“Some Would-Be Home Sellers In Denial”: California
The North County Times reports from California. In North County, the weighted average price for a new detached home in the last quarter fell to $885,683, a 4 percent drop from the second quarter this year, according to a MarketPointe survey. The survey said the weighted average price for a new attached home, such as a condominium, dropped 9 percent, to $380,086, from $417,865.”
“Sales and prices of new homes and condominiums in North County continued to decline from the second to the third quarter this year. Sales of new homes and condominiums in North County declined 36 percent, to 866 last quarter, from 1,343 in the second quarter of this year, according to the quarterly survey.”
“The number of new area detached homes sold dropped from 534 units sold in the second quarter to 358 in the third quarter. The number of unsold attached homes available decreased from 2,095 units in the second quarter to 2,093 in the third quarter.”
“For all of San Diego County, the pace of average net sales of new homes and condominiums reached the lowest level since 1999, MarketPointe said, dropping 38 percent.”
The Voice of San Diego. “In October, the local Realtors association saw declines in total sales volume to the tune of nearly $200 million in attached homes like condos and townhouses, and more than $400 million for single-family, detached homes compared to the same month a year ago.”
“The report attributed the financial fall to a 35-percent decline in the number of attached homes sold and a 29.22 percent decline in the number of detached home sales in October 2005).”
“Median prices in both markets suffered year-on-year drops — down 4.63 percent to $370,000 in the attached market and down 3.5 percent to $550,000 for detached homes.”
“A Japantown development in San Jose appears to be the latest casualty of the softening housing market, as a $26 million deal collapsed in a dispute over land values. The Seal Beach-based company lowered its offer to $18 million for the five-acre site, said John Weis, deputy director of the San Jose Redevelopment Agency.”
“Land brokers have reported that deals negotiated at the height of the housing market have fallen through now that both sales volume and prices have declined. But Weis said he doesn’t believe values in Silicon Valley, particularly San Jose, have dropped. ‘We think the market is not going south,’ Weis said.”
“He speculated that the company and now feels the need to pull back because prices especially in the central part of the state have fallen.”
“Two Santa Cruz County real estate offices affiliated with Century 21, have merged under new ownership. Randy Ziganti said the downturn in the real estate market was a consideration in the merger and acquisition. ‘Many companies will be cutting back services to try to save money,’ she explained.”
The LA Times. “Emeryville-based online brokerage ZipRealty Inc. lowered its full-year forecast and said the slowing housing market prompted third-quarter profit to plunge 80%.”
The Orange County Business Journal. “Newport Beach-based William Lyon Homes Inc. on Thursday reported a 72% decline in third-quarter profits, the latest local homebuilder to feel the effects of a cooling housing market.”
“Orders for new homes fell 40% to 501 homes in the third quarter, even though the average number of sales locations was up 31% to 55 housing developments. Buyers backed out of 39% of the contracts made during the latest quarter, compared to 15% a year ago. The company also said it took an impairment loss on real estate assets of $14 million for the third quarter.”
“The company sells in California, Arizona and Nevada. Softening has continued through the year in many of its markets, the company said.”
The Fresno Bee. “In the central San Joaquin Valley, prices have dropped, and thousands of new and existing houses are for sale. Gary Kittredge said families who bought when the market peaked and are now trying to sell will not fare so well.”
“Overall in Fresno County, the median price of an existing home has fallen almost 5% this year to $290,670, according to the California Association of Realtors. ‘There are some really good bargains out there,’ added Joan Jolly, president of the Fresno Association of Realtors.”
“Jolly thinks many neighborhoods have already reached bottom. ‘A lot of areas have already seen a 12% decline,’ she said. Jolly noted that some areas and price ranges have seen greater declines than others. ‘The $325,000 to $425,000 range is where the unsold inventory is. I have five or six listings in that price range, and all have come down $20,000 from first expectations.’”
“Home builders also are under pressure. The amount of unsold inventory has climbed 82.3% in only three months in Fresno, Madera and Merced counties, while sales fell 3.3% in the same period, according to The Gregory Group.”
“The average price fell 2.5% for the quarter and 2.8% for the year as builders attempted to clean up their inventories.”
“The greatest year-over-year decline in new-home price was 21.5% in Atwater. Madera and Fresno experienced year-over-year price gains of 3.3% and 2.1% respectively, while the average price in Clovis has slid almost 2% in the last year.”
“‘We definitely have had some standing inventory,’ said Craig LeMessurier, spokesman for KB Home. Developers are holding sales, offering buyers incentives, trying to sell excess lots or taking other steps to cope with a sluggish market.”
“Sandi Ehrastom of Sierra Residential Appraisal Services said some would-be home sellers are in denial. ‘Some areas are holding their value, but some others have dropped 10% in two months,’ she said.”
‘The average price fell 2.5% for the quarter and 2.8% for the year as builders attempted to clean up their inventories.’
Of course this doesn’t include incentives. Even the Orange County Register has been reporting 20%+ declines in new home prices.
Wow! Just wait until the rest of the world figures out how far new home prices have already fallen. I guess this underlying reality is already priced in to the builder share prices, as Wall Street types have better crystal balls than the rest of the world…
“as Wall Street types have better crystal balls than the rest of the world…”
Not so. More than 80% of actively managed mutual funds fail to achieve as good a return as the passive “index” funds. Every line of work (physician, teacher, engineer, wall street manager, blogger) has almost exactly the same distribution of performance among its participants, from superstar to abysmal.
What was the name of that hedge fund that recently shut down due to excessive trading losses?
Ameranth. Or something like that. Lots of other funds are suffering in bad positions.
HedgeFundanalyst,
Please remind me how you guys find GFs to pay your exorbitant fees?
Unfortunately, big HF investors include government/private pensions, insurance companies, and other vehicles which are supposed to be managing money conservatively on behalf of hard-working Joe Sixpack types. For their sakes I hope most hedgies get through this intact.
I know this is the housing bubble blog, but the low rate/loose credit environment we’re now emerging from has bubbled up other asset classes besides residential real estate, including private equity and hedge funds. Be interesting to see how it all unwinds.
Posted earlier but still funny
http://www.underthecounter.net/archives/2006/11/cheezeborger_ch.html
Fees based on 20% of net gains — is this standard?
If so, no wonder these funds throw caution to the wind to chase yield.
The funniest part is how they believe they’re “hedged”. A LOT of these “whiz kids” will go down in flames.
The “hedge” qualifier is just a meaningless but sexy advertising gimmick which gives them the license to charge GFs excess fees for substandard performance.
> More than 80% of actively managed mutual funds fail to achieve as good a return as the passive “index” funds.
Not so, the returns are very good for the managers of the funds.
“I guess this underlying reality is already priced in to the builder share prices…”
Yes, it is already priced into HOV’s share price. The $300,000 write-down reported last-night came off today. HOV’s market cap dropped to 1,754.51 mil. As reported by WSJ.com, HOV’s quarter ending 7/31/06 total balance sheet equity equalled 2,054,317 mil. Consequently, 2,054,317 - 1,754.51 = roughly $300,000.
Remember, these stocks are trading at book-value as reported by Barrons. Also keep in mind unlike dotComs, builders were actually generating income by selling highly demanded products with huge profit margins. Consequently, as reflected in retained earnings, there book value increased tremendously during the run up of the boom. So, from here on out adjustments to book value by way of land write-downs, option adjustments, or out right quarterly losses may well determine share price.
I remain convinced that the builders are hiding bodies which will ultimately sink their book values (think Enron again). Time will tell whether my hunch is right…
You’re absolutely right about your hunch. All of the major builders have created loosely affiliated partnerships that handle the land-option portion of the business. Often these partnerships have some obscure name and they do their best to give the appearance that they are in no way related to the builder. Conveniently, the builder leaves off the balance sheet any loss incurred by the operations of said partnership. Its all very cute, but at some point the losses are impossible to hide.
Come to think of it, all of this is EXACTLY what Enron did - and that turned out so well…
No wonder their minions are trying so hard to discredit my posts.
