“A Return To Reality, Not A Market Crisis”
The Appeal Democrat reports from California. “After years of almost surreal rises in home prices, home sellers and builders in Northern California are being sobered by the cold bath of a slowdown, and the Yuba-Sutter area is no exception. According to Mid-Valley agents, the contraction…reflects a return to reality, not a market crisis.”
“‘The self-fulfilling prophecy is the opposite of what we had in the good market,’ said Lloyd Leighton, a Yuba City broker. ‘The herd mentality drove prices higher than it should have; now it’s causing them to drop probably farther than they should.’”
“October home purchases fell 31 percent from October 2005 and median selling prices sank from about $310,000 to $280,000, while the projected time to sale for newly listed houses more than doubled, to 9.3 months. Crimping homeowners’ ability to charge top price are major homebuilders with the will and financial means to cut prices on new houses, as well as a jump in the number of foreclosed homes being resold by banks, he said.”
The Sacramento Bee. “In a sign that Sacramento-area home values are still searching for a bottom, October sales prices across much of the region again posted the biggest year-to-year declines in California, statistics released Wednesday show.”
“Placer County topped California in September with a 14.3 percent price decline from the same month a year ago. In Sacramento County, the median sales price of $354,000 for all homes and condominiums was down 8.1 percent from October 2005, DataQuick reported.”
“‘You’ve had people who have probably reconsidered and investors who have turned to renting their homes,’ said (broker) Bob Bronswick. ‘During the fourth quarter, there is a pullback, and this year is not going to be any different,’ added Anthony Graham, analyst at Lyon Real Estate. ‘Obviously, there’s a lot more withdrawn listings because of the overabundance of supply.’”
The Press Democrat. “Sonoma County’s housing downturn deepened in October as prices fell for the fourth consecutive month and homes continued to languish on the market. The median price for resale homes was $565,000, down 4.2 percent from a year ago.”
“Prices also fell in July, August and September, making this the longest stretch since a six-month decline in prices that began in fall 1994, according to The Press Democrat’s monthly real estate report. County home prices peaked at $619,000 in August 2005 after an eight-year run of strong sales and record prices.”
“‘This market is top heavy with overpriced properties,’ said Ted Horsman, broker-owner in Santa Rosa. ‘If I bought a home today, I’d use a little bit of caution. Shop, there’s nothing wrong with that.’”
The LA Times. “It’s familiar: A handful of Californians make a killing on investments, and their tax payments send state revenues soaring. Lawmakers go on a spending spree, without a plan for paying the bills when fortunes turn.”
“California is once again on budget quicksand. ‘I’m at a loss to see how they are going to balance this budget,’ said Stephen Levy, for the Continuing Study of the California Economy in Palo Alto. ‘The state got bailed out last time around by a surprise revenue surge. That is unlikely to happen again.’”
“The bubble in the housing market that began to deflate after tax receipts that fueled this year’s spending were tallied. Now, analysts say, inaction may come back to haunt the state. The influx of cash ‘we’ve seen in the last couple of years could go in the other direction…’It is just a question of when,’ said Brad Williams, an economist (with) Elizabeth Hill, the Legislature’s nonpartisan budget analyst.’”
The Desert Sun. “‘I think the real story in terms of California’s economy as well as the nation is what is happening in the real estate industry,’ Hill said. She noted that the real estate industry…makes up 15 percent to 20 percent of the state’s private sector economy.”
“The slowdown in this industry was the largest single factor in a sharp decline in personal income growth, resulting in a drop in withholding tax payments from over ten percent in the first half of 2006 to less than five percent in the third quarter, Hill reported.”
“‘California has been hard hit by what has happened in the overall real estate sector,’ she said. ‘That is the main reason we see the softness in California’s economy through 2007 and the rebound in 2008.’”
The Daily News. “The San Fernando Valley’s residential real estate market continued weakening in October with home and condominium sales well under the year-ago level, a trade association said Wednesday. Last month homes sales fell an annual 22.7 percent to 771 transactions, the lowest level for the month since 642 sales in 1992, said the Southland Regional Association of Realtors.”
“The median house price increased an annual 1.7 percent in October, or $10,000, to $610,000, a record for the month. But it was $15,000 shy of June’s all-time record of $625,000.” “At month’s end there were 6,791 houses and condominiums listed for sale, a 6.7-month supply at the current sales pace and up 58.7 percent from a year ago.”
“‘There are no panic sales, no one is losing money,’ said Jim Link, executive VP at the Van Nuys-based association. ‘All that has been lost is the madness and the quick profits. Those days are gone.’”
