiots have out numbered us for years.
nope, no deal. The best part, though was in the full story. Two of the buyers are in mid-20’s, living w/their parents. One, an accounting clerk (bought @ $394k) and one a mental health therapist ($401k). Double DOH!
Either those fields pay a HELL OF A LOT more than I think, or they’ll be back up for auction in 12-14 months.
I loved the picture of the auction they ran with LA Times story this morning. The 24-yr old kid who got the smokin’ deal on the $410k condo and the people around him had a very cool Dawn of the Dead vibe. Poor kid living with parents, about to experience true meaning of “out of frying pan, into fire” i imagine. Kudos to the financial governmental industrial complex for putting it to the younger generation right off the bat. The draft might be more humane, really…
If that condo ain’t a 2/2 with a whitewater ocean view in Orange County…
…that kid got taken to the cleaners.
Another fine example of how it ain’t auction time just yet.
Sorry, no ocean view … Aliso Viejo is inland O.C.
Actually Aliso Viejo is a pretty well-laid out community, with abundant greenbelts and well-manicured tree-lined roads. At least on the surface. I would imagine that mello-roos fees must be quite high for property owners in Aliso to maintain all those greenbelt parks and pathways.
” The 24-yr old kid who got the smokin’ deal on the $410k condo”
Repeat after me “the condo ai’nt SOLD till the deed gets recorded” Pulte is reporting 38% cancellations, do you think auction sales might be even worse? Wait till the 24 year old gets buyers remorse, and even his friends start repeating the “not to buy” mantra from this blog. Betcha this doesn’t close!!
I agree, The quotes in the article from these two lucky souls intimates said remorse.
You’ve got to be kidding. I wouldn’t lend a 24 year old $41.
What in the hell is going on???
Fraud.
not to worry. Dad will take car keys away. he will be unable to get to mortgage office to sign loan.
“not to worry. Dad will take car keys away. he will be unable to get to mortgage office to sign loan. ”
This is funny and NOT funny.
I believe most folks can’t save any serious money. Some friends of mine that make decent salaries spend like bi-polar manics. Savings? What’s that? Gotta have it now, baby!! Save 20% down on a home. Not gonna happen. Hey wait! We can borrow $500k, look! The payent’s low to begin with, we’ll refinance later…(Dr. evil touches pinky finger to corner of mouth and says, “rigghhhht.”)
It’s still unreal to me how easy it is for any kid (like above)or fiscally retarded schmuck to get into a home. Crazy and very, very scary.
DOC
A 24yo should be able to live in any ol’ studio for a year or two. What would rents be on that $410k place? Breakeven seems like it would be $2300 or so, and I know you can find 2brs for less than that .
I know this condo complex. It is an Aliso Viejo and is a condo-conversion from some nice apartments. No way is the crap worth 410k let alon 394k……This suckers…ahem..I mean winners just got ripped off.
I love how the L.A. Times article describes the 24-year-old (named Fleishman) who was the “winning bidder” on the condo in Aliso Viejo, by stating that his “persistence paid off” at the auction, because he snagged one for $410,000… The way they describe it, you would think he found buried treasure!!
I also loved how the article describes how the young Fleishman looked “slightly stunned” in the immediate aftermath of the auction, as he was already signing the closing documents. Sounds like buyer’s remorse was already beginning to set in!! They should check in with Fleishman in a couple years and see how he’s doing.
Somebody should check in with that FB down in San Diego who snapped up his little condo around June or July and thought he had made a great investment since he got something like $10-20K off (or was it incentives? I forgot).
LA Times is classic RAH RAH Real Estate Reveler.
can you post location? Would love to see what’s hanging on zip now.
You are right…We should cleans the gene pool!
“Kudos to the financial governmental industrial complex for putting it to the younger generation right off the bat.”
Got that right! The blue collar union workers are financially dead, so now it’s up the economic totem pole a notch higher for more “chow” to phuck over. Wall street doesn’t care who gets destroyed either; just show me the money!
By the way, is there any alleged analysis to back all the “experts” saying the RE market will come back in 2007, because I would love to see this. I don’t want to have to keep dealing with my cynical belief that they just made this story up on the basis of no evidence whatever.
