“Times Are Changing” In California
Dataquick reports from California. “Last month was the slowest October for Southern California home sales in a decade. Prices continued to level off. A total of 22,117 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 22.4 percent from 28,489 for October a year ago, according to DataQuick.”
“‘It’s harder to buy a home if you think it might go down in value than it is if you’re convinced it’s going up,’ said Marshall Prentice, DataQuick president.’
The Union Tribune. “San Diego County’s housing price slide reversed course last month, DataQuick reported. September’s overall median of $476,000 was the lowest since February 2005. The inventory of unsold active listings was 35.9 percent higher than a year ago, standing at 20,416 homes.”
“But agents, brokers, lenders and all the other players in the housing industry shouldn’t uncork the champagne just yet, market watchers say. Ross Starr, a UCSD economist, said a ‘bicoastal housing recession” has developed in previously hot markets, including Southern California, South Florida and Las Vegas.’ ‘The bubble’s burst,’ he said.”
“The median price for resale single-family houses fell $10,000 in October, DataQuick figures showed. The $535,000 median was down $34,500, or 6.1 percent, from its all-time high of $569,500 set in May and is back to where it stood in March last year.”
The LA Times. “DataQuick analyst John Karevoll cautioned that L.A. County’s rate of price appreciation could turn negative at the end of this year or early next year, as it has been for several months in San Diego County.”
“‘It’s not the end of the world. It might be uncomfortable for those who bought at the peak if they have to sell,’ he said.”
“The median home price in L.A. County peaked in July at $520,000. It dipped the next two months, hitting $509,000 in September, before rebounding last month (to $514,000).”
“In Ventura County, home prices dipped 2.3% to $582,000. Sales fell 19.6% to 940. In Orange County, the region’s priciest market, the median price rose 3.1% to $625,000, which was the same median a month ago. Sales declined 24.9% to 2,715.”
“The Inland Empire counties of Riverside and San Bernardino, where prices were still rising by double-digits as recently as this spring, also showed marked slowing. In October, the median in Riverside rose 4.9% to $410,000, but was off its peak of $423,000 reached in September. Sales fell 24.2%.”
“San Bernardino’s median price was flat with the median price set last December. Sales declined 21.3%.”
The Contra Costa Times. “Robin Anderson’s home here was on the market for six months with no offers when her real estate agent decided to quit. The Andersons’ home started off on the market in February at $525,000, dropped to $485,000, and only a handful of people had looked at the house.”
“After moving into a new home and paying three mortgages (two firsts and a second), the Andersons were in a hurry to sell. ‘All the real estate agents said the same thing, that nothing’s selling and nothing’s moving,’ she said. ‘Then one of the agents suggested the auction.’”
“‘It really was scary,’ she said of the idea of putting her house on the block for a minimum bid of $299,000. ‘But at least with this option we knew it would sell.’”
“The Andersons had to move and soon began looking at new homes in the Oakdale area. They received great buyer incentives for their new home, including thousands in free upgrades when they bought a new home in February for $425,000.”
“The only problem was the same thing was occurring in Discovery Bay, where their resale home was competing with new construction with up to $100,000 off. The reality of paying two first mortgages and a second became a stark reality. ‘In the market right now, I don’t think there is an ideal situation,’ Robin Anderson said. ‘The ideal situation is hanging on until the market turns, but that wasn’t an option for us.’”
“The auction of the Anderson home took only four minutes in front of the house on a recent Saturday afternoon. The winning bid was $434,500. The Andersons received $395,000.”
“Home auctions increased 4.5 percent in the third quarter from last year, said Erica Brown,of the National Auctioneer’s Association, making it the biggest growth sector in the industry, even surpassing charity auctions. ‘People are sick of their home burning a hole in their pockets while they sit for six to eight months,’ she said. ‘Now, they’re increasingly going to auction.’”
“‘Times are changing,’ said Ann Galassi, who owns two houses in Discovery Bay’s Country Meadows subdivision, mentioning that she could not sell one of her homes for what she paid for it a year ago.”
“Steve LaRocque, owner of the Pacific Auction Exchange franchise in Pleasanton, said the next auction is scheduled for Dec. 2, where his office will auction off several parcels from San Mateo, Sonoma, Mendocino and other counties in Foster City.”
“LaRocque said that they have turned down many customers who ask him to auction their home, since many are in debt for more than 100 percent their loan value.”
“‘The auction process won’t work for them because no one will pay that much for the house,’ he said. ‘Homes that are 110 percent of the value of their home are difficult to sell through a real estate agent or auction process.’”
The Tracy Press:
‘Banta superintendent William Draa admits the valley housing market has significantly cooled since last year. A drop of 30 percent to 40 percent in valley housing sales this year means River Islands will have a lot of competition, said Larry Rumbeck, president of the Central Valley Association of Realtors. Until the industry gets rid of its unsold inventory, he said, ‘I sure wouldn’t want to invest millions in infrastructure with the way housing is right now.’
‘It’s way too soon to talk about a condo-conversion craze in Redding. But the idea, common in cities like San Diego and Miami, may be catching on in the north state. Today the Planning Commission will consider a proposal to convert 72 Hilltop Drive apartments into condominiums. That’s the second such request the commission has considered since summer. Until this year, Redding had gone nearly three decades without a condo-conversion proposal.’
‘Rising rents have made developers eager to build new apartments in the South Bay as the market rebounds from five years in the dumps. But builders say construction will not start until land prices come down, a lot. Prices are still 25 percent higher than they should be, said Joseph Perkins, executive director of the Home Builders of Northern California.’
‘A lot of land sales have failed. Home builders are walking away from millions of dollars in deposits, they’re cutting their losses,’ said Stanford Jones, an investment broker in Palo Alto.’
It seems to me the median price is so meaningless to compare from one month to another month without knowing the sq. ft. of the median price home. If you have a $500,000 median price in July for a median 2000 sq. ft. home and a $510,000 median price in August for a median 2200 sq ft home, then the median price is up because bigger houses were selling. The Main Stream Media
makes such a big deal about this figure, and it tells me nothing
about what is really happening in the market place. Am I wrong?
It isn’t very useful in a transitions period, IMO. I think the press wanted to throw a bone to the bulls. Go ahead, guys, buy another house. Maybe two!
That has been my reponse to all bulls now that it is clear this thing is OVER.
“Go out and buy then if you feel so confident!” - Usually get a “HUH” repsonse.
You are correct. The better gauge of price trend is similar home sales. Comparing prices for a 2000 sq ft house on 5000 sq ft lot with the time differential in a geographic area. Anybody where to get this data?
S&P Case-Schiller-Weiss index. This index tracks same homes selling without major modification for a true sense of the market.
http://www.macromarkets.com
Unfortunately they only track 10 major US cities (but the three Cali majors of LA, San Diego, and San Fran), and the index is published once a month and is on a three month delay.
Not very convenient but it’s widely believed to be the most accurate home value indicator. And yes, most major indices are off their peaks and trending down.
Of course, none of this takes into account that the continuing depreciation in the dollar’s value (inflation) means that the median should be at least 3% higher each year in a flat market.
Does the CSW Index correct for the upward bias created by builder incentives and other forms of appraisal fraud? I think not. In fact, I would guess this issue remains off the radar screen for most mainstream economists who pay attention to housing.
Being a resale index it is not concerned with the shenanigans of builders selling “new” houses.
The fact is the resale index is heavily impacted by the “shenanigans” of new home builders. Their new home costs are dropping in a declining market as commodity prices and labor costs drop. They further undercut the prices of the resale market, soaking up more buyers and causing the resale index to decling further. Viscious circle for people trying to sell individual homes….
Skooch meant that the accuracy of the resale index is not affected by the tactics of new home sellers. Of course resale prices are affected by the new home sellers.
Thanks for the insightful comments. I did not realize CSW index was for used-homes only.
Wait a minute — “repeat sales index” — doh!
You are correct. The better gauge of price trend is similar home sales. Comparing prices for a 2000 sq ft house on 5000 sq ft lot with the time differential in a geographic area. Anybody know where to get this data?
1. The median home price is a misleading stat at best.
2. That stat doesn’t figure in all the seller concessions such as closing costs, cash back at closing, cars, kitchens, pools, etc.
3. EVEN if that stat had substance…with the increasing inventories, and declining sales pace…what is the next logical step???
4. This IS nothing more than a fluff piece put together by the industry for the media to ‘report’. Most people are realizing that no matter what the ‘median’ data is, they cannot sell their house for what they could have a year ago.