In a normal market, the “huge profit margins” that everyone talks about are closer to 10%. Once we leave the fantasy land of huge value increases after land purchases, we’ll get back to that.
“Sandi Ehrastom of Sierra Residential Appraisal Services said some would-be home sellers are in denial. ‘Some areas are holding their value, but some others have dropped 10% in two months,’ she said.”
We’ve been talking about a dam burst…
Could it be starting?
“Orders for new homes fell 40% to 501 homes in the third quarter, even though the average number of sales locations was up 31% to 55 housing developments. Buyers backed out of 39% of the contracts made during the latest quarter, compared to 15% a year ago. The company also said it took an impairment loss on real estate assets of $14 million for the third quarter.”
55 housing developments with 501 sales. 9 home sales/month per development… Ouch. That 39% “back out rate” is very interesting. It screams that people know the market is going down.
Neil
“It screams that people know the market is going down.”
or they just can’t sell their other place & that’s why they have to back out.
ROTFL
Good point
Casey Serin Anti-Meme - for your questionable enjoyment or horror -
http://www.realmeme.com/roller/page/realmeme?entry=an_anti_meme_casey_serin
http://preview.tinyurl.com/y5oz6q
I have a theory as to why Casey doesn’t show up on Google: he was probably trying to artificially boost his site ranking, got caught, and now he’s banned.
“Tis a mere flesh wound!”, said the Black Knight …
9 homes/month/development would be beyond belief GOOD!. You forgot to divide by 3 months/quarter so it is more like 3 homes/month/development. Not so good.
nice catch.
Then you need to subtract the cancellations, which are running around 40%. So, about 1.8 sales/month/development. Even worse. HBs are going to have to cut prices to move this inventory.
“Sandi Ehrastom of Sierra Residential Appraisal Services said some would-be home sellers are in denial. ‘Some areas are holding their value, but some others have dropped 10% in two months,’ she said.”
Not getting much of this sort of news out of Reno, but things have got to be even worse. I just checked the resale listings for the entire city of Reno. Get this: Of the 2,728 homes for sale in the city, 73% of them are asking more than $300k. Given median income, this is absolutely staggering. Sales are screeching to a halt. I am seeing the same homes listed for months upon months. And in the over $800k market, there are a mind blowing number of homes. I cannot imagine who is going to buy them. A 50% haircut would not be surprising for the area. It is BAD.
Thanks for the Reno info B-Bear…..
From Reno, NV:
‘Remember my clients who paid $595K for a beautiful, 3003 square foot home in Wingfield Springs last year at the height of the market? Last night we dropped the price to $450K. That’s only $150/sq ft for a beautifully upgraded, fully landscaped, picture perfect home… I don’t think you could build this home for that price! Let their loss be your gain. It’s a company relocation, they have to move, they’re motivated.’
Ben;..Couple of comments…..If you looked at the u-tube video did you see the new construction directly accross the street ? Did you see how small the back yard was ? I am not a Nevada expert (Where are you nnmorgbrk) but I am guessing this is still overpriced ? Also, isn’t a large amount of the demand for houses in Reno, in this price range, due to retiree’s relocating ?? If so, why would you build 2 stories ?? I suspect, because you get more volume on a small lot, but, without a buyer, what have you accomplished ??
RE: YouTube - Reno house
Watching this video, I had the sense of a burglar running through the house looking for the goodies. Weird.
This one is better:
http://www.youtube.com/watch?v=CxP74RlM_Do
thanks i needed that
I think there’s a new paradigm here, and I should consider quitting my day job soon to take advantage of it.
The builders are getting people to pay them thousands of dollars for not buying a house. This is the easiest money making scheme I’ve ever seen.
I don’t have all the nasty overhead of owning any property or paying long-term debt, so I’m sure I can under-price the big companies.
Rick
Sandi ain’t gonna find the mail-box too full for appraisal requests when she starts making 5% per month negative time adjustments to her comp’s in her appraisal reports.
The starvin’ L/O’s with no deals will scream bloody fookin’ murder.
She’ll be gone from the approved appraiser lists quicker than I shot that ‘ole TX Diamondback rattlesnake
By the way–in “normal” times, home sales of 3-5 per month is fairly typical.
9 per month is still too many.
Just caught the 9/3=3 sales per month comment above. With cancelations, we are officially below even normal sales pace expectations, and we’re just getting warmed up.
These are just the way outskirts here, folks. It really is just starting, the starting gun just sounded. In the first mile of the race, it is very, very slow going. Wait until the ARM’s, of which California has the highest amount in the world, begin to reset in earnest. And taxes increase to begin paying back the $44 billion in bonds we just passed.
“And taxes increase to begin paying back the $44 billion in bonds we just passed.”
Californians better start petitioning their Higher Power of choice for a high rate of future inflation.
JC - no sh*t on the bonds passing! I voted NO on every single one of them. Governments: national, state, and local, all need to stop spending like drunken sailors. I cannot even begin to guesstimate how much waste could be trimmed. CA is in a real mess.
Having been a drunken sailor for 16 years I can honestly say that the government has me beat when it comes to spending.
Seriously. People should stop insulting drunken sailors. At least they go out and spend THEIR OWN money.
I voted “no” also. Then I looked and find them all approved by wide margins. I don’t think Californians understand that we ended up paying for these bonds. We are taxed enough. Our legislature needs to use what they already get through taxes.
All approved, yet big NO votes on a measly $50 per parcel for schools. I don’t get it.
I grew up around a lot of drunken sailors (including my dad) but I’ve never seen a drunken sailor spend like our government. I think we need to revamp the phrase. How about: “Did you see Seaman Jones at the E.M. Club last night? He was spending like a sober government official”!
He was spending like a sober government official”!
You mean: He was spending like a soon to be former bush administration government official……
“JC - no sh*t on the bonds passing! I voted NO on every single one of them. Governments: national, state, and local, all need to stop spending like drunken sailors. I cannot even begin to guesstimate how much waste could be trimmed. CA is in a real mess”
So the cal voters voted for massive bond spending. You see, they all think that it’s all free money to pay for free improvements. Actually Cal is among the highest taxed states(8.25%sales tax, high gas taxes,ect).
These bond spending measures are big wasteful boodoogles for big unions and contractors. There was massive cost overruns and wasteful spending running into the billions for the LA Metro Rail system.
Flood control, shoring up levees, widening SCal freways may be necessary measures, but the jobs take forever. And by the time one project gets finished Cal packs another 10 millon ‘immigrants’ to overload the system again and again. Take the current widening of the 22 fwy in Garden grove. If they add two more lanes by yr 2008, there will be another 3 million ‘immigrants’, another 2 mil cars, and another million housing units jammed into already overcrowded SCal which will overrun the newly built infrastructures.
In Riverside/SanBernardino, the massive freeway improvement project at the 91/60/215 interchange in Riverside will get done in 2008, but this area of IE will get another 2 mil ‘immigrants’ packed into their third-world barrios in Riv.SBer metro region area, which will negate any freeway improvements. So in another 4 years Cal voters will be asked to vote more Bonds, and add to the total indebtness, all because the Politicians(Both sides of political asle) have allowed CA to become swamped by uncontrolled illegal immigration.
Ask people from CA what a bond is and who pays for it. Most of them won’t be able to answer the question. The passage of Prop 26 five years ago was the point at which my wife and I decided to sell our house and leave California. Prop 26 changed the vote needed to pass an initiative from 2/3rds majority(made law in 1879) to 50%. So it should come as no surprise to Californians that pretty much every bond now passes. After all, it’s for “the children”.
Vote Libertarian!
Just for perspective, CA has a gross state product of $1.5trillion and a state budget of $120 billion. These bonds will cost about $4billion a year for 30 years and go primarily to fund critical infrastructure projects like transportation($19b) water supply($10b), and to improve education facilities($5b)
When you consider that California has a population of 35 million and will add another 15-20 million in the next 30 years, this spending doesn’t look all that extravagant.