Look in the investment bank dotCom stock relationship drawer under the title ’similar patterns of behavior’; you will find all the creative analytical research you need to support this and other industries’ stock prices. After you are finished dissecting that pickle, look under ‘take the money and run.’
“‘There’s 1,000 extra homes out there,’ said Monterey County Association of Realtors CEO Sandy Haney. ‘There’s too much competition. I think right now the market is at a stalemate. They’re saying it may have hit bottom or it’s close to it,’ said Haney. ‘Now, how long it stays there is the question.’”
Sounds just about what someone from Monterey would say…constant denial. Although Monterey is a nice place indeed, it is way too far off the beaten path for it to be immune from this housing downturn, which has just begun. As OC falls, which actually has some high-paying jobs and is close to big cities, unlike Monterey, there is no way Monterey will hang onto their gains. Plus, with Salinas lurking nearby (the dirty secret nobody in Monterey/Carmel likes to admit to), the entire Monterey county market has every likelihood of falling as hard as any in California.
In Salinas, you have 2, 3, even 4 migrant families crammed into SFH’s. They qualified for various suicide loans, and all families working together can pay the mortgage. Now anyway. If immigration reform makes ANY headway, some will leave or be forced out.
The house will default, and the bank will be left with a house which had 15-30 people living in it for the last couple years. Cooking in their rooms, throwing up their partitions to create privacy, etc….
Yeah, Monterey county ain’t going to be pretty in the next few years. My family lives there. I told my brother he should look into real estate law (he’s a lawyer) but he says it is way too boring.
Anthony, you are absolutely right - the whole Monterey region is in for a rude awakening. I live south of Salinas in a tract home. We regret buying our home and wish we were renters again, but are we ever living the American dream. Our home costs are $3200/month (PITI) and we could rent for $1500. We are house poor. We bought right before the market peaked in early 2005 using a 5/1 ARM (yes, big mistake). Realizing things were heading south and fast (from reading this blog and others), we decided to sell earlier this year. We were unable to sell (frequest price reductions, watching our street become flooded with For Sale signs, etc.). So, forced with either selling below what we owe the bank, hang on and hope for the best with 3 years left on a 5/1, or refinancing using what little equity we had left to secure fixed terms, we chose to re-fi. By the skin of our teeth in terms of our loan to value ratio, the re-fi went through this week. We were lucky to find a lender that would loan to us (without majorly jacking up the interest rate) since our home had just been taken off of the market. We now have a fixed 30 year. Thank God we both got raises this year. We have completely looked at our spending habits, and cut out all of the frills. We are in it for the long haul, and we are stuck knowing we are headed for about 10 years before/if the values start heading up again and heading up from who knows where (40%+ reductions likely). Please anyone considering buying right now, DON’T! I have talked to a few people who think now is the time to jump in (rates are low, prices have declined) and have told them to do their research. This is just the beginning. But, in this neck of the woods, people like the term “correction” and “soft landing.” It’s complete denial, the whole “it will never happen here” philosophy is deelpy entrenched in the minds of those who live in here like in many parts of the country. When I’m feeling really optimistic, I’m hoping for a false bottom psychology to set in during the spring and to try to sell it again, but not bloody likely! I’m fairly certian our ship has passed and we are stuck.
disARMED,
I used to live in Seaside and worked for the US Government in Monterey. That was way back in 2002. Even though I made a pretty good income (especially for the area) the local loan officer at B of A wouldn’t even sit down with me because “other, more able candidates had immediate business deadlines.” At least, that was how it was worded to me.
So, I left Monterey — and B of A too — and actually ended up buying elsewhere. I sold that home in 2005 when inventory was going through the roof. My wife & I would love to buy a home, but it just doesn’t make economical sense right now. So we wait.
But, one thing that always got to me about Monterey was how pretentious much of the local population was. It seemed far worse to me than OC or SF. A couple that I used to work with there, who had been sitting on the sidelines since 2001, recently bought in Carmel Valley. $750K selling price from a realtor who bought the property six months earlier for $675K. Since she actually knocked off $50K from the original $800K price tag, they felt they got a great deal. As I told him right before he signed the loan docs, “you’re buying from a flipper, and I hope that you have every intention of sitting tight for the next 10 or 15 years.”