This ain’t rocket science people….it just takes time! 2007 will be the year things REALLY get interesting.
SoCalMtgGuy
http://www.housingbubblecasualty.com
http://www.housingbubblecasualty.com/forum
Median has been used as a yardstick for the markets. David, I agree with you that there is flaw with median price but what else can you use? A more accurate approach is Case-Shiller index but it’s not widely used yet. According to Case-shiller future contracts for LA (cshpca), future price will drop about 5% within less than 1 year. Here are the future contracts:
Contract date Index
11/06/2006 273.6
02/07/2007 269.6
05/07/2007 260.6
08/07/2007 257.6
In my opinion, the real median price has to be less than the reported number because of incentives. Don’t you agree that it’s deceiving?
I personally would be careless about the median price. I’d rather focus on the trend — huge ARM reset and a possible recesion in 2007. In the nearest term, at least wait until the ARM reset is over. There are absolutely no good reasons for buying now. Can you think of anything? I don’t.
“There are absolutely no good reasons for buying now.”
What if you knew that the Fed’s plan was to create stealth housing price inflation, and it had a high probability of succeeding? How can you rule out this possibility? Or better yet, how can you insure against the risk of getting priced out forever while you are trying to avoid catching a falling knife?
I don’t see that it matters whether you are “priced out forever” if renting is much cheaper than “owning”. Of course you have to find some way of keeping up with the stealth inflation, which presumably you could do by moving your assets to a harder currency.
GetStucco, you made a very good point and actually it was my main concern about housing price in the long run. I still believe there are absolutely no reasons for buying NOW. However, there is a risk of not buying in the longer term. Unless the government is serious about making fundamental changes — 1. fix the deficit 2. control their spendings 3. stop printing money freely, etc. we are facing the hard reality that the dollar is losing its value. So, I do agree with you that a real house is worth more than paper money in the long run.
“What if you knew that the Fed’s plan was to create stealth housing price inflation, and it had a high probability of succeeding?”
It won’t work without wage inflation. With jobs sent to China/India/anywhere but here and imported illegals/HB1 visas for those jobs that can’t be offshored, wage inflation won’t happen.
The main reason left to buy a house from a monetary perspective is if the Fed chooses high or hyper inflation.
If rents go from $500 to $5000 for a 1 BR and heating a home goes from $500 to $5000 or more per month, then owning a house (with a mortgage and with a geothermal HVAC for much lower climate control costs) would be the better deal.
If inflation really got that high, it would be impossible to borrow money to buy a house (or anything else), home buyers would have to pay cash, and prices would collapse.
Anyway I don’t think the Fed really wants to turn the US into another Brazil anytime soon.
Anyway I don’t think the Fed really wants to turn the US into another Brazil anytime soon.
Whether or not that’s their (or Congress & Dubya’s) actual intention, the “plan” seems to be working out brilliantly.
Luckily for the Fed, their leading competitors at the ECB and BOJ seem to be following the same plan.
“If inflation really got that high, it would be impossible to borrow money to buy a house (or anything else), home buyers would have to pay cash, and prices would collapse.”
What if some unnamed entity were intervening in the long-term Treasury market to keep the lid on interest rates?
At best the median is a noisy and lagging indicator of market values during a downturn. The problem is that big inventory pile hanging over the market like the Sword of Damacles about to drop. The reason that it is piling up is because a preponderance of buyers have a lower subjective valuation of home prices than the sellers do. Hence homes are coming on the market more quickly than they are either being purchased or delisted. A widening gap between bid and asked prices normally foreshadows a drop in prices.
GS - I’ve never faulted you for not being prosaic. Sweetly turned.
Peace, brother Paul.
… am inclined to wonder when not being prosaic would be considered a fault …
Condo conversions in Redding? Redding, CA? WTF?
That place is up north, isolated, with plenty of land around. If you move to Redding, you move for the land, not a freaking condo. Plus, it is THE hottest place in the valley, easily going to 112 F.
My reaction too. I rode through there once on a motorbike, didn’t see anything worth stopping for other than gas.
can anyone explain to me ..what exactly is a condo conversion?
Do they just kick everyone out and say,”who wants to buy an apartment?”
Yep, pretty much, but first the obligatory Chinese or Brazilian Granite Counter tops go in.
Condoconversion. n. (kon-doe-kon-version) Comes from the japanese word ‘hondaconversion’, or, a way in which you screw one thing up by making it- amateurishly- into something else. Also known in Orange County as an often illegal process that tends to send Huntington Beach mayors to jail. Never, ever a good idea.
Don’t forget the stone siding…
Condo conversions in Redding? Seriously, the articles are getting stranger with each day. When this junk gets proposed, you know the end is near. There is a reason no one has proposed a conversion in 30 years. It was an inexpensive, isolated town with little economic base. Mostly a place to retire to. Lower prices will be coming to all zip codes soon.
Had a couple of buddies living in Hilltop Village two years ago so I am familiar with those units. Believe me, there is no amount of granite/stainless/travertine that could make any of those units worth $175K.
BTW, one of those buddies is an agent with Coldwell Banker in Redding, hasn’t had a sale in months, his last four listings all cancelled in the past 30 days and he has his Ramirez 1A for sale on ebay.
Prices are indeed sticky on the way down. In my part of So Cal (Valencia, CA), new homebuilders are starting to lower prices. Hovnanian’s Stetson Ranch in Santa Clarita cut $100K plus landscaping and closing cost. Received a phone call from their sales agent saying that buyer’s want a cut in prices so that’s what we are doing, “we don’t even bother that much with incentives, buyers want the bottom price.” I must say that’s one enlightened sales team and homebuilder. I remember those houses were selling around $750,000 six months ago and their least expensive model is now at $630,000. I will wait when it goes down to ~$500,000. They actually stopped opening new phases until their built inventory is sold. It is a slow process.
“I will wait when it goes down to ~$500,000.”
500k for a tract home in Valencia? I hope you don’t mind too much when prices ultimately revert back to 2001 levels, i.e. about 300K.
dwr,
How did you come up with that conclusion (2001 prices)? We are all just speculating here, educated GUESSES at best. My $500K is 30% less than what similar houses sold for 6 months ago. I agree these are tract houses but they are 3000 sq ft in large size lots. If you have a crystal ball, I would assume you bought 20 houses in 2001 and sold 19 in October 2005. You seem so sure of the reverting back to 2001. I’d be happy with a 30-40% reduction.
We all have crystal balls here on this blog, didn’t you know that
Everyone on this blog knows exactly what will happen - we didn’t in the past, but we do now. Each of us also has at least 1 million dollars in liquid savings, zero debt and buy everything with cash 
DD posts ” We all have crystal balls here on this blog”
Yep! I got a pair and they never lie….LOL
No doubt they’ve been sending messages from beyond that FB are entering into a very “prickly” situation and are barely “hanging in there”…
DD,
How about a super model wife, 2.5 kids in honor classes and two Ferraris in the garage of the apartment (not a homeowner because waiting for prices to revert to 2001 levels).
You’re right. Go knock yourself out when prices hit 500k.
Well, isn’t a price-to-rent ratio a reasonable way to resolve the question of where prices “should” be? When I sold a condo in ‘96 (still a slow market), the amt of the buyer’s mortgage payment was just about what the rent would’ve been. Even so, I was glad to get out, so that I didn’t have to pay condo fee, property tax, etc. Guess what I’m saying is that in the 90’s downturn, prices didn’t go QUITE down to a parity with rents.
Absolutely. I do believe in a slight cost premium to owning (make sure you don’t forget maintenance!)… but they should always be close.
Former-I’d have to agree with DWR. Why in the world would you buy with only a 30% reduction at $500,000. It that a PFA number…pluck from air?
Let the market tell you when to buy not guessing at a 30% reduction.
sd renter,
The market is irrational. If it were rational, “mom and pop” investors will get their cake handed to them by Wall Street professionals. Who can explain the way HB stocks are moving? You guys are all wishing for a crash the same way sellers are listing for wishing prices (sorry Cote - got to borrow the term).
Valencia is not perfect but it is a safe, family friendly town with excellent schools. How did I come up with the $500K wishing price? Because I am renting a townhouse for $2000 a month. A $400K mortgage will run about $2500 a month - a slight premium for owning a a much bigger house. So I will knock myself out when those houses are selling for $500K.
Comment by formerlahomeowner: “How did I come up with the $500K wishing price? Because I am renting a townhouse for $2000 a month. A $400K mortgage will run about $2500 a month”
Keep in mind that’s at today’s mortgage rates, which are historically on the low side. Just imagine what’ll happen if mortgage rates hit 8 or 9%.