But how many of those will be illegals not paying taxes?
Illegals do pay taxes: they use fake social security cards for which real taxes are withheld, and like most poor people, they pay most of their taxes in sales tax.
True that illegal aliens pay sales tax as everyone does, but don’t you think they have figured out that they should claim the max dependents towards income tax. That should reduce money withheld to about nothing.
Any sales tax that they contribute is quickly spent on hospital care, schools, and jails/prisons. I happen to work in a job to know about this first hand…but somewhere between 20-30% of all illegal aliens crossing the border already have a criminal history in the US.
“Illegals do pay taxes:”
They pay taxes when they cross the border at peril of death, then again when they take labor which nobody else in the USA is willing to perform for less money than any US citizen would work for, with no benefits to boot. The tax comes in the form of a discount in their paychecks.
…they take labor which nobody else in the USA is willing to perform for less money than any US citizen would work for…
Thus undermining the free market, where wages would have otherwise risen to the point where US citizens would gladly take the work.
“They pay taxes when they cross the border at peril of death, then again when they take labor which nobody else in the USA is willing to perform for less money than any US citizen would work for, with no benefits to boot. The tax comes in the form of a discount in their paychecks.”
Getstucco,
Which came first, the chicken or the egg?
Getstucco,
In southern cali, many, if not most, of the construction workers were (are) illegal aliens. When I grew up here, many of my friends fathers worked in construction. Not any more. Deflation of wages due to “immigration pressure” on wages. For me, your views on this matter are misguided.
No matter. Keep espousing those “limousine liberal” speaking points, while your driving your 92 Hundai to work . If it feels good, do it.
Happy to say I don’t drive a ‘92 Hundai.
Also happy to say my landlord employs illegal immigrant laborers who provide excellent lawn care, which frees up some blogging time on the weekends
Yet I know you must at least lightly acknowledge my point.
I used to cut 2 neighbors lawns for what seemed like a lot of money for a 15 year old.
Today. No Hundayi for someone like me. Can’t compete…
Grew up in el lay, in Hacienda Heights and I was 12 or 13 when they built Puente Hills Mall, and I went lots, when I was a kid, but hadn’t been there in years and my wife and I were @ my mom’s for a few days and we went to see a movie @ the mall and got there about 30 minutes early and decided to take a look around. It became apparent that there were no white folks working (except for the jewelry stores, in the middle) any of the jobs at the mall. A mixture of different Asian and Hispanic Cultures were represented, and it got us thinking, where do late teen, to mid 20’s white adults work, anyway?
But to your point, CA has about 2.8 million illegal immigrants according to the DHS
I suppose you would have to consider what impact the border fence will have on future illegal entry.
Any sales tax that undocumented aliens pay in CA is far outweighed by the financial cost that they incur onhe State and local government. For example, take a family of 4 (and you are lucky if it’s a 2-parent family) whose income is around $3000/mo. If one of them works under the table, no state or federal tax, social income is being paid. They spend about 25% (if that much) of their income on goods that are taxable (25% x 3000 = $750; $750 x 8% average tax rate = $60/mo; 60 x 12 mos = $720/yr). So give or take between $700-1000/yr in contribution to the state coffer in sales tax.
Now, the average cost to educate/keep each one in school is about $4000-$5000/yr. Multiply that by 2 kids and you have a cost to the CA tax payers of $8000-10000/yr alone for education. Add in county health care and countless other social programs and you see the tremendous cost that are weighing on the state budget. And I haven’t even discussing about the countless number on public assistance.
Say what you want but it’s time to put a stop to all of the this. This state is not what it used to be.
Talk to anyone who works in a Hospital in SoCal about the finacial impact of illegal aliens. My wife worked in two hospitals. One was so totally overrun with “uninsured” patients that it was finally shut down. There were about 250-300 births in this facility per month. The corporation running the other Hospital, located about 10 miles from the now defunct one, decide to close it’s OB/GYN because it wound attract the same “uninsured” people who bankrupted the first Hospital. Meanwhile, the legal residents who would normally be server for their prenatal and birthing care by this particular facility now have to travel 25 miles to the next nearest Hospital.
It does not matter. The vast majority of California taxes are income taxes on earners of $200k/yr or more. Poor people mostly pay sales taxes which hardly matter.
“Poor people mostly pay sales taxes which hardly matter”
Sales and Use Tax: $28 Billion
“Receipts from sales and use taxes, which are the state’s second largest revenue source, are expected to contribute nearly 31 percent of all General Fund revenues and transfers in 2006-07.”
Illegal immigrant do not pay any state or federal income taxes. Most of them work for cash and the ones who do file taxes end up getting refund for child tax credits and so on…add that up with their 5 children in school and medical and welfare. If massive numbers of uneducated people having too many children are a benefit to society, then Africa would be the richest part of the world.
“It does not matter. The vast majority of California taxes are income taxes on earners of $200k/yr or more. Poor people mostly pay sales taxes which hardly”
” Illegal immigrant do not pay any state or federal income taxes. Most of them work for cash and the ones who do file taxes end up getting refund for child tax credits…”
On the subject if whether illegals or green carders pay their fair share into the Cal taxation system:
I know for a fact, and so do most of your run-of the mill Cal politicians(as well as the LA times), that there is a hugh black Market economy here in LA area, which is 25% of all economic transactions. That is billions($) in unrecorded sales transactions not reported to the State board of Equalization, or vastly undereported sales. All done in the huge illegal immigrant community of LA. Such transactions as selling junk autos and parts for cash, tijuana auto body shops, yard sales,mom&pop shops &eateries reporting -50% of their sales, Street swap malls and vendors using fake DBA.s and fake identities to set up shops and fleece the State board and other taxing agents.
As for illegals paying taxes on personal income, they may pay SS on the pitiable amount they earn, but they pay no fed + they get extra cash back in the form of EIC,s, which often amount to several thousand dollars per filing year.
Right on Jerry!!
Chris,
Sales tax is only 31% of the state’s budget according to the figure you put out there. The state taxes that I pay every year are a lot less than I lose to the federal govt. In the grand scheme, sales tax is my smallest tax bill. It is behind federal, state, and if I owned a home…property taxes. And that is really all the illegal aliens are helping with.
……then Africa would be the richest part of the world.”
Or Mexico or South America for that matter.
I find that even the most anti illegal immigration Americans are still in favor of controlled legal immigration.
However, those opposed to controlling immigration apparently do not believe in any limits, otherwise the debate would be about how much “legal” immigration should be allowed.
If that was debate, and immigration was controlled, then all Americans would have representation. As it is now, unchecked illegal immigration could very well be the American Trojan Horse.
Yeah. Except there is going to be HUMUNGOUS waste and corruption this time around with the money. And this is in addition to the amounts we already spend on upkeep.
And spending huge money on classrooms etc??? We already spend way too much in this state for far, far, far too little results.
We should burn the schools to the ground and salt the earth where they stood.
And I knew that the state legislature would bail out the idiots who bought in the (formerly condemned) delta floodplains. You bought knowing it was in a floodplain. You should pay for the protection from the floods. Simple.
I decry this because this is the harbinger of things to come to bail out the many idiots (who can vote) who will be upside down soon on their loans.
I would, however, vote for a $10 billion bond to fund some better border protection coupled with a series of buses running south with people here illegally. And my many members of my family who came here legally agree with me 100%.
Pay 4 Mexican generals $25 million a year each to secure the border, and back change them $100k for each illegal who gets into the U.S. Problem solved.
back charge them, that is
You my friend, are a genius.
“Pay 4 Mexican generals $25 million a year each to secure the border, and back change them $100k for each illegal who gets into the U.S. Problem solved.”
Great… Then where would we get the massive influx of cheap labor needed to destroy the U.S. middle classes?
From many large slow-boats from China
“And spending huge money on classrooms etc??? We already spend way too much in this state for far, far, far too little results.”