The Daily Press. “The Victor Valley real estate market has mirrored the rest of Southern California. Sales for new houses in San Bernardino County fell as much as 25.8 percent in September compared with September 2005, according to DataQuick. Those same DataQuick numbers suggest the median price of new homes sold in San Bernardino County decreased 4.1 percent between September 2005 and September 2006.”
“Broker Caroll Yule of Victorville, asserted that local buyers have been biding their time until they saw the market wouldn’t slide anymore. ‘Buyers are waiting for someone to tell them the market is stabilizing. But the prices are still falling,’ she said, ‘Wouldn’t you wait and see what happens?’”
“Yule’s inventory soared from 200 houses in the summer of 2004 to 4,600 listings in the middle of this year. Now, she said, her inventory has dropped to about 4,000, a sign home owners once blinded by thoughts of instant real estate treasures have become more realistic and taken their houses off the market.”
“Crimping homeowners’ ability to charge top price are major homebuilders with the will and financial means to cut prices on new houses, as well as a jump in the number of foreclosed homes being resold by banks, he said.”
Is it still too early to say “I told you so?”
“‘The self-fulfilling prophecy is the opposite of what we had in the good market,’ said Lloyd Leighton, a Yuba City broker. ‘The herd mentality drove prices higher than it should have; now it’s causing them to drop probably farther than they should.’”
Sounds about right. Up 200%, ‘Buy now or be priced out forever’…down 5%, ‘probably farther than they should’. But herd mentalities are just that - and this herd isn’t even close yet to swinging around.
you ever watch those nature shows? right now it’s just that one slow animal peeling off the outside of the pack. just wait till the leaders realize they’re stampeding alone.
That comment makes no sense. If the herd mentality drove it up higher than it should, then the extra drop is as it should be, not more than it ’should’. The reason it drops further is because it shouldn’t have been up there in the first place. So it’s just going back down to the level it really should be at.
I just read the self-fulfilling prophecy quote, and had the exact same thought as turnoutthelights. These RE agents are real knuckle heads. If he thinks that prices have dropped further than they should, well he is in for a world of hurt. The imbalance created in the past five years will take a lot more correction than what we have seen thus far. Why do they continue to quote realtors when they are continually wrong?
In a way I’m actually glad that the MSM, Greenscam, and the entire REIC are shouting from the rooftops that a “soft-landing” has been achieved and that housing has bottomed and there is light at the end of the tunnel, etc, etc.
This must mean that there will be absolute obliteration and we’re nowhere near the bottom. I’m actually getting goosebumps thinking about the bloodbath coming in a few months.
Will the builders continue to profit at the expense of homeowners? Perhaps the builders stocks will not crash after all.
turnoutthelights- prices are actually down 10%, but obviously not enough.
You’re right of course. Lord, who coulda quessed a year ago you would a had a hard time remembering the right price DROP?
Oh really? Who gives the builders the free $125,000 cars they offer as incentives?
But “There are no panic sales, no one is losing money” !!!!
This is another of claims, like Lereah’s “Great Depression” comment that are incredibly revealing. Why would anyone, if there was absolutely no concern with “panic sales” or “losing money”, even mention it?
The guy is lying and he doesn’t care because he’s scared.
“‘There are no panic sales, no one is losing money,’ said Jim Link, executive VP at the Van Nuys-based association. ‘All that has been lost is the madness and the quick profits. Those days are gone.’”
Dear Mr. Link,
Little ditty for you:
Put out your signs and cheer up, put on a happy face
X-P
So inventory’s way up, put on a happy face
And spread your horsesh#t all over the place
while you put on your happy face…..
We love you David,
Lereah we do-o.
We love you David,
your lies untrue.
We love your shilling,
it’s true,
Oh David we love you.
First the REIC said there would be no real estate downturn. Next it was there will be a soft landing, not a hard landing. Next it was there is a hard landing, but there will be no crash. Now they are saying there will be no crash, but we are nonetheless putting in precautions just in case at some unspecified point in the indefinite future, there is a crash.
And all that in about 9 months.
I just ran two analyses showing how builders are undercutting the resale market:
Priced to Sit: How Flippers Get Into Trouble
Priced to Sit Part II: DR Horton
These two builders have taken over 500 resellers out of the market with their pricing strategy.
Great job with the graphs. I’ll bet that you would find similar data in every single development from a major HB.