A $400K mortgage will run about $2500 a month - a slight premium for owning a a much bigger house
Compare apples with apples. You can’t compare rent with just mortgage payments. You have to include taxes, HOA, insurance, and maintenance. Where does that get you?
Obviously with a fixed rate mortgage, the cost of owning will not change.
If rates go “sky high” (9%+) that would obviosuly wipe some people out and drop the value of homes (and prop taxes) but that will also create inflationary pressure on rents.
I guess it isn’t clear to me how rate increases favor renter, buyer or seller.
With increased rates, there will be more demand (and money) chasing rental units. SF Bay Area is experiencing rent increases as home prices stall and retreat.
There are ~150,000 new job seekers entering the job market every month. They’ll be renters.
yogurt,
You are absolutely correct. All those expenses can cost about 3% of the purchase price. But how come you forgot to mention the tax deductions for the mortgage interest. You guys seem to look at just the negatives of owning a house. There will be a point where buying makes more financial sense compared to renting. For me, that is a $500K 4 bedroom house with a nice size yard versus a $2000 monthly rental condo with 2 bedrooms where my 2 kids have to share a room. What is the trigger point for you? Don’t give me the doom and gloom prediction unless you are Robert Shiller.
former,
I think you should look at when the CREDIT BUBBLE began. It was around 2001. By that time, prices had already risen in LA to rather unaffordable levels. IMHO, they would have gone down from there, if not for the CREDIT BUBBLE.
Do not underestimate the power of zero-down, no doc loans in the hands of greedy/foolish/naive people.
$500,000 is A LOT of money (think half a million dollars). With that, you should be able to buy a nice (custom?) home on a decent lot — NOT a McMansion with HOAs and Mello-Roos (not sure if they have them there) on a lot where your neighbors are soooo close, they can watch you doing all your “business” inside your house.
If your current rental is too small, it might not be a bad idea to get a slightly larger rental so you do not feel pressured to catch the falling knife.
Just MHO.
Former, we all have to look at our personal situations before buying, but at $500 you will still be overpaying. Wait until another year or so, when the new RTC is warehousing selling homes and then buy one at $175. Which is what anything in Valencia is really worth. Then if you ever have to sell, you are making a profit.
I don’t know about other areas but 2001 prices are about what we need to fall back to to get in line with traditional ratios - i.e. income (rent) to price and price to median household income. But also keep in mind that bursting bubbles (or in the case of housing - slowly deflating bubbles) tend to send the price below the appropriate mean as “investor” psychology makes even a fair price seem to high. The deviation from the mean is what you look for when determine if an asset is in a bubble. The reversion back to below the mean is when you buy an asset.
And no, none of us have crystal balls. But prices were out of whack in 2003 and should have gone back to 2001 prices (adjusted for inflation.)
That’s impossible, at least according to a co-worker of mine. He told me prices won’t go back to 2003 levels. When I asked him why his response was (with serious look on his face) “it can’t”. True story.
I get the same thing - eventhough the incomes don’t support the current prices! BTW… The houses at Stetson Ranch start at $697,000k. At least it is a start! I heard of a builder in FL who discounted some houses from $450k to $200k to sell. Imagine what that did to comps! I am hoping for the same here!!
LArenter,
The least expensive model was just reduced to $630K with front and backyard landscaping plus $5K in closing cost assistance. Funny thing was, the sales person said that prices will go up after the Super Bowl!!! I was gonna speak my mind but had to bite my tongue because she was so nice in answering my questions.
“it’s can’t…because everyone wants to live in Valencia. They now have a Macaroni Grill, Claim Jumper, AND a Walmart.”
Macaroni Grill…
imploder hates to correct dwr, but Valencia has 2 Walmarts! Valencia is HIGH of imploder’s BUY list! Also has wonderful weather for roasting hot dogs bought at Savon. Grill not required! Just lay them out on 125 degree sidewalk and watch them sizzle.
wtf is a “Claim Jumper”?
“They now have a Macaroni Grill, Claim Jumper, AND a Walmart.”
Sounds like a classy town. Easily worth $500-600K!
“It can’t go down.” Man, that is too funny. Thanks for a laugh at the end of my day!
fiat lux: “Claim Jumper” is another restaurant chain.
CJ is like a middle market steakhouse type chain. Several cuts above ponderosa, but not quite Morton’s.
http://www.claimjumper.com/hypertext/menus_dinein.htm
Cheese Potatocakes
Parmesan, Cheddar & Monterey Jack Cheese, Cilantro, Onion, Fresh Dill & Mashed Potato Lightly Breaded and Fried Crisp. Topped with Fresh Chives and Herbed Ranch Salsa”
Claim Jumper is also one of those restaurants that serves single portions which would feed a family of 10 in other countries. And it’s all covered with cheese, butter, etc.
Tastes good, but will kill you.
Wait a minute, you put Claim Jumper and Morton’s in the same sentence?
DD posts “He told me prices won’t go back to 2003 levels. When I asked him why his response was (with serious look on his face) “it can’t”.
DD… I bet he bought in 03′…. LOL…LOL
Yep, you got it.
Too funny… maybe you should point him to the
http://www.ofheo.gov/HPIMSA.asp web site…
Cleary shows during the prior downturn go back 6-8 year low.
The data is on local MSA…
I think $300k is too optmistic given that local gov employees get decent raises every year. I think LA cops or fire fighters just got a 17% raise for next 3 yrs. I tend to agree with formerlahomeowner. If prices drop to around ‘03 level and I am back in and even better if it’s ‘02.
LA County firefighters got 18.5% over three years. Nurses are getting close to 30% over three years based on experience ($100K per year on average). Still does not explain the 100% increase in house prices. Sold my house in 2004 thinking I could rent a year or two until prices go back to sane levels.
You sold in 2004, and now are hoping prices drop back to what, October 2003 levels? I might not have a crystal ball, but you’re a fool.
dwr
And you are a market timing genius
‘I remember those houses were selling around $750,000 six months ago and their least expensive model is now at $630,000.’
Such builders can actually lower prices a LOT and still make a profit. It doesn’t cost anything close to that to build tract housing in exurbia. As they lower prices, many existing homeowners dependent on increasing equity to finance their status will enter foreclosure and the cycle of falling prices will become a self-perpetuating downward spiral. At some point builders will be dumping inventory below cost merely to get it off their books. Wait until that point.
I hear you. It’s been like eternity waiting for the correction to get reflected on selling price. This could take many more years as more and more exotic suicide loans are introduced regardless of the lending “guidelines.”
Note to the Andersons, re: “Plan Titanic”: if you hold on long enough, your finances won’t matter anymore!
——–ALERT! ALERT! YOU GUYS NEED TO READ THIS!——–
Sponsored by the I sh!t you not: ‘It’s a great time to buy committee.’ Pay attention to the ‘facts and fiction’ button, and the ‘FAQ’ button. Learn the ‘true’ reasons why you should sign up to become the next GF/FB then go ahead and scream your heads off!
Link: http://www.jaxhomefacts.com/index.php
“Most importantly, housing markets adjust periodically according to overall economic conditions, and any or all of these extremely favorable variables could change for the worse, just a few months from today.”
Yeah, and if they do your new home’s value will tank. So intelligent people buy BEFORE the economic fundamentals change driving prices down.
They waited until the 10th paragraph to quote another economists, this one for the National Association of Realtors, as saying it is an expected price correction and prices should go back to positive growth in early 2007.
Could this be the same NAR economist who recently said:
“”We need a price decline, we were overbloated”
and
“”In 2007, it will be a flat year, maybe 1 percent [sales] drop, and that’s it. After 2007, we’ll be back to expansion again.”
and
“I’m optimistic for 74 percent of the country. The other 26 percent are in for some rough times.”
Yes, and the same real estate economist who is losing his shirt at the moment on his Florida investment condos. Luckily he has book sales to make up for his investment losses.
No matter what the economic conditions or your financial position or market conditions or whatever, the logical conclusion in *all situations* is ‘it’s a great time to buy.’
OK, I’m ready to puke after reading the FAQ on that site.
If you follow the committee’s advice, you will soon be McF_cked!
Love it (the “jaxfacts” thing) - one of the reasons cited why you should buy a home now is “lower prices” - egad, lower than what? Lower than a few months ago? Thanks a lot but no thanks. Let’s await a WHOLE LOT lower.