God bless you and good luck. I hope this adversity makes your family stronger. At least you have your eyes open.
Congrats on the refi–I suspect many who will try won’t be as lucky in the coming years.
A sincere good luck to you and your family. It sounds as though, even though stretched at the moment, by refinancing you have put yourself in the least risky position given the circumstances.
disARMED,
Sorry to hear about your situation. While reading your story, the whole time I’m thinking This could have been me. Wife and I have been under pressure from well-meaning but clueless relatives and friends for years to “take the plunge.” It took courage to post your story in a forum like this where you’re not likely to get much sympathy. Best of luck.
disARMED,
I think that despite your bad decision you at least understand reality right now and have a very good chance of staying afloat. Let me tell you, I was talking to someone at work who purchased a new condo in Irvine early last year for about $430,000 with no downpayment (an ARM). The person is married, has no kids and together with her husband, make I would guess no more than $120,000 a year. They decided that they want to flip their current condo and bought just a few weeks ago another condo that hasn’t been constructed yet for a little over $550,000 she said. The thing is they didn’t put their condo on the market yet because they want to do that next summer so that it will sell by next fall when their condo will be finished. I tried to tell her to try and sell right now before her condo is going to tank in price but she is in total denial and tells me that her condo has gone up in price by 200,000 in a year. I couldn’t believe it. I told her she didn’t get anything because she hasn’t sold her condo yet. I told her how my husband and I are renting and will wait until house prices are at renting or a little above renting levels. She believes that just because she bought in Irvine her house will always go up. She told me my husband and I are the only ones who didn’t buy (considering we have pretty good income for Irvine). I felt a bit insulted but hey in the end she is the one with almost a 1M in debt, NOT ME! My husband and I are saving every penny and hope to buy in a few years when the price is right.
We all respect you, disARMed, for telling it like it is. Amazing you are willing to admit you were fooled. Even though none of us here wants a false-bottom psychology to prolong the general agony, we may wish you one day of good luck. Can you not possibly afford to auction off the house? Any chance at all of getting a personal loan to make up short sale?
“At Wells Fargo, when mortgage holders contact the bank to say they are struggling, the bank works with the borrowers to assess their finances.
“We look at their overall picture and ask questions about what the situation is, what their cash flow situation is and what assets they have available,” said C.”
It is still amazing to me that that the lenders didn’t want to look at cash flow and assets before they made all these loans. I know, Iknow, there was just too much profit to be made…
Human nature. You don’t look “gift horses” in the mouth (markets on the way up) but, once the music stops, you get sober quick and you double check everything you do. IMHO that’s why consumer spending will slow. There’s just too many people involved in this debacle and its too easy for everyone to relate to the (particularly bad) experience even if they aren’t directly involved.
Survival is an even more critical component of one’s psyche than greed.
That’s why the “soft landing” and “correction” notions are, to me, very much wishful (or shortsighted) thinking.
misprint
“At Wells Fargo, when mortgage holders contact the bank to say they are struggling, the bank works with the borrowers to
assesstheir finances.correction:
“At Wells Fargo, when mortgage holders contact the bank to say they are struggling, the bank works with the borrowers to access their finances.
“We look at their overall picture and ask questions about what the situation is, what their cash flow situation is and…..”
then tell them we are going to foreclose. We are nice like that.
As a CPA I can tell you the IRS asks the same questions when they come collecting.
Indeed. As a tax attorney, I can tell you that often the IRS won’t even bother to ask questions before they collect.
“‘There’s 1,000 extra homes out there,’ said Monterey County Association of Realtors CEO Sandy Haney. ‘There’s too much competition. I think right now the market is at a stalemate. They’re saying it may have hit bottom or it’s close to it,’ said Haney. ‘Now, how long it stays there is the question.’”
Why dont you stop accepting clients…its that simple.. wait a minute .. we have a glut of realtors too…
too much inventory not moving
too much agents not generating income
no buyers to feed either!
Silly Rabbit — Dont feed the Bears
OT but this is absolutely unbelievable.