Again, the building of more schools is just more boondoogle spending and construction. And for what? To provide an education for millions of kids of recent immmigrants, most of whom end up getting pregnant in their teens(Latinas), and their boyfriends/young dads end up dropping out of hi school to go to work in some low-paying occupation. The drop-out rate for LA-area high schoolers is around 50%.
My $0.02 on education–the problem isn’t facilities, it’s quality teachers. No one wants to pay teachers well, so many who would be great teachers do something else so that they can live a better life.
Waive CA state income tax in its entirety for quality teachers in CA, and I’d gladly pay more in state taxes to have them around to teach our kids. The challenge is the there would need to be some kind of rating system so that only quality teachers are rewarded as such.
The biggest impediment for getting something like this done unfortunately is probably the teachers unions themselves…
naw, by itself it never does. And then the next raft of bonds. And the next….
Those radio ads for Prop 1a/b/c/d bonds made me wanna puke. “Vote for em to improve the freeways, WITHOUT A PENNY IN NEW TAXES!” oh wait, forgot…we’ll just default!
Chris makes a good point.
If you want a low tax state try Oregon with way worse infrastructure, roads, Universities, etc.
The roads are a dream in CA compared to OR.
JCclimber posts ” It really is just starting, the starting gun just sounded. In the first mile of the race, it is very, very slow going.”
“Wait until the ARM’s, of which California has the highest amount in the world, begin to reset in earnest.”
You nailed it. Out here in California we are still behind the curve but catching up fast. Your two point are bang on and regardless of anything they are going to happen, then indeed have begun. How ever slowly just like you said. In past cycles the “down and flat” times are 2 to 1 the up, we have come off about 6 good years… Add all of the fraud, bad loans and endless supply of dumb buyers. Easy 10 years to unwind.
Check out this, unsolicted, email I received today:
_________________________________________________
Thank you for your loan request, which we recieved on 08/11/06,
we’d like to inform you that we are accepting your application, bad credit ok, We are ready to give you a $260,000 loan for a low month payment.
Approval process will take only 1 minute.
Please visit the confirmation link below and fill-out our short 30 second form.
http://www.gonein.com
I get 5 of these daily, and I don’t own a home.
Just a phishing email, trying to get folks to give up personal info so they can use it in identity theft scam.
Lol.. At least they have a sense of humor…
http://www.GONEIN.com
Approval process will take only 1 minute. –> 60 SECONDS.
You’re credit rating will be GONE IN 60 SECONDS… hehehe
Sorry…
“…central part of the state have fallen..”
LIES. Actuall, as of now, the central valley prices (per the CAR #’s - YOY) are doing better than other parts of the state!
“In North County, the weighted average price for a new detached home in the last quarter fell to $885,683, a 4 percent drop from the second quarter this year, according to a MarketPointe survey. The survey said the weighted average price for a new attached home, such as a condominium, dropped 9 percent, to $380,086, from $417,865.”
Good God — how many owners can actually afford this crushing debt burden when prices are moving against them?
3 months and a 9% drop. 3% a month of 300,000 =
$9000 a month loss if you buy a condo right now.
You need to make $108,000 a year, after tax, just to make enough to cover your evaporating equity. Then again, now is a good time to buy according to the NAR.
no stucco, how many can afford this crushing burden even in an up market? the object of the game is to get the hot potato out of your hands asap.
Get the hot potato out of your hands? It seems more like getting out from under the house that is about to fall on you and crush you like the wicked witch of the east.
Great analogy.
I predict a TIME magazine cover in early 2008 with a still shot from “The Wizard of Oz”, with the wicked witch’s ruby slippers poking out from under a house.
Brilliant!
“Sandi Ehrastom of Sierra Residential Appraisal Services said some would-be home sellers are in denial. ‘Some areas are holding their value, but some others have dropped 10% in two months,’ she said.”
____________________________________________________
Lots of REIC members are still in denial also!
“Jolly thinks many neighborhoods have already reached bottom.” What does Jolly base this on? I’ve noticed that realtors don’t like to give details or specifics, just baseless numbers.
Jolly’s conclusion goes against common sense and market wisdom.
She is just trying to generate sales (commissions). She should go out and buy 5 houses herself.
There you go, she should if it’s the “bottom”. I know a realtor with two flips on his hands in our area (S.Carolina). He is staring to look a little skinnier and pale.
How about the Palm Beach diet? Buy two condos and watch the fat in your bank account melt away.
“Jolly thinks many neighborhoods have already reached bottom.
You’ll know you’ve reached bottom when the sidewalk smashes your skull to bits just before the lights go out.
Same joke said in a funnier way.
What is the last thing to go through a flippers mind?
The sidewalk.
Thanks for pointing out the fakes.
She should go out and buy a dozen “bottomed” houses, then she can
tell the buyers : “see, I am getting a dozen myself”.
Jolly is from the ” Do as I say, not as I do” school of thought.
AKA the Ted Haggard Institute for Creative Morality.
Jolly bases her information on wishful thoughts, not facts and statistics.
I agree with the denial term. Wishing prices have essentially held firm in 93552 ($415K median) for the last 6 months, despite 400% or more inventory YOY. The property tax bill didn’t apparently break their spirit. It makes me wonder if anything short of BK or foreclosure will do so.
“a $26 million deal collapsed in a dispute over land values. The Seal Beach-based company lowered its offer to $18 million”
That 30% decline in bid is probably reflective of where the market REALLY is for “buyers” to actually “get off the fence” for real estate of any kind. That may even be optimistic if a recession occurs.
I live in San Diego and here’s a situation I ran into…
I found a house currently listed for 480k. In zillow I was able to see the last purchase was on 1/2/06 at 520k. Directly across the street a house just sold for 405k (most recent comp). I offered 350k giving myself wiggle room to negioate up.
The owner declined my offer and did not offer a counter.
Talk about head in sand denial. Most likely the property will end up in foreclosure. I’ve got my eye on it so maybe I’ll be able to pick it up as a REO.
It sucks when I have to compete for houses with people that shouldn’t have been able to qualify for a mortgage.
“It sucks when I have to compete for houses with people that shouldn’t have been able to qualify for a mortgage.”
My simple advice: Don’t buy while these people are still getting free money. Anything which cannot last forever will stop, and this cannot even last for very long, IMO.
I might be wrong, though… Maybe we are seeing a stealth replacement here for the welfare programs which met a high profile demise in the mid-90s. The question will be resolved quickly when and if lots of Option-ARMed subprime buyers suddenly cannot make payments after resets over the next couple of years.
When he calls you back (he will if he doesn’t get any other offers) and says he take 350 (or counters) tell him the market’s changed….now you’re only good for 300. Then you should be safe. He won’t take that either…until he calls back and…..
The price is probably a short sale or close to it. He (the seller) probably wont take anything lower than what the listing price is since he cant pony up the difference.
I posted this a while back, but I think it bears repeating.
Don’t buy now at a 15 to 20% reduction from a seller who’s facing foreclosure. Don’t buy that foreclosed property from the bank in six months for 35 to 40% off. Wait a year until the reconstituted RTC takes it over and they offer it for about 60 to 80% off.
Be patient.
RTC - how do you hook up with them to get the bargains or is it an insider thing?
Correct. There’s way too much negative karma in housing right now, not to mention all the leverage unwinding that will cut loose all at once with a kaboom heard around the globe. Then see how many offers for cash-out-refi’s you get in the mail. We’re going to see a cash market in a couple of years.
shadash,
I’m in SD too and I think it’s too early to lowball. You wait 2 years and that 350k you wanted to pay would have been too much.
sd renter,
You’re right. But there’s a cost to renting as well that has to be considered. Currently I’m paying $1300 to live by the beach in PB. 1300×12=15600 per year. Since I’m paying rent I can’t use it as a tax write off. So at best this would = around 30000 per year I could be saving by buying.
Considering that the housing market will probably decline by half over the next couple of years. The amount saved by renting still makes sense.
I have a consulting company as a second business that I use to write off a lot of expenses so not being able to write off rent isn’t that big of a deal. It just burns me paying rent when I could own a house.