(the “jaxfacts” thing)
Imploder thinks these Realtors can go JaxOff!
Brain…hurting…..must….stop….reading…arrrrgh…..
My neighbor sold his house six-months ago for $300,000. Today, I can only get $270,000 for my home. Why should I take a $30,000 loss on my home? Doesn’t it make sense to wait out the market until I get the same price on my home that my neighbor got before buying a move-up home?
A:
It’s always better to trade up in a buyer’s market, like the one we are in now. While the value of your house has fallen, the price of higher-end homes has also dropped. Your home value is now down 10 percent to $270,000. But don’t forget that in today’s buyer’s market, higher priced homes are also dropping in price.
But for argument’s sake, let’s say that a $500,000 move-up home has also dropped 10 percent in value and now sells at $450,000. If you sold your home today for $270,000 and purchased the larger house for $450,000, the difference in price would be $180,000.
But if you waited to recoup the 10 percent value on your home and sold it at $300,000, chances are that same move-up home would also move up in price to at least $500,000. That’s a $200,000 price difference between the two homes. So by selling today, you would actually save $20,000. And most likely, by jumping into the market today your savings would be even greater because consumers have much more bargaining power when shopping for higher-end homes in a buyer’s market.
OK, let’s see… following this logic, I find myself in a down market with a monthly nut thats probably double what I was paying before, “owning” an asset thats falling exponentially faster in value than my previous house. Not to mention that I had paid down a significant percentage of the principle, and had a lower tax base before.
“Not only is homeownership a stepping stone to a future of financial security, it also helps to build neighborhoods and strengthen communities. It is truly the cornerstone of the American way of life, and the fulfillment of the American dream.”
http://www.jaxhomefacts.com/faq.php#question5
Has anyone seen Debra Hetmer around lately?
““Not only is homeownership a stepping stone to a future of financial security, it also helps to build neighborhoods and strengthen communities. It is truly the cornerstone of the American way of life, and the fulfillment of the American dream.”
Geez, might as well just say “If you don’t buy now, you’re supporting terrorism”.
Because the American Dream is bankruptcy and foreclosure, where do I sign up! Financial suicide at these prices, who writes this stuff.
In today’s housing market, the real risk is in waiting to buy a home.
———————
Someone help me out here. Exactly what are we risking here? That we’ll be “priced out — FOREVER!!!”?
These people deserve to be sued for all they’ve got.
The slowdown in CA is moving from the outer suburbs into the major cities. It is only a matter of time before SF, LA, OC and SD get hit by double digit price declines if it hasn’t already happened.
As for the FB’s, handing the keys to the bank is the best option.
So, you are saying that price starts to move up from cities first then expands to suburbs during up markets and the opposite — price starts to move down from suburbs to cities during down markets. I think it makes sense. Is it how it typical works?
Others have predicted that this is the way prices will collapse. And, it does make sense to me, too, although I haven’t seen any hard evidence of how it played out in previous busts.
just check what happened in the antelope valley in the early 9os.One in every 10 houses boarded up with HUD sign attached many of those homes sat for a year ot two before buyers came in to buy them,i know i bought several for half price and sold them in late 04.
Same thing in Moreno Valley and other parts of Riverside County.
yep.
Check out the evidence for the LA basin. I love those hot oranges and cool blues!
(Caution: pdf file)
http://www.realestateclubla.com/pdf/Cagan_FireBurn_1104.pdf
As I’ve been looking at the dataquick zip charts I’ve been seeing the opposite on the downside. The priciest zips are now falling while outlying or ghetto zip are still increasing.
I would attribute this to the “smart money” having left the market. The only perps, I mean, persons still buying are financially or generally illiterate and are being goaded like cattle toward the sledge hammer.
this was known as being driven through “the Bridge of Sighs” at the Chicago Stock Yards.
I thought it was “the Bridge of Moos”
Good point and I agree with you. If it was 6 months ago — when there weren’t much bad news going on — I would understand. Are they illiterate to the point of not knowing what’s going on out there? Feel sorry for these people. The minority has always been the group got hit most after every bubbles. The rich left way before and then the middle class and finally the poor.
I’ve got kind of a unique view of this thing as I do volunteer work in a spanish language church group. I still see people moving up to the AV from “down below” to purchase their first home.
I generally will ask them what interest rate they got on their mortgage. I get a blank look.
I’ll then ask them if they have a fixed or variable mortgage, if I don’t get a blank look they’ll say “fixed”, so I ask them for how long, and I’ll usually get the response 2 years.
These people trust the salesman. America is the land where the streets are paved with gold. Why would this nice young man or pretty young lady who speaks my language try to hurt me?
50% of LA county now speaks spanish, there are lots of greater fools out there and that just makes the future pain of suicide loan resets that much greater.
It will be ugly. I’d suggest y’all go out and buy a good 12 gauge and ammo, you might just need it.
Has nothing to do with language - people born in this country do the same thing. American buyer mentality is extremely predictable and sad.
Bottom line: It doesn’t matter how much it costs, find a way to make the payment work. People are payment buyers. And that’s why they live 2 paychecks away from bankruptcy.
If it has nothing to do with language why does it seem that the last of the GFs are immigrants with little or no english skills?
Immigrants with little or no English skills are a prime target for predatory no doc suicide loans.
all we have in los angeles now is immigrants who cant speak english.most of the natives are long gone and i am thinking of joing them.47 years here and los angeles is turning into an armpit.the house across from my parents in northridge area of san fernando has 3 mexican families living thare and their son is a little gangster.last night they graffiti their house all up.if i catch the little bastards i will probably be the one who goes to jail.
I know we all rag on the OC, but “most” of LA and San Bernardino are hell holes. At least I can walk to work here in South OC without feeling like I will be shot at or pulled over by some over anxious cops with guns drawn. Do we have problems here, sure. Traffic, smog, McMansions, hosing cost. But I have lived in all three counties, inc. the valley of LA and so far South OC is the best, although Granada Hills was pleasant until the quake hit in ‘94.
‘But I have lived in all three counties, inc. the valley of LA and so far South OC is the best, although Granada Hills was pleasant until the quake hit in ‘94.”
SaN berdoo and compton win honors for highest per cap murder rates in California. 70% of LA and 50 % of LA county are officially Blighted tijuana Ghettos. Most folks living in LA don’t know that it has become basically a third-world sinkhole no different from Calcutta,Mexico City,Rio,Guat city, or any other third-world metropolis. Extremes of wealth are greater in LA than any other region in USA. You go from 20 million dollar brentwood gated castles to grimy slumzones of innor LA ring areas in 30 minites. The attempted socialist grab by the LA city junta for a bilion dollar affordable housing bond, payable thru exactions from the property owners, is just the beginning: look for more radical ’socialist’ measures to boost up the ‘poor’ illegals thru exactions from ‘rich corporations’ and property owners in LA.
So THAT’s why prices are so high in LA — everyone (in Mexico) wants to live there!
Been in Redondo for 30 years with a short stint in south OC. I noticed and found interesting that one can drive east from Laguna Beach for 20 miles and still be in the nice, safe, and comfortable, zone. 20 miles east of LA county beaches is a war zone. I predict that Manhattan, Hermosa, and South Redondo Beaches will someday become a gated community. Remember, you saw it here, first.
Yes. I know someone who bought a Northridge house in Reseda for 1.12 million in July. It now Zillows at $940,000 with a September comp sale at $840,000 (one block away and a better house/property).
correction - off Reseda
Cagan piece (to which GetStucco’s link points) shows that pricy coastal areas went down first, “affordable” areas last.
It will be SO much worse this time, because of the McMansion glut which the big builders have shat upon the market. The drop in McMansion prices will suffocate the prices of used homes of comparable or inferior quality in an effect not unlike that of Mt. Vesuvius’ ashes snuffing out the village of Pompeii.
http://en.wikipedia.org/wiki/Vesuvius
This latest report may offer a shred of false hope to the FBs and may encourage them to hang on just a little longer before, inevitably, tossing in the towel and the keys.
They may start putting even more on those credit cards…
I’m surprised that the media hasn’t started to challenge the vagueness and deceptive practice of the RE industry quoting “Median” prices. You would think at this stage of the housing bubble implosion that some smart business journalist would start to challenge the median price more in favor of an “average” price - maybe even start comparing apples to apples (i.e. 2200 sq. ft 3 bd/2.5 SFH average price versus YOY avg price…..).
Here in the OC, the median price is unchanged from last month around 3.1% but I know just from going to open houses that prices are very soft and have been coming down fast which is hidden in the meaningless median pricing data.