This FB bought this overpriced POS in April 2006 for $975,000.
Now 6 months later, without having done anything to the house, he is asking for $1,095,000.
He’s looking for a GF dumb enough to pay $120,000 more.
By the way, the FB refinanced 2 weeks ago.
http://www.realtor.com/Prop/1070389398
That’s one ugly house … I don’t care if it does have 3,200+ sq.ft., or if Newton, Mass. is a wonderful community. It’s still a butt ugly house.
Man, someone is sure to buy that. Look how welll furnished it is! Another DA/FB that should fry.
Do you know how many homes there are like this in Newton for sale? Tons.
A friend told me about a very successful developer in Newton. He’d bought and rehabbed a property in 2005. He saw the market shifting then and sold it immediately for about his costs just to get the heck out (he, of all people, could “afford” to wait).
Newton supply is big and nothing is moving.
“Falling prices, sluggish sales and mortgages that let borrowers pile up debt faster than they can pay it off could put more Bay Area homeowners out of their houses this year than at any other time this decade.”
Lets not forget … people in Silicon valley that overpaid and took out ARMs are still waiting for the rip roaring late 90’s to come back … and party like its 1999…. HA HA HA
You kept hearing… It will come back for the past 5 years…
Well all you really hear is …. stock option scams … BAHAHAHAHAHA ! AINT GOING TO HAPPEN! What will happen is HO’s will be in BK soon! Not to mention all the layoffs we had here.
Don’t forget all those acres of McMansions plopped down in the middle of the Central Valley with no city (or other buildings) in sight, just their community wall and gate and “INVESTMENT Real Estate!” billboards.
Ready-made sets for Over the Hedge II.
I often drove on I-580 and I-205, past places like Tracy and Manteca, and marveled at the endless new housing developments literally in the middle of former agric land in the Central Valley. Nothing around but clusters of awful cookie-cutter homes, surrounded by agric fields. The traffic to commute anywhere is horrendous. You have 110-degree days in the summer, and constant spraying of pesticides on the crop fields surrounding you. It sounds like absolute hell to me. The Central Valley will be screwed, big time, when the sh*t really hits the fan in Calif in the coming year or two.
It already has been. Prices are down nearly 20% in Visalia and parts of Fresno Y-O-Y.
Interesting side note, Leslie Appleton-Young, who last year said the Central Valley would be the strongest market in the state, with “15% annual appreciation” now says it is the weakest market in the state. Wow…what a finding! The inventory numbers exploding last year (from around 150 to 1,500 in Visalia during 2005) was the first clue this thing had to come to a “bad” end.
Too bad the people in charge were way behind the eight ball. Everyone here knew better.
According to CNN–the markets least likely to experience a price decline. SF, LA and Boston top out the picks.
“As big city incomes rise, home prices follow.” I feel so much better now. IMO all of these cities are likely to experience a severe bubble pop!
http://money.cnn.com/popups/2006/biz2/newrules_bubbleproof/index.html
Typical pablum that one would expect to come from Money Magazine….. I love how their analysis consists of “San Francisco is beautiful, and wages are rising, so there’s no bubble”. S.F.’s median house price right now is about $700K. The vast majority of people in S.F. cannot afford that or anything close. Salaries are not that much higher in S.F. The past few years, something like 60% of house purchases in S.F. have been made with Option ARM or IO mortgages … A sign that buyers are going way out on a limb to stretch themselves to get into a house. I love how the MSM and the San Francisco Comical assume that, just because S.F. is a great place to live (and it is), that people there can afford to pay prices upwards of $700K, and can continue to drive appreciation up to even more stratospheric levels. It’s ludicrous.
SF is becoming a large Aspen.
SF is losing families, the working class and minorities. The place is gentrifying and attracting wealthy people and wannabes.
It’s not bubble proof but the idea SF will crash like Modesto is plain wrong.
SF biggest industry is tourism. I live here for my job. Liked New York better. Very quite here. Like a big out of touch university. I imagine SF, much like New Orleans before the flood, everyone does their yearly things…until the earthquake and 2/3 of the population is forced to relocate. No way the rest of the country pays for SF to rebuilt. Will make for a nice nature preserve. Rent and don’t buy.