Why aren’t you writinbg off part of the rent for home office deduction? I think you should look into this with you tax advisor.
Sorry for the spelling/grammatical errors.
I’m already doing that.
Shadash,
Just to correct your calculations a bit. Lets assume that after you paid your mortgage for a whole year, the interest for your first year is about the same as the rent you’re paying now. (Most of the time, 99% of what you pay is only interest for 1st year on a standard mortgage)
Your $15600 per year interest expense does not yield a $30000 tax writeoff. At 35% bracket, your writeoff would be $5460.
Plus as a renter, if you’re married, you can take a standardized $10,000 allowance. Deducting interest on mortgage only works to your benefit, if your itemized interest deduction exceeds $10,000, because you lose your standardized deduction. In other words, switching from rent to mortgage does not yield 100% of the difference in tax gain. Meaning, if standardized deduction gives you $500 in tax savings, and mortgage deduction gives you $700 in tax savings, your net difference is only $200. Paying for mortgage for a whole year only netted you $200 in tax savings as opposed to rent only. I think this point is often misunderstood by people, who often think they saved $700 in taxes instead. No you didn’t.
Home Insurance and property tax itself would easily wipe out that $5460, not to mention maintenance.
Unless there’s growth in the underlying equity. Buying a home is a fools game. With flat/negative appreciation rate, renting makes more sense at current rent market prices.
The tax writeoff should never be a driver of house buying decision unless you’re a millionaire, where you *could* buy more house than your annual income, then the tax writeoff would be huge.
I just got married a couple of months ago. Sweet!
Listed at $480K, purchased at $520K… you offered $350K… I don’t think the owner just declined… I think they probably soiled themselves and then wept over their $470K mortgage.
470k? Try 520k. The 470k number is what they were offering most likely as a short sale.
“Home builders also are under pressure. The amount of unsold inventory has climbed 82.3% in only three months in Fresno, Madera and Merced counties, while sales fell 3.3% in the same period, according to The Gregory Group.”
Of course this information was already priced in to the homebuilder share prices as of May 2006, as the prices have been steadily climbing ever since (well, not today but…). After all, Wall Street analysts have far more powerful crystal balls than the rest of us debt serfs.
Homebuilding stocks are starting to badly underperform the broad market again. Check out XHB. It has underperformed the S&P for the last week, month and 13 weeks. I think they are rolling over again.
Paul in Jax,
Do you want to jump in here with some of your brilliant insights?
Sorry Stucco. I missed the sarcasm in your earlier post.
No matter — your response was excellent. And I appreciated that you did not feel the need to supply a one page resume documenting your superior credentials in order to make your point.
Checked my zip code, 95827, last night. Have already seen houses from 585K to 450K. Plenty of flippers are already under water. Several new homes from 2004/2005 are now selling at their original prices. And this they call the bottom of a 10% correction?
Sold my house for 245K in Dec. 2003. Saw the same model now listed at 265K. Things are going down quickly.
And sorry, but who the HELL wants to live in the Central Valley? Not the rich people, because those are the only ones who can afford these prices.
“And sorry, but who the HELL wants to live in the Central Valley?”
The Central Valley has all the cost of living in California with none of the benefits.
The central valley is a pit. Unfortunately, I think we will continue to see additional long term sprawl there. In the greater bay area we still have lots of vacant and underutilized land, but anytime a property owner wants to develop it, all the locals come out screaming and kill the proposal. Hence, the builders just head east to the valley. So all the tree huggers and other NIMBYs wind up contributing to the very problem they portend to fight. Very counter-productive and further evidence that most are fools.
Yeah. I’d prefer that the entire state look like LA. Open space sucks.
Typical CA attitude: “I’ve got mine, so f*** everyone else”
It will have to be that way at some point or we’ll have one paved parking lot with freeways running through it. Sorry, but a policy of building so the entire world can move to CA if they want to may be more “open,” but it will turn CA into even more of a s**thole than it already is. And, by the way, if you care so much about everyone else, there are probably better ways to help them than to build condos in Marin County.
posted “Typical CA attitude: “I’ve got mine, so f*** everyone else”
Come on! Like they would never be like that in NYC or better yet… Wall Street?
Good point smf, if you think about it there is no market in the central market for $500-600K homes. Anyone who could really afford a $500-600K home wouldn’t be living in the Central Valley, except maybe those poor saps who commute into the Bay Area.
Seeing this in the Bay Area as well. Places listed on craigslist are sometimes being offered for $10 or $15K less than they were bought for during the peak 6-12 months ago. Not enough to motivate anyone, though, at least not me. Unfortunately there are disproportionately more places still listed at $300K more than they were bought for in 2002 and 2003. I’ve said this before, but every piece of real estate in California is at least $100K overpriced. At least.
“For all of San Diego County, the pace of average net sales of new homes and condominiums reached the lowest level since 1999, MarketPointe said, dropping 38 percent.”
The pace of San Diego County home sales has reverted to pre-21st Century levels.
Next up: Price reversion.
“Newport Beach-based William Lyon Homes Inc. on Thursday reported a 72% decline in third-quarter profits, the latest local homebuilder to feel the effects of a cooling housing market.”
Luckily for owners of William Lyon Homes stock shares, Wall Street already priced in this third quarter profit decline last May, thanks to the superior crystal balls which Wall Street analysts use.
If I’m not mistaken Mr. Lyons has a really nice home in cote de caza. you can see it from street with binoculars through really large gates.
He ain’t just whistlin’ the Marines Hymn, by the way:
http://maps.google.com/maps?f=q&hl=en&q=Coto+de+Caza,+CA&ie=UTF8&z=17&ll=33.612859,-117.589459&spn=0.002886,0.008347&t=h&om=0
(And now off to figure that tinyurl thing out.)
Oh, very nice…
now where’s that “launch missile” button on google map?
http://preview.tinyurl.com/ybwfrq
this is getting easier all the time!
Is that the company that built the Lyon Estates subdivision in “Back to the Future?”
“Sandi Ehrastom of Sierra Residential Appraisal Services said some would-be home sellers are in denial. ‘Some areas are holding their value, but some others have dropped 10% in two months,’ she said.”
A 10% drop in two months represents a 47% annualized rate of decline. Whoa, Nellie!
The roller coaster picks up speed fast as the last car crests the pinnacle. I think we’re approaching that point in some markets, while in others it appears that only half of the cars have crested. There will likely be some quick upturns, only to be followed immediately more plunging until the bottom is eventually reached.
Wow Getstucco, you’re on a roll today. Just stop talking about inflation…
Better get used to a new term. Stagflation.
What does this new term mean?
Not new — it harkens back to the 1970s. ‘Stagflation’ is a sniglet which linguistically and conceptually weds stagnation with inflation. Normally inflation is accompanied by happy days (Roaring 20s, Roaring 90s) and stagnation is accompanied by deflation (Japan from 1990 to 2006 and counting, USA 1930-1941 or so).
But there have been some extremely nasty periods when inflation was coupled with stagnation — generally when the central bank was busy behind the scenes trying to tax away debt through inflation when the rest of the government was unwilling to do their part by either cutting spending or raising taxes.
In the 1970s we faced Vietnam war debt, the stranglehold of OPEC on the oil markets and the collapse of the Bretton Woods system of fixed exchange rates. Today we face Iraq war, Katrina and tax cut debt, an $800b+ trade deficit with the rest of the world and a persistantly negative US household savings rate for the first time since the 1930s. We can either work it out the hard way through a combination of higher taxes and less spending, or the easy way through higher inflation. The only problem is that higher inflation is likely to be coupled with subpar economic performance, as we already have a glut of homes on the market, and higher inflation tends to stimulate more speculative purchase of houses (as well as gold and other hard assets — just like in the 1970s) and also to stimulate more homebuilding — not a desirable outcome given the inventory glut already in place.
thank you for that…
The 1970’s… was this just before 1980’s? What happened then? I mean economically speaking?
“the weighted average price for a new detached home in the last quarter fell to $885,683, a 4 percent drop”
hmmm… only about $440,000 left to go before the average becomes anything close to a price I might barely consider.