While it bothers me that the media hasn’t challenged the vagueness and unreliability of the “median” prices, it doesn’t really surprise me. It seems that most journalists are too stupid or too lazy to figure it out and report on it honestly. They just get their quotes handed to them from the REIC and slap it together and think they have done some real reporting. Rather pathetic, really.
To question and challenge a statistic that’s been used for years is not news reporting. Investigative journalism would look at it and see if it has any ‘legs.’
Would the average guy riding the bus or subway read that article? Would Joe Soccermom use it as an opportunity to get up for another beer?
If so, don’t expect the MSM to pick-up on it. Mortgage fraud and homedebtors being evicted = much better for circulation.
Because it’s a very general number that folks here pay way too much attention to. That number is just like saying the National Median Housing price is $250k. What does that mean? Absolutely nothing if you live in California. It’s supposed to be used for comparision ie: In 1998 the Median Price was 200k in 2006 the median is 500k. Housing went up in 8 years. End of story. It’s not meant for rockest science in depth study. If you want that get local info for the area you’re interested in. Even the info that GS posted yesterday showed area’s in certain parts of SoCal going up while others were tanking. During the last downturn which I found hard to believe. Astounded may be a better description. But it is what it is.
I’m surprised that the media hasn’t started to challenge the vagueness and deceptive practice of the RE industry quoting “Median” prices.”
As long as the all the zeros at the end of the Advertising purchase checks are numerous and anything but “vague”, why question use of the Median price number? Hell, the newspapers can’t even get someone to fill out an info sheet (thanks bugmenot!) let alone pay to read them! What do they owe the readers anymore?
Real Estate Industry and it’s Advertising is the newspaper’ friend. I wouldn’t expect much reporting in the negative, especially from the LA Times until it’s old news and they’re just hawking the schadenfreude for the rube rubberneckers.
What idiot paid 435K at an auction for the Anderson’s house, which was originally 525K? Who here thinks that dope got a deal? Didn’t think so. All I can say is that the Anderson’s were lucky to find some GF at auction. 299K was the starting bid. I’m surprised to find that there was any activity at teh auction other than crickets.
What’s really astounding about auctions is the 10% commission. Those funds are due up front, too, at an auction company here in VA. It takes deep pockets to fund such endeavors. At these prices, it’s not worth it for me to attend them.
Auctions are the gimmick du jour. The first ones to use it will probably meet with some “success” because of the novelty but auctions, over time, don’t work to the advantage of single, unremarkable, properties (aside from the pay day for the auctioneer). Look at that example; had they cut the price aggressively there’s a good chance they’d have netted quite a bit more. Few buyers bid up for assets that are being sold by the desperate. I should say, few intelligent buyers. Maybe there will be a few more suckers who think they’re getting a “deal” at an auction but I doubt there is an endless supply of such fools.
Give it a little time, the “bad” auction outcomes will proliferate and the gimmick will go the way of muffins, “presentation” and other such “clever” ideas that imagine buyers are dopes impressed with sparkly beads and bangle thingys.
Uh, buyers ARE impressed with such things. The problem is that most of that pool has been exhausted already, and now mostly the smart money is waiting.
There are enough bigger fools still out there, though, to keep some sales closing. Notice sales have only dropped from the astronomical levels they were at recently. They haven’t dropped to 2001 levels yet.
I don’t agree with that, if the auction is structured properly.
It seems that in the US, and auction is a way of getting a house “under offer”. In the UK, if you bid at auction, you have to have the cash ready as you put down a 10% deposit and sign a binding contract on the spot.
This adds liquidity to the market and enables prices to find their natural level.
If you had alot more of your stock going through this type of auction, the pain would be the same magnitude, but a hell of a lot shorter.
Regards,
Loafer
I just heard a radio commercial about great investment opportunities in Boise, ID! That is such an up and coming city, with their opera, great theaters, internationally recognized restaurants, great healthcare facilities, wonderful international airport, etc. Can’t miss!
Sarcasm off…
smf,
Damn! I knew it was too good to be true. I heard everyone wants to live in Idaho. Then I read that you were being sarcastic. Bummer.
Boise has an opera? Surely you jest. Anyone seen Eric Estrada pitching these deals on TV lately? That was classic.
In L.A., friends mortgage broker told him that we’re all set for prices to take off again soon, since the FED would be cutting rates next year. Latest info seems to have inflation easing, so maybe the rate cut will happen. Will it matter? Could a FED cut revivve this monster. And if not… why? Just need some argument ammo. hehe…
Nope, a FED cut won’t bring the market back. First, mortgage rates track the 10-year treasury rate, not the FED overnight rate. The FED has no control over the 10-year treasury rate, and moves by the FED have not been tracking to mortgage rates (e.g., the infamous “conundrum”).
Second, a 25 or even 50 basis point cut in interest rates won’t be enough to make housing affordable. For example, on a $500K loan (30 yr. fixed), the difference between a rate of 7.0% and 6.5% only amounts to $166 less per month ($3326 v. $3160). Are people really just $166/month away from buying that house?
Third, the demand is just not there. The run up in sales over the past 5 years was based on two components: speculators and borrowed demand. The speculators are gone, and are not coming back. And, the borrowed demand (i.e., people who bought because of the market conditions who otherwise would have waited to buy if the market had been normal) can’t come back, since they’ve bought. Homeownership rose from its traditional 67% to near 70%. There is a good percentage of people at any one time who are simply unable or unwilling to buy for various reasons. So, where is the new demand going to come from?
These are just a few reasons that a FED cut won’t revive the market. There are, of course, many others (some markets are overbuilt, ARMs are re-setting, people are running out of money to feed their alligators, lenders may tighten, etc.). So, challenge your friend with these types of facts, and ask him what facts he has to back up his claim. Watch the exasperated look on his face. It will be priceless.
Would lower FED rates translate into lower ARM rates? And again… would it matter? Thanks for the info BTW! I think he’s wrong, just have a hard time articulating the reasons. Sadly,(for me…) I’m surrounded by bulls, many of whom have done very well in this boom. Hard to get through to them. They’re concerned, but think this is just a blip, not the end of the game…
From my understanding something like half of the ARMS out there are tied to the LIBOR (London Inter Bank Offered Rate) Bank of England has been raising and threatening to raise more. Anyone have more info to share on that?
Yea, I’d like to hear more on that. If anyone has the info.
I have no stats but, from emperical evidence, i know a large portion of arms are tied to the libor. It seems to be the favored son of the handful of financial indices. As far as them raising the rate, i have heard similar info. You can google and chart it. It’s been roughly congruent with the fed funds increase over the last couple years.
LIBOR has nothing to do with the Bank of England.
hedgedude’s opinions have little to do with fact.
hedgefundanalyst OK I’m sure your right. Do we get any thing more in the way of info, or just this lovely, yet, short burst of condescension?
Technically he’s correct…The British Bankers Association sets the LIBOR. Of course, BBA is in no way associated with the BoE.
Correct Hedgefund?
hedgedude’s opinions have little to do with fact.
Well, at least they’re brief.
And at least they contribute to the discussion.
Who has a real ARM these days? Nope, they have option ARM with negative amortization and teaser rates. It doesn’t matter what interest rates are, they GFs bought with IOUs they can’t afford when the reset comes.
Even if their ARM interest rate stays low, these loans will reset to a higher payment that will now include the principal. And since the principal payment, and sometimes (with option ARM) interest payments have NEVER been paid, the shorter amortization time will make them bigger once the reset happens.
you say they have done well but they doesnt anything unless they sell.all their paper profits are slip sliding away every day.
Agree lowering by Fed would not save this housing market. The only thing that made it worthwhile to buy rather than renting was the supposition that rapid appreciation would persist. Without that, the mkt is already dead. Ponzi.
Libor is the interbank rate, as opposed to the rate set by central banks like the Fed or the Bank of England, but can be in any interest rate.
The US$ version is US Libor, which is a confusing name, I agree.
Less confusing is the Euro equivalent which is termed Euribor.
US Libor has nothing to do with the Bank of England or GBP interest rates.
Regards,
Loafer
true, but the PPT does control the 10 yr rate.
I think you meant the PRC, the People’s Republic of China
Both!!!