I agree Rent in SF.
I disagree about the nature perserve. It’s a bit over the top.
“Along with San Francisco, Los Angeles was the first major metro in the United States to become “filled up” during the 1960s and 1970s because of geographic constraints and political restrictions on building. Three-quarters of new construction is now in-fill development, and much of it is high end. The gentrification is pricing out middle and lower income families, who are moving in-land.”
WTF!! Political restrictions on building In LA! Are they kidding? I see a tons of new condos/apts going up all over LA, especially in areas such as Studio City, N Hollywood, Van Nuys, LA Downtown, Mar vista,LOng Beach,Alhambra,Hawhorne,Gardena,East Torrance,Glendale,ect.
Not much of LACounty has Gentrified. Much of the innor ring LA dwtn communities resists Gentrification(east LA, Boyle hts, pico -union, rampart, Lincoln hts, El Sereno) as well as Echo park, large parts of hollywood,koreatown, jefferson park,Large portions of the eastern SFern valley,ect..
Actually The lower working classes are not leaving LA in droves, but concentrating in Scentral,Compton,SGate, lynwood,bell, EastlA,Montebello, huntPrk, maywood, Pacoima,Sfernando, Panorama city, van nuys, Burbank,Alhambra, willowbrook,La puente, pomona,ect. They can pack several families into the SFH’s or cram into the abundant apts/condos/twhome projects springing up in the poorer Barrio districts of LA County. Damm right there is nothing but infill development going on all over LA, but it is not mostly hi-end, except in the westside/dwtn LA areas. N Hollywood and other areas are creating abundant mulit-units for the masses.
If anybody would like a good laugh, click on http://money.cnn.com/popups/2006/biz2/newrules_bubbleproof/jump.html and see what Money Magazine is calling the five “bubble proof housing markets!” (Perhaps, it was a editing failure and they meant to print “bubble poof.”)
I think by “bubble proof” they mean “proof that there’s a bubble”.
I believe there will be places that will be only mildly affected by the collapse, but those ain’t them.
*shrug* as always, it depends. A “classic 6″ in a good prewar co-op in Manhattan will hold up better than a POS condo conversion in outer Brooklyn.
In this case bubble proof means “proof of a bubble” — bubble: proof — or maybe Bubble? Proof!
For a bigger laugh, read this piece from the Las Vegas Review Journal:
Las Vegas is different you know……
http://www.reviewjournal.com/lvrj_home/2006/Oct-27-Fri-2006/business/10462480.html
Are they kidding? Nothing in LA is moving…it is a complete standoff right now.
Their bubble-proof prediction is 3.9% annual appreciation!? I can make 5.5% on a SAVINGS account. Besides, once PITI is taken into account, that +3.9% = MINUS 4%. Nice “investment”. Chuckles…
Even better is the CNNMoney : Top 10 where to buy now:
http://money.cnn.com/popups/2006/biz2/newrules_bestinvest/index.html
3 of top 5 FLA.
Much more of this and we’re gonna need to start mandatory drug testing for the media.
LA Times:
Sares-Regis sold off all the units at an average selling price of $401,000, a 15% discount from where the company had tried to sell its units before the auction.
Only 15% off? Not low enough.
…Yeh the pundits on CNBC are starting to say the same thing…” well, we may have a slightly harder than soft landing…but everything will pick after the new year”
…oh yes the NEW economy …new debt on old
Right now we’re at the equivalent of the Nasdaq going from 5000 to 4500.
They’re saying it may have hit bottom or it’s close to it,’ said Haney. ‘Now, how long it stays there is the question.’”
These people can not really be this damn stupid! Sister you ain’t seen nothin yet.
This is slightly OT, but is anyone watching the increased frequence of arsons happening? One of the byproducts of a crashing real-estate market is people setting fire to unsellable homes and collecting the insurance.
Right now the “Esperanza Fire” which has already killed 4 firefighters today in Southeast California is burning out of control. There is strong evidence the fire was started by arson.
I predict we’re going to see a wave of house-burnings across the US in the next year.
Real estate is on fire!
Yes I’ve been watching that one and I hope they catch the low life M F’er POS that started it and burn him/her at the stake as a warning to the rest.