Cisco field in Fremont is now going to congest this area on game days beyond imagination. Add to this additional supply of condos to Fremont and soon we have a perfect storm in the making. Didnt someone say real estate is local
I often take BART to the A’s games, but I do look forward to a new park as the Coliseum is a dump. However, the traffic will be a real problem in Fremont, like you said. I’m not sure how they plan on solving that one. I know, they can just float a ton of bonds! We will worry about paying them back in the future! Isn’t that the CA way? The Mets are going to abandon Shea, but they are going to re-build on the current parking lot. I would think the A’s could have done the same?
That’s one concern. The proposed location is right off I-880 (close to Christy Street, Automall exit). The train tracks run pretty close (along the Bay - Amtrack and ACE use them), and when the BART extension gets done, BART will be fairly close in Warm Springs and Irvington. So the public transit could be as good as it is for the Giant’s ballpark.
Wolff (A’s owner) is planning on paying for it partly by the changing the land’s zoning from commercial to residential, so he can build a lot (IIRC, about 2000) condos there. If housing prices fall, that might affect his plans, but I’d love to see more housing in Fremont. He is not expecting any public funds (other than zoning change, and probably infrastructure improvements).
The Mission/I-880 interchange rebuild had better be done before the ballpark - that’s a huge mess right now.
BTW, looks like the San Jose A’s of Fremont might be joined by the San Francisco 49ers of Santa Clara - 49ers just announced they’ve broken off negotiations with SF, looking at SC.
Yep. I heard that today too.
Santa Clara, or somewhere else in California. Hey, I’ve heard there is an unused football stadium in Los Angeles!
Foreclosures seem to be picking up steam in Boston. Saw a handful this week, most hadn’t been owned more than couple of years.
Of all the bubble markets I get positive data on (positive meaning sellers are burying plastic statues in their lawn) San Diego’s news gives me the most joy. So arrogant over….. what? For many years the U.S Navy/defense contractors were about the only employers in town. Sure it’s diversified since say the 80’s but when I was stationed there sailors were truly 2nd class citizens. Just seeing SD’s take it in the shorts to the tune of Joe Walsh’s “All Night Long” warms my little heart. Can’t wait to stop in on my way back from “TJ” w/ a six pack Olde English 800 just so the cops can pour me out of a cab in Coronado like back in the day.
We had friends who moved from del mar to upstate NY (summer ‘96)then back to Del Mar (spring ‘97 - after 1 winter). Hearing thier stories, we all thought real estate was crazy in San Diego BACK THEN. Can’t even imagine it today!
It was crazy in 1987. Now, it’s just off the charts.
just so the cops can pour me out of a cab in Coronado like back in the day.
LOL, that reminds me of my wedding night. Someone (still don’t know who) poured me out of some vehicle into my front yard in San Diego where I woke up the next morning. Not the most auspicious start
The second drunken sailor reference tonight. I feel right at home. I’ll be moving back to SD just as soon as those tiny 2 bedroom condos up on the hill over Poway Road go back below 150K. That’s where they started in 95 and I bet they get close to that again.
Wishin’ and prayin’…
jag: Foreclosures seem to be picking up steam in Boston. Saw a handful this week, most hadn’t been owned more than couple of years.
They could all use a virtual St. Joseph statue as far as I am concerned. And put it right where it belongs!
walnut creek townhome
=====================
List price:
———–
599k for a 2b/2b townhouse!!
575k.oct 2006
569k oct/28/2006
539 nov/08/2006
not sold yet..
bought for 310k in 2001
This is what I’m talking about. Pre-bubble, bay area real estate historically appreciated at around 8% a year. So this place should be going for around $450 - 475K today. But, as the saying goes, markets have no memory.
Yes! This doubling in price over a five year period is ridiculous. The fact that it has hit even crappy 1980s condos is proof that memory is indeed vague.
Its amazing to see 800sq ft condo which went for around $ 85-90K going for $ 400K today… There is a memory and reasoning lapse! What the hell are these people thinking?
“Some Would-Be Home Sellers In Denial”: California…
Here is one seller who is in severe denial:
http://tinyurl.com/ygzujs
2 weeks back he reduced his price from $720K to $615K and he had a decription saying that bring all offer by XX-Nov-06 date. House will be sold …won’t last at this price etc etc.
Clearly he was expecting buyers would come crashing through the gate and bid up the price to what he REALLY wants.
Did not happen!
Now he increased his price back up to $720K
(And he removed old reference to reduced price and changed the wording on the description ofcourse)
From Zillow.com the present owner purchased this home on NOV 03, for $498k.
Hope the owner wakes up before price goes back to that level.
Have Californian homeowners received their property tax bill yet? First payment is usually due on December 10 and I’m sure there are a lot of flippers that weren’t planning on still owning their “investments.”
Yes, we’ve had them for several weeks now and I’m putting off payment untill the last possible second. I’ll blame my tardiness on my inability to write a check after dodging the moon sized potholes on highway 101.
posted Have Californian homeowners received their property tax bill yet? First payment is usually due on December 10 and I’m sure there are a lot of flippers that weren’t planning on still owning their “investments.”
Oh yea, Oh yea…. In 05′ I “owned” my condo first HOA $220.00 then “Master Plan HOA” $31.00 then EQ Assement loan $53.00 (30 years) then CRA EQ Ins $40.00 month then Homeowners Ins $100.00 per month then Flood Ins $50.00 per month( I loved that one for Simi Valley Ca.) Then at last bill a little over $2.400.00 per year $200.00 per month……..lets see about $700.00 per month……. what a joke!
$2.400.00 property tax
“The LA Times. “Emeryville-based online brokerage ZipRealty Inc. lowered its full-year forecast and said the slowing housing market prompted third-quarter profit to plunge 80%.””
So now what is this about discount and internet brokerages taking over the real estate business. LMAO yea right. Wonder how long these guys are going to be able to hang on losing that kind of money. It only works in the good times folks.
And the profit margins on the traditional property brokers? When the when lack of sales fully freezes, will they’re profits post any better?
I do agree that “Sales” always involves “the human quotient.” Still, for the more economically and emotional cognizant, internet sales will be a thriving alternative.
But Weis said he doesn’t believe values in Silicon Valley, particularly San Jose, have dropped. ‘We think the market is not going south,’ Weis said.”
Another example of crap reporting and wishful thinking. This guy Weis needs to remove his head from his a$$. The evidence of a falling market is all around you, moron! Typical comment from a City official.
“We believe….”
Well, believe in one hand, and sh!t in the other and see which one fills up first. The reporter should have responded with, “And why do you feel your original price from a year ago is still valid? Isn’t that contradictory to all recent evidence?”
Don’t be too hard on the guy, both sellers and buyers here are unaware of falling values since they are masked so well here. Many buyers are still paying full price without underbidding. A smaller condo than mine is about to go up for sale in my complex for what mine would have gone for in the spring. I’ll report back on how fast it sells.
And has anybody looked at the Bay area population for the last few years?? I mean, if your population is going down, how the hell can house prices go up?
families with children are being displaced by single/childless people with unlimited access to EZ credit.
Net effect is an unchanged number of households but fewer people per household.
(My wife and I experienced this first hand when we chose to buy a house in Oakland rather than SF. Sold in late 2003 at what I thought was the peak.)
From a local paper here:
———-
What’s it like moving into the Davis real estate market? Consider the experience of Dave Bardin, his wife Changwen and their 1-year-old daughter Nina.
Davis Enterprise, The (CA)
October 26, 2006
Author: Jeff Hudson
Enterprise staff writer
Estimated printed pages: 2
What’s it like moving into the Davis real estate market? Consider the experience of Dave Bardin, his wife Changwen and their 1-year-old daughter Nina.
The Bardins moved here recently from Truckee, where they’d owned a home. Bardin has a new job as a clinical specialist for ArthroCare Corp., which takes him to medical centers in several Western states.