The Fed overnight rate will not have a big impact on the housing bubble implosion. Most fixed rate mortgages are affected by the 10-year treasury yield, which currently hovers between 4.5 and 5%. The fed cut rates repeatedly during the 1990 bubble implosion and the ten year yield also fell during the early 1990s, but neither stopped that implosion of a (much smaller) bubble. History of 10 year yield at http://www.federalreserve.gov/releases/h15/data/Monthly/H15_TCMNOM_Y10.txt
If the price of a pack of cigarettes was $50/pack, how many new smokers do you think you would get? The NAR has shot themselves in the foot. You need the first time buyer. The only transactions that are occuring is people with roll-over equity. The delta to the inventory of homes for sale is 0 when this occurs. Only one thing will change this, price cut!
“The NAR has shot themselves in the foot. You need the first time buyer.”
Exactly. They have stolen future demand for goodness knows how far out. The % of “homeownership” (and I use that term lightly) has NEVER been higher in America. Who else do they plan to suck into their Ponzi scheme. This blog, along with SoCalMtgGuy’s, have pointed out numerous times that there is a limit for prices. Even if mortgages are stretched out to 40 years, the increase in purchasing power is not there. Not to mention, those 40 years loans end up with something like $200K more in interest payments if you’re buying a $500K house. These are just very rough numbers though. I think the FB blog has some good archive postings that would explain much better than I am.
You are so correct, future demand is already soaked up and in a suicide loan.
Even worse, its forcing companies to consider moving jobs to where they can hire. Unfortunately, that doesn’t always mean jobs in the USA.
My company is considering moving a major campus (a multi-billion dollar move). Note: only rumor. On my blog. 
Neil
Japan also went into long-term mortgages in the late-1980s, but that did not prevent a seventeen-year deflation in their home prices.
Off Topic - MDMORTGAGEGUY mentions $50/pack cigarettes and rhetorically asks how many new smokers you would get. State of Maine taxes cigs till major brands cost well over $50/carton, so people order on-line or bootleg from NH or mail order from New Mexico. And then guess what? State of Maine pulls some rabbit out of a hat, “Maine Use Tax”, and goes around billing the on-line buyers, harrassing the mail orderers with threatening TV ads (also paid for by taxes!!), and generally insisting that if you smoked it in Maine, you’d better have paid ME Use Tax. My @$$.
I always thought the best smoking deterrent would be a requirement to have “I AM STRONGER THAN YOU.” printed on every cigarette,
If the price of a pack of cigarettes was $50/pack, how many new smokers do you think you would get?
That’s a great OT question. I’m guessing a ten-fold increase in cigarette prices wouldn’t reduce the number of smokers by more than 50% and wouldn’t reduce final demand by more than 75%. Smokers are much m ore similar to heroin users than even either they or most non-smokers suspect.
Note, i said NEW smokers meaning first time. People start smoking at an early age. By the time they are in their 20’s, are far less likely to pick up. Teenagers cant afford $50/pack. By the time they can they are older and less likely to start. With the high barrier to entry, first time HB’s cant/wont get it in either.
Pardon the OT discussion but I must disagree. Kids have lots of money and will pick one up here or there - $2.50/each ($50/pack) for 20 or 40 fixes off a cigarette if you’re cagey - it is still competitive with drugs like heroin. If heroin was sold in the same (weaker) form as nicotine people would more easily see the similarities between the drugs. People who use cigarettes “hit up” on average 500 times a day - many if not most would continue to do it, even if they had to cut back to a pack a day ($50) and 300 hits.
I worked in Jamaica a while back some and I saw guys come into the bar, buy one cigarette, smoke it and leave. A whole pack was way too expensive for some folk.
I saw the same thing in Mobile, Alabama (in a very bad neighborhood) last spring.
Will interest rate cut help price take off again?
Good question. There is always a lag between the report numbers and current market condition. By the time the Fed digests the numbers and acts, it’s too late. Unless the Fed has a crystal ball to guide them ahead of time, there is no way around it. Another important obseravtion is that we have currently facing two bubble markets: stock & housing. The Fed runs out of bubble to create. Can you think of anything else? Unless the Fed do not care about U.S. currency and allows inflation going to the roof, otherwise we should expect a typical boom/burst cycle.
Yea. We’re all getting ready to experience the “Broke Bubble.” (assembly not required)
Yes, you make an important point about the Fed defending the currency. To me, that is the ultimate trump card against easing rates too far. The Fed has to be concerned with two things:
1.) Continued purchase of US Treasuries by foreign countries…you can guess who that might be.
2.) Protecting Reserve Currency Status (think oil denominated in USD).
These two things are going to make awfully difficult for Ben to fire up the helicopters.
If the US radically reduced the budget deficit, would that reduce the need to sell Treasuries?
You mean spend less than you make?
But that’s so un-American.
Which politically popular road to deficit reduction would you suggest, emcee? Higher taxes or lower spending?
That is the huge problem. The Treasury selling bonds provides liquidity to the banking system by the FED buying them and loaning to banks, who loan to us. Banks are a large portion of the money supply. The gov’t retiring their debt will seriously contract the money supply. It sounds sick and demented, but that is how bad it has gotten.
It has gotten to the point that nothing will change until it gets so bad that people are willing to forego today to have a better tomorrow. Things appear so great today, there is no way they will volunteer for pain to prevent the mere prediciton of it. So be it.
“The gov’t retiring their debt will seriously contract the money supply.”
Just like in the housing market, an inventory glut in the debt market normally results in lower prices (aka higher long-term T-bond yields). But given the conundrum, these are not normal times…
It won’t revive the market, but perhaps the crash might be softened.
Tell him that’s nonsense, since all those rate jacks certainly didn’t impair this thing. The real question is, will the insane lending orgy continue?
Here is a place to watch:
http://www.economagic.com/em-cgi/charter.exe/frbsls/s11+2000+2006+0+0+0+290+545++0
Spring is when the reaper comes.
Right now everyone is “Holding on until spring” and that’s exactly what the REIC is telling them - it’ll be OK in the spring.
When the spring is a bust reality will set in and this thing will be rolling in earnest - so far it’s just been the teaser event.
“so far it’s just been the teaser event.”
So, is this our teaser rate?
“Ross Starr, a UCSD economist, said a ‘bicoastal housing recession” has developed in previously hot markets, including Southern California, South Florida and Las Vegas.’ ‘The bubble’s burst,’ he said.”
Finally, a comment from someone at the only real university in San Diego!
I believe we heard from Ross Starr earlier this year, but he was saying “don’t worry, be happy, real estate is going to do just fine,” etc. Sorry I don’t have a reference to offer; going on memory here. Nonetheless, if memory serves, then he has done a 180 degree turn in his views.
Off Topic - hint of trouble in Very Low End housing: buyer backing out of a $58K deal for a single lot & 400-sq-ft mobile home in Pinal County, with clubhouse membership (pool, library, billiard room, laundromat, etc). I would say $58K was the 2001 price, although the mobile is obviously not brand new any more. This property is not too different from the one on which a Calif woman recently asked me to lend $120K towards $160K purchase (i did NOT do that). In the case of the $58K cancellation, I am owed only $34K so not too worried yet. Maybe I should be.
az- Do you lend outside of az and if so how many leads would you like?
/we get mobile requests every day that go in the trash.
I lend on lot-plus-trailer, i.e., they have to have title to the land, which must be in a quasi-upscale trailer park with attractive common facilities. Do your applicants fit this description? Thanks.
Sounds like a scary business! What’s your rental debt yield on these? How much is it held down by the “country club” (lol!) & site maintenance fees?
I guess that if a trailer depreciates over, say 7 years, and the underlying land value is linked to the market, £34k could be worrying.
Regards,
Loafer
Since I am the principal in this business, and got into the business by accident 13 years ago, I have no idea what “rental debit yield” means. I started out charging 10% interest, have had to come down a little in recent years, but still the average rates are over 9%. It has not been scary. I have had three repo situations (out of close to 100 loans); the combined net loss on those three was a small 4-figure number. The condo fees right now are in the $100-$150/mo range in the various parks where I lend. My lien is senior to the association’s lien, but in all repo cases, I went ahead and PAID the back condo fees, because in these several parks it behooves the Local Bank (i.e., ME) to be on good terms with the association. Although someone might regard a trailer as depreciating over 7 years, very often a 10-year-old one still looks good. However, the land and the share of the common facilities are indeed more valuable than the trailers from my point of view. I do write some 15-year notes as well as some 10-year notes.
Interesting. Sounds like a good business.
When I say rental debt yield, I mean in default, what would the rent be and what is that rent divided by the outstanding debt. It’s one of the measures I use in lending, particularly in respect of residual values on shorter term loans.