Um, the insurance companies pay to have the house rebuilt. You think they’re dumb enough to just hand over the cash to the homeowner? Any fool can see that moral hazard.
Good point. An FB burning his own house would get no benefit from it. The insurance would pay to have the house rebuilt, and he’s still stuck with it, and his mortgage.
No. Not true at all. There’s no mandate upon the recipient of an insurance settlement to rebuild.
does insurance buy the lot? no.
if recipient doesn’t rebuild, he will pay to clear rubble and make his now empty lot safe for the community. empty lot even harder to unload than lot with sh#tbox on top of it.
Insurance usually just pays replacement cost. The land is broken out and not paid on and if the basement/utilities are still in place and not damaged, those aren’t paid out on either. All in all, not a good strategy for a FB.
Correct me if I’m wrong, but:
1) The FB still has the monthly mortgage payment to make?
2) Insurance will pay for a hotel/apartment during the rebuild?
3) Actual cash value is only paid for a total loss? I read a few policies online, and most pay for the repair. By the wording, it doesn’t sound like a penny goes to the FB in a partial, but rather the insurance company brings in their favored contractors.
I’m really not understanding the incentive to torch the house. Mostly because 75% of the purchase price is the land… Walk away from less debt?
Neil
Yes, I think it works much better for boats…I heard that boat torching to trade up in yacht size used to be quite a pastime in the 714…
It might work if you’ve owned the house for 20 years and replacement cost is greater than the mortgage you are behind on, but not for all the flippers and their flim-flammery.
posted “I predict we’re going to see a wave of house-burnings across the US in the next year.”
Jewish lighting.
WTH do Jews have to do with it?
posted “WTH do Jews have to do with it?”
Down boy! It is a joke!
It wasn’t funny.
fiat lux posts ” It wasn’t funny.”
Well sorry! Did you hear the one about the big nose? Or what about What’s the diffrance between a jew and a pizzia? Never mind the punch lines….
They are keeping a tight lid on the arson investigation but from i can deduce it started in the hills south of the esperanza road which runs along the southern edge of the community of Cabazon. One possible scenarion is that a bunch of teenagers/young adults were partying and drinking late at night and one or more of them started the fire as a prank. Or they were having a party bonfire/campfire out in the sagebrush hills. I come across areas out in the IE/riverside boonies and see evidence of improvised campfires and trash/beerbottles strewn about made by revelers. Even a carelessly tossed cigarette could ignite the dry brush and easily conflagrate into an out of control wildfire.
The Inland empire outer sagebrush hills and canyons out in the wilder remote barren areas of riverside county are very easily conflagratible this time of year. With the SA winds howling out of the canyons in the SGorgonio pass combined with the entire IE brush being a dried sunburnt brown wasteland, producing excellent fire tender, the rapid explosive growth of this fire was inevitable. The reports of fires being started in scattered locales all over the dry hillside regions of Riverside, and even in the Cleveland nat forest in the OC, seem like hysterical overwrought media reporting in the wake of the very tragic deaths of four firefighters. Teenagers and others are constantly reveling out in the IE boonies, drinking and making improvised bonfires. Problem is that even a tiny piece of smouldering ember or trash carried by a gusting wind can be blown way from the bonfire and land in some dried brittle brush even a hundred yds way, instantly igniting into fire.
I still cannot comprehend that packs of arsonists are deliberately going out to to the IE hills and deliberately igniting fires. If so, then it becomes a deliberate terrorist attack. But for what motives? Prank? Eco-terrorism? Pissed off FB’s?
Everytime the stock market corrects or crashes, I read about a rash of people who sue their brokers for getting them into investments that were about to lose money.
Considering these NAR types are “calling bottom”, predicting better market conditions and appreciation (not to mention what they’ve said in the past) I wonder how many lawsuits we’ll see in the coming years.