“The biggest concentration of hospitals and surgery centers is in the Bay Area, Sacramento and Reno,” he said, so moving to Davis puts Bardin within driving distance of many of those facilities. The Sacramento airport also has some good airline connections to the other cities he serves.
Bardin and his wife, as parents of a young child, also were interested in Davis’ parks, and are aware that the Davis schools have a good reputation.
They decided to start with a rental house.
“We started looking on August 15, right when a lot of college students were looking,” Bardin said. At the outset, “we were looking based on price. But everything renting for $1,300 to $1,500 a month was student-oriented. We’re a young family, and I have two dogs. So we had to get something with a back yard.”
Since the Bardins weren’t finding what they were looking for in the under-$1,500 range, “we started looking at nicer places,” Bardin said. “And we saw some newer houses, up to $2,500 a month. We also saw a few places that were thrashed.”
On Sept. 1, the Bardins moved into a recently remodeled three-bedroom, two-bath home on Monarch Lane, in a quiet East Davis residential neighborhood. The rent is almost squarely in the middle of the higher and lower ends of the range they looked at. It’s a home that also was up for sale about a year ago, at an asking price of $575,000 — but didn’t find a buyer.
Bardin said the landlord was “happy to rent it to people who aren’t students.”
He said they figure they will be “renting for the next year or two,” while he sees how Davis works as a home base. He’s aware that home prices are trending downward, and there are homes for sale in many neighborhoods, so he doesn’t feel pressured to make a quick decision about buying.
For the time being, the Bardins have put some money into treasury bills and stocks.
“We had a good third quarter on the stock,” he said. “It was not a bad decision to have done.”
— Reach Jeff Hudson at jhudson@davisenterprise.net or 747-8055.
And yesterday’s letter to the editor about the article:
——-
Davis renters are doing the math
Davis Enterprise, The (CA)
November 8, 2006
As a newcomer to Davis, I’m intrigued by the local housing market. Your Oct. 26 articles (”Sales Slow, Prices Dip” and “Some Buyers Waiting for Market’s Bottom”) contrast the bulletproof optimism of real estate agents with the cautious realism of a prospective buyer, but missed an important detail.
The Bardin family in your article is apparently renting a home for roughly $1,400 a month that was listed at $575,000. The cost of owning the home at this price would be around $3,800 a month under standard assumptions. Even netting the $800 to $1,000-a-month tax benefit, buying this home would cost twice as much as renting it. This same disparity is rampant in Davis.
Like so many new arrivals, we are renting and waiting to buy. The greatest threat to real estate agent optimism may be that several of us do this mortgage math and choose to rent indefinitely.
Travis Lybbert
Davis
——–
I love seeing this in print right in my market. Preach on Travis, Preach on >; )
…on Monarch Lane… up for sale about a year ago… holy *!@#$.
I think I know that house. My mother sold it for her deceased friend in 2002. I think the price then was about $275K (it’s a halfplex.) It needed a new roof.
If it’s not that house, then it’s comparable. The single-occupancies on the street aren’t much grander.
If it IS that house, may the Bardin family take good care of the redwoods. There’s a lot of good karma they’ll reap by doing so.
Slightly OT (but it is an FB in OC):
Here’s an FB (or a scam, not sure) trying to make his mortgage payment by buying something on his Home Depot credit card for someone in exchange for cash.
http://orangecounty.craigslist.org/tls/230491077.html
Googled the info and found this. http://www.aroomstudios.com/
The guy is runs recording studio.
It’s sad when someone has to pay someone extra to make a payment. When we know he would be better off selling the house and regrouping
I collect these kinds of things - and foreclosure stories, flippers in trouble and email them to a couple of friends.
The subject line is always: Tales from the Future
Hello bloggers, I some questions for anyone who can answer.
1) What is the underlying cause of the relaxation in lending standards across the US?
2) Why do lenders allow no-doc mortgages?
3) If a person lies on their no-doc application, e.g. stated income of 750k per annum when the actual is 35k, what consequence might they face? (not considering it. I am simply astonished by the practice )
4) What are the tell-tail signs that identify the bottom of a housing market?
5) Is it reasonable to think that if the monthly rental payment on a property is more than the monthly mortgage payment on a 30 year fixed term with 5% down then it is a good time to buy?
I have moved here from England and plan to buy a home in Missoula, Montana. After reading this blog there is no way on God’s good clean Earth that I am willing to buy now so I am renting and waiting.
posted I have moved here from England and plan to buy a home in Missoula, Montana. After reading this blog there is no way on God’s good clean Earth that I am willing to buy now so I am renting and waiting.
Keep your money in your pocket and watch… and wait. In the USA if something is not against a certian law, it is legal. Regardless of how crooked it is, or how much it is against common sence. This applyies to business like the “wild west” new day a new dollar, if they don’t have a rule, then you make your own.
” What are the tell-tail signs that identify the bottom of a housing market?”
Usually best sign is people wandering around in the street holding their bloody bums and crying.
By the way, we used to have lending regulations with teeth, but they were tossed out with the general push to deregulate almost everything during the Roaring 90s (”get the gubmint off the peoples’ backs” etc.).
1. Corruption. Lenders don’t keep the loans, they repackage and sell them (to hedge funds and foreign buyers, mainly).
2. See above. They know the borrower would never, ever qualify on their true income, so they allow them to lie.
3. At this point in time, there are no consequences. They will be liable to the IRS for the amount of the loan forgiven by the bank later in foreclosure.
4. Bottom is acheived when the cost of rent exceeds or is equal to the Real, TOTAL cost of owning. Adding in interest, HOA fees, insurance, and taxes.
5. Sure, but be wary of the hidden taxes and fees.
I’m just going to answer your #5 question . Usually if the mortgage payment is lower than rents for the area on the example your gave it might be safe ,but there are other things to take into consideration .
(1) If your area doesn’t have good employment/good demand you still might not be able to sell if you needed to quickly .
(2) If the area your interested in doesn’t appreciate it might cost you to sell if you needed to .
(3) If your area is about to suffer employment loss the rents might go down as well as the property values .
(4) If your area has to much supply of housing or its a high foreclosure area you property values still might go down .
(5) Just always think about who is going to buy your home if you
needed to sell in a hurry . If there is no market for the home it might be better to rent a home like that . It all depends on the area .
The reason that all this funny money is being lent to just about anybody with a pulse is that there is enormous amounts of U.S dollars in the hands of Foreign Central Banks that has been rushing out of the trade deficit for years now that has no place to go. So it gets invested in thousands of “safe” investments, including supposedly safe mortgage backed securities which are repackaged loans from these screwball borrowers. There is such an enormous amount of money that it can’t be all invested in conservative investments because the yields are so pathetically low, which was especially true back in 2004. This is the so-called “global savings glut” that Bernanke was talking about.
This is the so-called “global savings glut” which has morphed into a “global debt bomb” which must keep Bernanke lying awake at night. To inflate or not to inflate, that is the question.
The federal reserve “private banks” print 24/7 paper money with no restrictions. Got to loan this out to someone. They are doing it tell the $ becomes worthless. Read your history. It’s not hard to understand.
Are you hedged against dollar inflation? Because the only downside I can see to renting in Missoula, or most other places in the US where there is a rental market with comparable housing to what might interest you in the purchase market is the risk that whatever savings you have on reserve for whenever home prices drift back down to Earth might meanwhile get vaporized in a concerted but stealthy effort to inflate us back to a confident, happy place.
Curious ….. If prices on real estate remained about the same would anybody buy if interest rates on a fixed note went down to 3.95% ?
article on the new agents…’ Babes in Bearland ‘
http://money.cnn.com/2006/11/07/real_estate/brokers_experience/index.htm?postversion=2006110716
NO, I wouldn’t.
Do you think alot of people might buy at current prices if the rates went down that low .
No. The bottom rungs of the property ladder are broken. New buyers can’t gain a toehold, and everybody else is either stuck or slipping.