Here on the Central Coast, Shea Homes is now offering a “new” model in their Trilogy development for the mid-500’s. Previously, the lowest priced homes in this development were in the mid-700’s. Pain.
Just another nail in the coffin of “fipperus infestus”…2001-2006
I just ran two analyses showing how builders are undercutting the resale market:
Priced to Sit Part II: DR Horton
These two builders have taken over 500 resellers out of the market with their pricing strategy.
Great stuff, Max!
Excellent analysis. One of the best I have seen in a long time. I would love to see this type of analysis in San Diego.
“‘There are no panic sales, no one is losing money,’ said Jim Link, executive VP at the Van Nuys-based association. ‘All that has been lost is the madness and the quick profits. Those days are gone.’”
Time to get back to Van Nuys’ core business of making porn films.
Too funny! There is going to be a lot of ‘mortgage porn’ going on in 2007 as lots of people are going to get f….d
Yeah, it is quite amazing that CA did the same things after all the gap-gains revenue from the .dom boom. Is it me, or does government NEVER learn and never plan?
It is all about ‘feel good’ programs today…and we’ll worry about who pays for it later…after all ‘I’ won’t be in office when that happens.
SoCalMtgGuy
http://www.housingbubblecasualty.com
http://www.housingbubblecasualty.com/forum
“Is it me, or does government NEVER learn and never plan?”
The incentives are perfectly aligned for the guys in office right now to use whatever combination of deficit spending, tax cuts, special rules, preferential subsidies, and monetary stimulus are available to keep the economy careening along in high gear. Never mind the approaching brick wall — that problem will have to be solved after the current guys are out of office.
That damn Pericles raided the coffers to build his stupid temple.
“Too funny! There is going to be a lot of ‘mortgage porn’ going on in 2007 as lots of people are going to get f….d”
Real estate and the sex industry…………the big difference here is……..real estate prices do come down…….not sure about the other………….but lots of people get f….d in both areas
Oh come now no one “goes down” like the porn industry.
LOL …Im laughing so hard
Sex, lies and real estate…
I doubt they ever stopped. Estimates of the amount of revenue in that industry are large.
(It is all about ‘feel good’ programs today…and we’ll worry about who pays for it later…after all ‘I’ won’t be in office when that happens.)
a good case against term limits!
“Time to get back to Van Nuys’ core business of making porn films.”
That was in the good old days. All Van Nuys makes now is Budweiser and Gang Bangers.
Too late for Van Nuys’ to get back into the porn industry. It’s already been outsourced to the East Europeans.
Damn outsourcing of American jobs!
“A return to reality, not a market crisis” — in this case, a sudden return to reality (prices 100-120x monthly rent) would just be part of the ongoing market crisis. Probably drive rents down further if they really had to compete.
“The slowdown in this industry was the largest single factor in a sharp decline in personal income growth, resulting in a drop in withholding tax payments from over ten percent in the first half of 2006 to less than five percent in the third quarter, Hill reported.”
Wow. By this does he actually mean that income taxes withheld from the wages of those working in real estate were halved v. previous quarters? To me, that sounds extremely signficant, and leads me to wonder why this turn hasn’t been reflected in the unemployment surveys.
Or, in California, is the amount of tax withheld from wages front-loaded in some fashion?
The larger the business, the faster the payment schedule for withholding - very large employers are required to submit daily. Small shop operations have as long the quarterly report submisions. You’re right. This is very telling of a large scale retractment in wages earned, and it would seem most of this is at the local small scale level. As I read this line though, is he speaking to ‘income growth’ reductions that have reduced the increase in withholding taxes from a 10% annual rise to a 5% annual rise in the third quarter?
“As I read this line though, is he speaking to ‘income growth’ reductions that have reduced the increase in withholding taxes from a 10% annual rise to a 5% annual rise in the third quarter?”
This actually makes a lot more sense.
illegals account for at least 30% of the jobs in los angeles so you will never see a jump in unemployment numbers.most construction workers here in Hotel California are illegal under the table workers,if you want to know how well the sub economy is doing just go to any Home Depot and count the men waiting for work.Home Depot on Roscoe and Balboa has at least 300 men standing in the parking lot looking for work,more of them than customers.Los Angeles City has chosen to make this once beautiful city a safe haven for anyone from anywhere to reside here illegally safe from proscecution.The police are barred from enforcing immigration laws and they release illegal criminals daily from our jails to commit further crimes.RANT OVER!!!!!!
Agree with you totally about the sub-economy. 300? If I saw that, I might mistake it for a … I dunno …. a really big crowd!