Another anecdote from SoCal. I’ve chronicled here before the friend of a friend who went from LAPD Cop to RE agent last year. At that teime, he bought a house for 740k. A year later, I guess he’s not making enough dough in RE to make the house payment, tax payment, mello-roos and HOA’s, cause he’s decided to pack it in and move to AZ and get into “commercial” property. Dumbo just put his home up for sale for 850k (the one he just bought for 740k). Similar house down the street has been on the market for 3 months at 729k. Total denial! He’s throwing in the plasma and appliances thinking this will make some FB pay 150k too much (if not more) to buy his crap-box. His former LAPD partner sees the nice house, the plasma, etc and decides now he wants to quit too and become an RE agent…. The average person is very stupid, especially cops. Sorry if I offend anyone here.
The average person is very stupid, especially cops. Sorry if I offend anyone here.
—classic. “you are stupid. sorry if i offended you…”
Does he have a retirement from LAPD? A lot of cops get retirement early (stress, ect.)
Just use the Southern trick. Say “bless his/her [little] heart” at the end, and it sounds nice (the “little” seems to be optional, but it seems to usually be reserved for people younger than the speaker). “He overpaid for his house, can’t afford his mortgage, has put the house up for sale at way above comparables, and is throwing in the plasma and appliances thinking this will make some FB pay $150K too much. He is very stupid, bless his little heart.” See, the “bless his little heart” line makes it seem like you are being nice.
or “bless his pointed little head”
Bless his little financial illiteracy, which I exploit in own clientele without putting them at actual risk of default.
“Scott Kucirek, Northern California general sales manager for Prudential California Realty, thinks that too much new-home inventory is the driving factor behind the price drop. Builders are reducing prices and offering incentives such as upgraded kitchens to draw in buyers.”
there is always an new excuse. I did not hear excuses on the way up - except for “no more land”, “RE always goes up”, “foreigners are buying everything”, “it is different here”,…I am sure I left out a few…
Just more BS from these idiots. Lemmings, where are you?
“Unwarranted optimism
The article, “U.S. housing prices sink 2.5 percent” [Marketplace, Oct. 26], contained this gem of logic: “But national [Realtors]association officials insist that the decline will be short-lived, noting that the price decline comes on the heels of one of the biggest housing booms on record.”
Doesn’t what the Realtors are noting support the opposite conclusion? What are the odds of “one of the biggest housing booms on record” being followed by the shortest-lasting correction? Until recently, the boom of the late ’80s was “one of the biggest housing booms on record.” It took years for the subsequent correction to run its course.”
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Thomas, I saw your letter in the OC Register editorial section this morning. It made my morning commute!
As you know, here in the OC most are still living like it’s 2005 with the expectation that Spring 07 “will be heaven” (ala Gary Watts).
WOW!! I am a corporate controller working in Aliso Viejo with a CPA license with over 10 years experience in Big 4 public accounting. With my salary, I can’t afford the $394k condo, unless I plan to eat dry bread and soup for the rest of my existence. And this stupid accounting clerk in her mid-20s bought a place. The most these clerks make is $40k. Trust me, I hire and fire them all the time. Using this math, this stupid fool is paying close to 93% of her GROSS pay in mortgage plus taxes and association fee. Using an interest rate of 6.0% and $50k down. No wonder this country is fuc***. We are a bunch of stupid idiots. These generation Y folk are dumber then doornails. I can’t wait for the next recession, to see how these guys will survive.
‘They’re saying it may have hit bottom or it’s close to it,’ said Haney’
Of course it has hit bottom. How could it go any lower? http://graphics8.nytimes.com/images/2006/08/26/weekinreview/27leon_graph2.large.gif
(Is this Mr. Haney from ‘Green Acres?’)
Of course it has hit bottom. How could it go any lower?
Hmm… to co-opt the old adage, “If you think to ask how could prices go any lower, then you can’t afford it.”
SoCA buyers are waiting until prices go down more and they will.
Buyers have waited this long to see the trend turn around and they’re patient enough to continue waiting. Sellers are greedy and are refusing to reduce their selling price — well buyers will wait and force the market down further. The housing bubble is not even half deflated yet, 2007 will prove interesting and I wonder how long sellers will wait before they realize that they need to take what they can get and move out of state.
With all the problems SoCA has now and the coming future, I don’t know what anyone in their right mind would want to pay these outrageous house prices. The state is tanking and houses aren’t to be worth much in the future here.