When I have looked at holiday parks over here involving trailers, the only lending I could get to was on the concete pads, i.e. land. Whenever I looked at the trailers themselves, the underlying value was so low over the life of the loan it was too much. I guess the situation is different with you.
Regards,
Loafer
Great example from the West Side of Los Angeles.
This 589 sqft home is on sale for $680K.
http://www.jasansherman.com/fp/1006broadway-1.htm
Lovely.
OMG! Granite countertops in a 589 sq ft house!
Now I’ve seen it all!
LOL! Optional Murphy bed in the living room. What a steal all for about $1200/sq ft. Boy, Santa Monica must be nice. I wonder if this place is near the Regal Beagle?
Yep, nothing like spending close to $1,200/sq. ft. for a 1920s cottage that is smaller (by a couple hundred sq. ft.) than my one-bedroom apartment. Unbelievable.
589 square feet? This wouldn’t even hold imploder’s rare collection of sasquash droppings? Where would imploder put precious collections of newspapers and magazines.? imploders current location still large enough to allow for “tunnels” between towering, valuable “heaps”.
Plus if imploder is going to pay 1200 per sq foot, imploder will NOT allow this Murphy guy the “option” of keeping his bed in imploder’s living room! You real estate bast@rds! Enough is Enought!
imploder - keep it coming, that is too funny. I didn’t know anyone still had Murphy beds. The Regal Beagle comment above was good too. Damn, there are some serious comics on this blog.
Imploder you crack me up. I can just imagine you crawling through the “tunnels” of your piles of newspapers and magazines. That house for sale has to win some kind of award for the worst value on earth. $1200/sq. ft.? Is that place built out of gold or built on an oil bed? Criminey, that is flat out overpriced by 550K. I don’t give a hoot that it is Santa Monica. No different that anywhere else, except for beach and weather, and that surely is not worth the 550K weather tax!
But it has granite and stainless! That’s worth about $100k right there, isn’t it? Some people sure think so. This house has no other selling points at all.
“Yep, nothing like spending close to $1,200/sq. ft. for a 1920s cottage that is smaller (by a couple hundred sq. ft.) than my one-bedroom apartment. Unbelievable”
That location, 1006 broadway, may be adjacent to or even within a commercial, or light industrial zone. Certainly it is a mixed-use zone, probably zoned for apts, businesses, and condos.( The ad says zoned for SMC4). Going east from Lincoln ave(700 block), good stretches of broadway and Colorado are lined with various mixtures of workshops, auto shops, ent studios,ect. Further east past 20th st are some major ent industries such as Columbia Music, lions gate, revolution studios,and a host of others.
The seller(s) of this pint-sized motel room are apparantly hoping to snare a highly paid ent wiz-kid/gf to latch onto this tiny 1920’s stucco shack, which is not located in the really prime section oF SM near palisades park or north of California/Montana ave.
I am thinking the $680K is a mistake It looks like it would be hard to part with $80K for this beauty - I guess it would rent for $1000 or thereabouts.
Looks like a fun place to live. I’d top your 80K and pay 100.
GH - you make the most interesting point - what would the rent on this place be? anyone familiar with the Santa Monica rental market?
10th and Broadway in Sta Monica, a one bedroom garden she… uh “bungalow” might rent for $1900. Lots of people want to be 10 blocks from the beach but NOT right on Broadway…
This is guy (sherman) is why I have such a low opinion of most SoCal realtors…
Why?? have you dealt with him. Surely it’s not because of his listing. I have seen similliar close for a higher price than that. I was thinking that one must be on the wrong side of Montana (I think that’s the street) and at least this one has stucco. Granted the lots were bigger 5000 and 6500 sqft but I’ve seen similliar to those close for 800k-1.2 million. Not the brightest thing to do with a million bucks sure but hey it’s Santa Monica (LOL). I’m sure smlandlord has seen worse.
heh, yeah, I was gonna say… for Santa Monica that’s a bargain… for now
And shoot, don’t blame the realtor… blame the moron who would *pay* that kind of price!
Yea, it’s perfect for some trust fund slacker, his surfboard, his mountain bike and his dog (errr scratch the dog that reeks of responsibilty) whose been kicked out of Mommy and Daddys guest house in Malibu because his bong party got out of hand while they were playing quarters with Daddys 100 yr old scotch scarfed from the liquor cabinet.
It’s also perfect for appraisal fraud, kick-backs and stacking the comps with a phoney purchase. It might be the only thing that sells this quarter.
“”It’s also perfect for appraisal fraud, kick-backs and stacking the comps with a phoney purchase. It might be the only thing that sells this quarter.”"
What makes this property so different then anything else on the market for those types of actions.
‘that one must be on the wrong side of Montana (I think that’s the street) ‘
Santa Monica prices are arranged in steps as you go south of Montana, south of Wilshire, south of the 10, and closer to the 15th street gang (this one is about 8 blocks from that area). I’ve lived in Boulder, Berkeley, Miami, and several midwestern states, all over LA and Ventura County. No one place was nearly as nice as Santa Monica. Of course I paid $300/month for a 700 sq ft rent controlled apartment and ran to the beach daily when I was there.
This may be the final straw. This house is such a joke at that price that my little mind is boiling over. Note the photo of the kitchen. Look closely at the refrigerator. There is something terribly wrong with the dimensions…it is stretched about 100% wider than normal. My guess is ALL of the photos are stretched in this way. That COTTAGE is actually a DOLL HOUSE.
Come’on it’s Santa Monica everyone wants to live there evidenced by their large homeless population
LOL!
bwaahahahaha
that made my old cramped NYC apartment look spacious.
Re Discovery Bay auction: “Anderson said she kept her fingers crossed and hoped the house would sell for $360,000, enough to be out from under the home’s two mortgages”
The Anderson’s purchased their home for under $230K in 1999. So here’s another example of excessive equity extraction creating a “nail-biting” situation.
They were very lucky to sell so easily - which is most likely why their home was held up as the example.
Anyone take a look at the homebuilder stocks today? They were absolutely on fire. The HGX index up about 4% and many stocks up more than that. The crappier the HB company the more it was up. WCI Communities, my first choice to enter bankruptcy was up a mere 14%. Horton up around 10% on a terrible earnings report. Home Depot up huge on missed earnings and gloomy forecast.
This economy and the stock market are on different planets right now.
The stock market makes no sense to me sometimes. My company is lined up for $4.1b year, our biggest ever, yet when we announced it last week, our shares dropped 7%.
Now the HB’s are announcing horrible news and they are skyrocketing? WTF?
Insiders are already postioned for the bad news. Small Spec shorts come in on the news bad news and the boys squeeze the shorts balls until they’re screaming. Never ever short on bad earnings news especially during what is so eloquently called “scam week” when options expire. Better to stand aside and let the black boxes fry each other. The market does not have any basis in economic reality, only market reality.
Don’t you just love the divergence between reality and investor expectations…
Even though the CEOs of these companies are out loud bearish, investors can’t get enough. Just like all the GF/FBs out there, these poor saps are going to have their come to Jesus moments.
What is up with the Dow at all time highs?? I personally think the economy sucks! Is it all the speculators flocking to the stock market from housing to gamble?
“What is up with the Dow at all time highs??”
Don’t Fight the Fed.
Yep. As they say, the trend is your friend. Today I officially gave up on trying to understand the current market. Hedgefundanalyst: based on past posts, you seem fairly rational. You might be playing the current trends, but you’ve made some bearish comments. Do you think the Dow is overvalued, and if so, by how much? My gut keeps telling me the top is already here, but again it’s like they say: the markets can remain irrational longer than you can remain solvent.
I agree. Which is why now is a historically awful point in time to invest in a hedge fund.
—————————————————————————————
Fed: Hedge Funds Get Too Much Credit
In a sign of growing concern, the president of the New York Federal Reserve calls on banks to tighten up their lending to hedge funds.
Ronald Fink and Tim Reason, CFO.com
May 16, 2006
Banks should impose stricter lending standards on hedge funds, the president of the Federal Reserve Bank of New York said Tuesday. That is the strongest suggestion yet that bank regulators remain concerned about often incestuous relationships that allow banks to lay off risk to hedge funds, even as those funds borrow from banks to fund their activities.
http://www.cfo.com/article.cfm/6939883?f=related
“What is up with the Dow at all time highs?? I personally think the economy sucks! Is it all the speculators flocking to the stock market from housing to gamble?”
Yessssssssssssssssssssss.
Not trying to start any trouble but it is only fair to keep in mind:
(1) S& P 500 corporate profits have risen at a double digit pace for 13 consecutive quarters.