Honestly, it must look as if the entire parking lot is full of people.
But if taxes are being withheld from wages, that person qualifies to file a claim for unemployment.
When was LA a “beautiful city”?
posted ” When was LA a “beautiful city”?
We never claimed that…. we are the city of the Angels “
When we lived in the South Bay, I think it was Redondo Beach, that enforced the law that I think was intended towards prostitutes, that if you lingered in one area close to the street for a certain amount of time, facing the street, it was a crime, so there were some corners, where they’d be 20-40 meskins, hanging out, all looking away from the street, really a weird sight, the first time you see it.
‘The herd mentality drove prices higher than it should have; now it’s causing them to drop probably farther than they should.’”
Why is it so unreasonable to assume prices will fall back to pre-speculation days ? Why is a 5% drop considered a “bottom” after years of 20% gains ?
Because the greedy FB’s don’t want to loose their paper gains?
I need prices to drop 50% here in Silicon Valley or I’m gonna have to move!
Maybe your wages will catch up?
Maybe, but at the moment, we are lucky to get 7% yearly pay increase, that’ll never catch up with the house prices in our area $800,000 - $1.2m
7%? Must be nice. Folks do the happy dance here at work when we hear talk of 3 or 3.5%.
BayQT~
It would depend on what your starting salary is and last year we were lucky. Probably won’t be so lucky this year. Also, factor in inflation and voila! little or no payrise.
Overall average where I work was low 2’s.
you people really need to stop “waging” on each other.
Something is definitely happening. I saw my first “Hummer for sale (H2)” sighting today. (didn’t have my dang camera!) 408 area code…. Silicon Valley. I think they are trying to disguise themselves with the added 669 area code, but everyone in the area knows where 408 is.
BayQT~
imploder knows many places in bay area where “hummers” are for sale. i mean,…told by friend and all…
18th and Shotwell.
The “luxury car”, “fine jewelry”, and “upper crust” condo ads are becoming more frequent. Always a bellweather of a downturn…
Hummer H1 for sale here in Council Bluffs, IA
“Why is a 5% drop considered a “bottom” after years of 20% gains ?”
Because realtors usually have zero finance and econ knowledge outside of what their leaders tell them? Because realtors are terrible at math? Because the realtor career has one of the lowest barriers to entry, and therefore it attracts the dimmer bulbs? I could go on and on.
It never ceases to amaze me that people on this blog actually believe realtors believe what they are saying. They do whatever they have to to con as many buyers into buying as possible. “Buy now or be priced out forever”, “we knew prices couldn’t go up forever, but it’s a great time to buy or sell”, “We’re at the bottom”. Every time they make a statement like these, some more buyers buy, and realtors make more money. It’s pretty simple.
Yeah, but it is outrageous behavior that they get away with it without being run out of town.
Bring back tarring and feathering!
What do you expect them to say….”don’t buy for the next 2 years”? Can’t tell the truth when your stomach holds you hostage…
Yeah, I expect them to go hungry or find a career that pays.
I hear Taco Bell offers employee discounts.
14% decline in one year? Heck, that’s already close to one half to the total depreciation that the “chief economist” said was totally impractical.
BTW, why is this guy EVER quoted by any news source whatsoever? I can’t remember this guy being correct on ANYTHING (either he’s incorrect or lying).
Because newspapers and cable channels derive a huge % of their ad revenue from HBs and Realtors.
The economic news today on msn was the “Stocks overall moved higher thanks to lower oil prices, a report suggesting the worst is over for home builders and some relief on consumer inflation”.
I can say that lower oil is better, however how can you belive this quote “At the same time, the National Association of Home Builders’ monthly report on builder confidence suggested the industry may have reached bottom. They’re seeing a touch more business, a touch more traffic, and builders see better business in the next six months. Lower interest rates are also helping optimism. The 10-year Treasury note was yielding 4.66%, up from 4.62% yesterday, but down from 5.2% in July. ”
Helping Optomism??? WTF! Helping optimism thats like “a fuzzy warm feeling that things are better” what a load. Show me some real numbers and projections, however I should consider the source NAR!!!
I have noticed properties on my way to work that were for sale that are now for rent!!!! HAHAHHHAHAH!! Suckers can’t wait for the bank to take them over.
There’s a property a block away that’s for sale AND for rent. Been advertised that way for several months. No takers, obviously.
any hooker can tell you which of the two is more likely to occur.
get your mind outa da gudder
Bottomfedder1 get your mind outa da gudder
The poorboy was born there. He is the American Dream, better than Bill Cintion, from much better stock….Imploder is your dream!