The universities and beauty schools can only grow so many suckers a year, and there just ain’t enough to fill the gap. Too many buyers bought too much, too soon, and now the only people left on the sidelines are deadbeats and bears.
The RE industry has eaten its seedcorn. It will be meager harvests for a long time to come.
That is a superb summary of the situation.
$500K @ 6.25% = $3650/mo
$500K @ 3.95% = $3000/mo
Savings over 5 years: $39,000
Don’t forget that less interest is less deduction:
Net Interest Savings over 5 years: $30,000
Home Price Depreciation @ 20% = $100,000
Think about it like this: Even if you get a 0% loan, you still lose equity in the short run (call it 5 to 10 years.)
Looking at the HB stocks, one has to wonder.
Is this a race to the basement or is the PPT on post election vacation
http://www.marketwatch.com/tools/quotes/quotes.asp?addsymb=peet&symb=tol+kbh+len+ctx+dhi+fnm+aapl+goog+bzh+phm+sbux&siteid=mktw&vc=1&x=17&y=17
It is not a race to the basement, because they are still in the same range they have been stuck in since May 2006. This is why Paul in Jax is full of sh!t when he says the builders have already put in a bottom. First we need to have capitulation, and everyone say what a dumb investment real estate is, before they will put in a bottom. We are not even in the first inning yet. In fact, I am not even sure we are past the first out.
26 more outs to go before bottom. It’s going to be a while.
GS
Hey the first out was Kara……….falling prices…….huge inventories……..Un-affordability…….you surely don’t see a spike in prices right now, it can’t possibly happen. Housing is headed to the wood heap.
By the time this thing bottoms, there will be new initiatives which will mean better housing designs by that I mean cost effectiveness and maintenance. Need is the mother of invention. Builders will come to realise this and if they don’t they will be consigned to history. Toll Mc Mansions will be a relic of the past. Hey by the way, I told you about that block of land I got at a reduced price……….$295,000 he paid for it…….I got it for $150,000. But that’s no big deal as a block of similar quality just sold for $210,000………..be very careful and have plenty of space in the deal if you want to buy now.
GS - Show me where I said the builders have put in a bottom. I have never said or even implied anything like that. You twist the meaning of other people’s postings if you see anything on this blog that calls into question an apocalypse.
GS posts “builders have already put in a bottom. First we need to have capitulation, and everyone say what a dumb investment real estate is, before they will put in a bottom. We are not even in the first inning yet. In fact, I am not even sure we are past the first out. ”
You are right. I think many, many will go broke before this is played out.
“But Weis said he doesn’t believe values in Silicon Valley, particularly San Jose, have dropped. ‘We think the market is not going south,’ Weis said.”
You havent seen anything yet honey!
Interesting………………
http://www.lewrockwell.com/north/north487.html
footie,
Gary North. I read this guy. Don’t always agree, but find him intelligent, common sense based and logical. I’m not sure on his assessment concerning inevitable Fed induced inflation. He makes so much sense that he makes me question my basic belief that we are in for a bout of deflation. Inflation, deflation…that’s the big question isn’t it…
Mate, IMHO, your Fed is between a rock and a hard place…….Drop interest rates and they trash the dollar…….raise them and they have a real (dinky die) recession. These are truly interesting times we are going through…….Hey, love your wit……..it adds a lot of flavor to the blog………..I always put the coffee down before I read your comments
I think the WSJ lead op-ed piece nailed them pretty well a couple of days ago — they would prefer to play the Disraeli strategy (”Never complain, never explain”), pretending there is no housing bubble and somehow rigging the game behind the scenes to keep inflated home prices on a permanently high plateau while accidently creating enough wage inflation for wages to catch up to home prices. That would be the Fed’s perfectly-executed soft landing.
Too bad that a record number of homes for sale at unaffordably high prices coupled with internal dissention boiling over into the press (Dallas’ Fisher) is spoiling the plan.
———————————————————————————-
But, Mousie, thou art no thy lane,
In proving foresight may be vain;
The best-laid schemes o’ mice an ‘men
Gang aft agley,
An’lea’e us nought but grief an’ pain,
For promis’d joy!
– Robert Burns –
Is the global central bank cabal unraveling before our very eyes? Maybe the conundrum will end before we are all dead…
—————————————————————————————–
ASIA MARKETS
Tokyo slips after BoJ chief cites yen-carry ‘concern’
By Chris Oliver, MarketWatch
Last Update: 1:11 AM ET Nov 10, 2006
HONG KONG (MarketWatch) — Asian stocks edged higher in mid-afternoon trading Friday, though Japan’s Nikkei 225 Index fell after Bank of Japan Governor Toshihiko Fukui said the central bank is concerned about the risk of a rapid unwinding of the yen-carry trade and its potential impact on asset markets.
Japanese exporters Toyota Motor Corp. and Sony Corp. led declines among blue chips while banking giant Mitsubishi UFJ Group was also lower.
“There’s a big risk that if there’s a sharp shift in the outlook of interest rates, that could spark a rapid unwinding (of those trades) and bring on various distortions,” Dow Jones Newswires reported Fukui as saying in parliamentary testimony.
Fukui added the central bank was trying to communicate with the market on monetary policy to ensure if an unwinding of the trade were to take place, it would “proceed smoothly”, but he added the process would be difficult. Fukui also said the amount of yen-carry positions seemed to be increasing.
The yen carry trade is a popular strategy used by speculators who take advantage of Japan’s low interest rate to invest in higher-yielding investments outside the country.
The Nikkei 225 Index (JP:1804610: news, chart, profile) ended the session 0.5% lower to 16,112.43. The broader Topix index fell 0.5% 1,581.37.
“We refuse to turn overly bearish on the market,” Citigroup Japan equity strategist Patrick Mohr wrote in a research note to clients Friday. “Despite the weak economic data to have recently been reported… the overall level of revision in company guidance at the sales level is the highest in at least five years.”
http://tinyurl.com/ueh7c
luvs_footie,
Thank you. Due to time zone, I am usually raising glass above keyboard just before writing the dummy notes.
Others finally explained the numbers you kept writing after my name as a code attempt a ™. It’s a very good thing. Thought you had my Arrest record numbers! Imploder™©® got worried!
Sh*t…….ya got me ………coffee key board again……ah well, it’s only a MS key board.
‘The LA Times. “Emeryville-based online brokerage ZipRealty Inc. lowered its full-year forecast and said the slowing housing market prompted third-quarter profit to plunge 80%.”’
What sweet sorrow. This information age pioneer, which makes instant information about current listings available in a form which takes away the ability of traditional Realtors (TM) to pull the wool over unsuspecting buyers’ eyes, seems to be a victim of its own success. For the first time ever during the down-leg of the current cycle, it is readily apparent that prices are falling and inventory is hanging over the market like a heavy snowpack about to morph into an avalanche. And so ziprealty’s profits are going down the tube in response.
Yeah, it’s trippy. ziprealty.com is an excellent resource, but it has totally reinforced my bearishness. Google ought to snatch them up just for the technology. Forget about trying to sell real estate with it.
Zipr is great; except for that RE agent that calls me 30 minutes after I log in and look at any property in San Diego (I don’t have any intention of living in San Diego; just like to look at trends there, especially gs’s zip of 92127).
Yes, ZIPR’s downfall is that they liase local RE agents to people who register. Better if they would link their users to lawyers who could handle the transaction paperwork for $$$. I can generally tolerate a lawyer’s personality a little better then a realtor’s.
“In North County, the weighted average price for a new detached home in the last quarter fell to $885,683, a 4 percent drop from the second quarter this year, according to the survey. The survey said the weighted average price for a new attached home, such as a condominium, dropped 9 percent, to $380,086, from $417,865.”
What would four consecutive quarters of 4% declines do to new North County home prices?
[1 - (1-0.04)^4] X $885,683 =
(sorry — family interruption …)
[1 - (1-0.04)^4] X $885,683 = $133,431, a modest 15% drop, at only about twice the median San Diego county income. Of course, this does not factor in the additional 20% or so that Ben mentioned above due to the effect of builder incentives…