(2) Stock prices have underperformed corporate profits over that period.
(3) Stock P/Es are in the middle range of their values over the past 40 years.
(4) Interest rates are relatively low.
Clarification: (1) double-digit pace on an annualized basis, of course.
You might find this beyond the realm of fit-in-the-headable but I actually agree with you.
And I agree with me.
But guess why them companies made that big big profit?
Think you know what I’m gonna say.
Not trying to start any trouble but it is only fair to keep in mind:
(1) S& P 500 corporate profits have risen at a double digit pace for 13 consecutive quarters.
…
(5) Wall Street bulls don’t get mean reversion.
(6) Wall Street bulls always drive will looking through the rear-view mirror.
Do realtors in California etc. use “benchmark” pricing at all?
No. Realtors in Cali would prefer to just find a “Mark”. Much easier that way.
Realtos only want the highest price price what ever it takes.
“The median price for resale single-family houses fell $10,000 in October, DataQuick figures showed. The $535,000 median was down $34,500, or 6.1 percent, from its all-time high of $569,500 set in May and is back to where it stood in March last year.”
It is a long way from here back down to March 1998 prices, but at $10K off per month, we could get there in less than three years…
San Diego continues to lead the pack (with Sacramento not too far behind). I’m looking forward to OC following SD’s lead down in prices.
OC would be right there with San Diego if you cut out the incentives. OC new home appreciation Y-O-Y +11%. Gimme a break.
In due time…
P.S. The 6.1 percent decline from May 2006 through October 2006 (over five months) translates into a 13.9% annualized rate of decline. If that rate of decline continued through May 2007, the SD median SFR price would drop by $79,300 over one year’s time, which is well in excess of the median SD household income. Gulp…
“Robin Anderson’s home here was on the market for six months with no offers when her real estate agent decided to quit. The Andersons’ home started off on the market in February at $525,000, dropped to $485,000, and only a handful of people had looked at the house.”
FSBO time, Robin…
Anybody in the Central Valley hear this story:
Apparently, Asian gangs/gangmembers bought up 25-30 houses in the Modesto, Lodi, Stockton areas. Apparently the individual gang members bought up 25-30 houses and converted them to pot-growing facilities. Well, the neighbors got suspicious when they realized no one was actually living in these houses. People were only spotted in the houses during the late night hours. Finally, the police investigated and found the houses full of pot and pot-growing equipment. Needless to say the banks foreclosed on the houses and arrests were made. Apparently the houses can not be resold because of the damage done from the pot (not sure why this is). The homes must be completely demod and then rebuilt.
BTW, I was told the mortgages were paid up - no defaults. Of course they bought each house with no money down, no doc loans. Man the criminal element in this housing bust is larger than most people realize.
I’m not in the valley, but yes, this story is true. I read the article from their local rag. I believe it was in The Modesto Bee. These were homes in new subdivisions too, not ghettos. Evidently it was the same couple of RE agents that handled all the transactions.
If only I’d have known this kind of underhanded criminal activity was going on!!!
(…I would have created an under-the-radar Doritos-making house right next door.)
Coulda been a billionaire.
Auction that is hilarious and very enterprising of you!
You oughtta be cryin’, too.
You shoulda been makin’ the gum. (Cottonmouth).
All the articles I googled were about white gangs/gangmembers dealing marijuana.
“Of course they bought each house with no money down, no doc loans.”
How dastardly. Amazing how ingenious the criminal mind can be…hey wait minute!!!
I, unfortunately, was born and raised in Stockton. I got the news the day it broke, from my Mom. Didn’t surprise me in the least. That area is full of low-lifes and criminals. I actually left town at 17 and never looked back. Wish I would’ve picked up a couple of $50,ooo houses before I left, they now go for 400k with all the Bay Area commuters. What a bedroom community…you get home and have to make sure you don’t get shot on your way out to the mailbox.
NOW this is how you grow pot secretly, not buying an entire hood New Jack City style.
http://forums.phishhook.com/viewtopic.php?t=550448
I’ll tell you what’s up with stocks. Don’t trust all these Wall Street junkies, er, I mean brokers, etc. These guys make a living off you and I. How many Enrons do we have to have before the sheeple get it. Of course, there are some good brokers and stocks out there. However, we must all be careful. Everyone is out to make a buck, right? Arthur Anderson built his company and staked his good name and rep on it. Of course, the company was cooking books for Enron long after the guy died. I wouldn’t trust much of what comes out of Wall Street as of late and even less from the MSM pumping the market. When this crashes it will be a blood bath. Besides, even with new highs, when one factors in inflation, it is still behind the previous high of a few years ago. All this talk is all that. 12,000 Dow be damned.
I’m coming to the conclusion that the expression “sheeple” has become a self-incriminating term.
Still no change in the 91773 zip. I don’t know what it’s going to take.
Looking to get out, maybe move up north, Placerville area, still waiting for that area to tank. Friend I spoke of with house in Goodyear, AZ just lowered again to 255,000. Had it at 339, said he wouldn’t lower it….he paid 139 for it, so if he gets close to 250, he will do ok, but seems nobodys buyin’, question is, when is the boom going to be lowered? It’s taking too long!!
“San Diego County’s housing price slide reversed course last month,”
“reversed course” is pretty strongly manipulative language. Very irresponsible analysis. Even if the data isn’t manipulated,which it probably is, one little blip does not demonstrate a trend. Shame on the UT for not being more critical.These people should face the fact that the downward trend is here to stay. As long as sales volume is low and shrinking yoy there will be no reversal in the slide of prices. Data Quick is named almost appropriately, assuming that things done quickly are usually of poor quality, except Bull Shit Quick would be better.
“Shame on the UT for not being more critical.”
You don’t get their business models. The UT sells advertising space. Ad space is much more valuable when people are in the mood for buying homes and cheap junk at Walmart. And DataQuack is part of the REIC — they cannot afford to alienate their industry clientele by speaking too freely.
“Still no change in the 91773 zip. I don’t know what it’s going to take.”
Time is on my side, yes it is…
From Ross Starr in the UT article:
‘“The bubble’s burst,” he said. “There’s a big difference between that and a U.S. recession but real estate is a big piece of investment and it’s investment that drives changes in gross domestic product. So the conventional view is the U.S. economy will continue to grow but will grow real slowly because the housing sector is contracting.”’
We need a “housing bubble quotes” blog. Because I would love to see how Ross’s views on the relationship between recessions and bursting real estate bubbles evolve over the next twelve months. Meanwhile, perhaps someone who knows him well should suggest to Ross that he should look over this great piece of research on the relationship between housing busts and recessions from the IMF…
————————————————————————————————-
World Economic Outlook — April 2003
Chapter 2: When Bubbles Burst
(Caution: .pdf file)
http://www.imf.org/external/pubs/ft/weo/2003/01/pdf/chapter2.pdf
Fingerpointin’ time at the SEC? (You can’t see this online, but the print edition of today’s SD Union-Tribune has this headline with 1′ lettering:
SEC SLAMS CITY ON PENSION DEBT)
————————————————————————————————-
Fraud: Report details pattern of deception
Fines: City avoids financial penalty
Sanctions: Officials still under investigation
Oversight: Commission demands independent monitor
By Craig Gustafson
and Matthew T. Hall
UNION-TRIBUNE STAFF WRITERS
November 15, 2006
* Feds’ mirror reflects ugly truth about San Diego
* Background on pension system
The city of San Diego’s black eye turned a darker shade yesterday as the Securities and Exchange Commission ruled that the city defrauded investors in 2002 and 2003 by not disclosing a massive pension deficit.
The SEC found that the city “knew or was reckless in not knowing that its disclosures were materially misleading” in committing securities fraud. The commission laid the blame on unnamed officials still under SEC investigation.
http://www.signonsandiego.com/news/metro/pension/20061115-9999-1n15sec.html
Here are some updated charts for SoCal real estate.
Hope I’m not too late - comment #240?
Any way you slice it prices are still out of line with most middle income wage earners. I don’t even pay attention to Wall Street they have their own agenda. California and the west for that matter will correct some areas more than others. Granted there are some great companies who pay higher than average salaries but that is the exception. You can’t have half million dollar median price and expect buyers. It will take years to revert to sanity but it will. Recession in 07 should start the process patience and conviction will prevail. Those who lived recklessly over their means will migrate out those on the sidelines with cash, intact credit will be in the cat bird seat. Realistically prices need to fall to about 40-50% of current or 2.5 to 3x income.