Wow,
Imploder deems it necessary to make this statement:
“With America’s sons in the fields far away, with America’s future under challenge right here at home, with our hopes and the world’s hopes for peace in the balance every day, I do not believe that I should devote an hour or a day of my time to any personal partisan causes or to any duties other than the awesome duties of this office–the imploder of your country.
Accordingly, I shall not seek, and I will not accept, the nomination of my party for another term as your imploder.
Thanks for your support, and sorry for my potty mouth!
Peace and support to all Americans here and abroad and to the World in total.
imploder
Imploder I was going to proffer you for dogcatcher. Next step to VP of the USA then of course to PREZ.
That report is seasonally adjusted, right? If so, its very possible that any “gathering strength” that they’re seeing is an artifact of their statistical analysis rather than an actual change in the market. When you get to regress everything to mean, all changes in trends appear muted.
The report was a mixed bag. Up a few points in the Northeast and South (except for Florida, I’m sure), down a few points in the Midwest and West.
So, overall, up a blip point last month, up two blip points this month. On the face of it, only an idiot or shill would say that the downward trend has been broken.
‘The herd mentality drove prices higher than it should have; now it’s causing them to drop probably farther than they should.’”
The ratio of home price/med income drops from 10 to 9.5 and this represents an overcorrection?!!? When the PE of internet stock dropped from 300 to 280 in April of 2000 did these yahoos come crawling out of our noosepapers calling that an OVERcorrection?
any drop is an overcorrection. Prices appreciation is expected to slow or plateau at worst, not go negative.
I’m amused…
I’ll wait for their reaction when we really get into a downturn.
It hasn’t started yet. Not even close. 2Q 2007 is the start of the fun!
Neil
I agree with you, Neil. Let’s wee what kind song everyone is singing in 3rd quarter of 2007.
Imploder ” song everyone is singing in 3rd quarter of 2007.”
No Doubt it will be played on the “skin flute”
“In a sign that Sacramento-area home values are still searching for a bottom”
why the bias towards the bottom? when prices went up 14% a year, nobody said “in a sign that Sacremento-area prices are still seraching for a top…”
John re your question: “why the bias towards the bottom? when prices went up 14% a year, nobody said — ‘in a sign that Sacramento-area prices are still searching for a top…’ ”
Don’t be silly. You know why! Because “prices always go up!”. There is no top. Hmmm…then why should there be a bottom?
Does anyone out there have that cristopher thornberg’s speech to the economist’s on the price values dropping in the last real estate bubble?Trying to find the average peak price from last time .Around 1990 to the low of around 1995 in southern calif.Or maybe some article.
Don’t have the thornberg thing, but there’s are a bunch of graphs for LA County & Orange County in the Cagan piece that was cited in this blog a few days ago. Google “cagan fire burned out” and click on the powerpoint presentation.
Here ‘ya go:
http://tinyurl.com/ej8ys
Thanks much, somehow I lost mine.
“California is once again on budget quicksand. ‘I’m at a loss to see how they are going to balance this budget,’ said Stephen Levy, for the Continuing Study of the California Economy in Palo Alto. ‘The state got bailed out last time around by a surprise revenue surge. That is unlikely to happen again.’”
Sounds like it is time to blow another bubble…
I wonder how many bubbles we have left? Precious metals probably go unreported a lot of the time, so not much help there for the state. Stock market seems to be puffing on it’s self nicely, but I don’t see a “dot com” style boom here either.
“Placer County topped California in September with a 14.3 percent price decline from the same month a year ago. In Sacramento County, the median sales price of $354,000 for all homes and condominiums was down 8.1 percent from October 2005, DataQuick reported.”
Three more of these type of drops and we are getting near to what I call a buying environment. If only the idiots buying now could see the opportunity that is coming their way if they were to delay their purchase another 2 years. So sad
Anyone notice Gary “15% in the bag” Watts STILL hasn’t updated his dataquick information for October. Excluding new homes, the OC is now negative compared to Jan. of this year. Condos are dropping like stones too.
“Anyone notice Gary “15% in the bag” Watts STILL hasn’t updated his dataquick information for October. Excluding new homes, the OC is now negative compared to Jan. of this year. Condos are dropping like stones too”.
I believe imploder did ok with Gary and the Sasquatch droppings……..their in the bag he said
Banks told to predict effect of 40% housing price crash
I wonder how our banks in the US would handle that stress test. I can’t imagine they would do very well. I think we’ll see (not sure if the national median will drop 40%, but I believe that a number of areas will drop by at least that much).
Remember that negativity always tends to be understated so as not to cause panic. If they are saying 40% you bet it will be worse than that.
Right on schedule…..
easy… ben unleashes the helicoptors.
“California is once again on budget quicksand. ‘I’m at a loss to see how they are going to balance this budget,’ said Stephen Levy, for the Continuing Study of the California Economy in Palo Alto. ‘The state got bailed out last time around by a surprise revenue surge. That is unlikely to happen again.’”
what amazes me about this statement is that in BOTH eras of the Dot-com and now the Housing bubble, California had the perfect opportunity to use this influx of additional wealth to prop up divisions of the state that have been suffering from DECADES.. like their public schools, now ranked 47th in the nation.. or basic systems, like the freeways that are full of pot holes, or better yet- housing developments that might benefit the poor or even middle class who’ve ben gradually squeezed out as the state, especially the cities, become giant overpriced cesspits of trust fund babies.
They didn’t address ANY of these issues, and now that the housing bubble is gone, tech is long gone, and any industry that involved middle income and blue collar work has essentially packed bags and left for other countries and states, they are really up Sh*t creek without a paddle. I have NO pitty for the state whatsoever. They want to run the state without addressing serious issues? Fine by me. It’ll be interesting to see how it all turns out and if Detroit and SF wil one day be sister cities.
We pay more per student than most developed countries and our education system is abysmal. Gas taxes are supposed to cover road infrastructure. Subsidized lending leads to higher home prices which creates affordability problems.
I’m going to propose something crazy in honor of Milton Friedman, use the extra money to cut taxes. I know that’s totally insane and that I’m an evil capitalist but I just thought I’d throw it out there anyway.
All the money in this state and we have these problems. It just goes to show you that the corruptiona and back-room, cigar-smoke filled rooms still exist. By the way, wasn’t the Lotto supposed to pay for all the education in this state. What a bunch of bull! I am still amazed that this state can function at all. However, don’t worry, pretty soon the entire state will be third-world! I know that I will catch hell for that comment, but who cares. Obviously not out state politicians.
OCDan: don’t worry, I won’t disagree with any of what you said. CA has really squandered some great opportunities in the last 10 or so years. There is something fundamentally wrong with this state and it goes deep. Just look at all the recent bonds that were approved by the voters. Isn’t CA the world’s 7th largest economy? And yet our roads and schools are crumbling. What kind of taxes will we have to pay in order to service all this debt? I’m starting to prepare an escape plan in case things get much worse.
CA Guy I am with you. Already pulled the plug on the house elevator this past Jan. and got out near the top. Took of the debts, got the wife home, commut 4 miles each way to work, and am already looking at Northwest S. Carolina as a possibility. Humidity sucks, but the Spartanburg area is nice and the schools are good. This state cannot justify what it is asking from the taxpayers anymore and I am afraid when the end comes, it won’t be IUO’s like 10 years ago, it will be like Orange County going bankrupt.
Meant to say paid off the debts…
OCDan, don’t leave RSM. CA may be screwed up but RSM is one of the nicest cities in the whole U.S.
Carolina’s are ok, but I would move northwest or mountain region if you like RSM-like communities.
Every state that has a lottery claims that it funds education. In actuality, here is how it works: The state makes the education budget. Lottery money goes towards that budget, thus pulling away tax dollars from education. The bottom line is that lottery money does not cause there to be more money given to education. In actuality, it causes politicians to have to give less to education, and more of our tax money to other things. Hence the term “voluntary tax”.
Public schools get more money and hire more administrators, who add little value to the system. If we want to improve public schools, budgets should be cut 50% and the deadwood should be cut. A teacher in Irvine, CA told me about a decade ago that the district had one administrator per teacher and administrators make a good deal more. Public education is a cash cow, and very little of the money ever sees it’s way into the classroom.
what we need is school vouchers.public education is a joke i know because i went to catholic school for my first 8 years and in 12th grade they were just covering what i learned in 8th grade.we can do much better,its time to let the private sector teach our kids.
school voucher is even more joke.
Well… The facts of the matter is that affordability IS already a problem, the schools ARE bad, the roads ARE terrible, and Taxes are high. The problem isn’t neccesarily a money problem. The problem is a money management issue. Basically- CA blew it’s load… twice while still failing to fix age-old problems. CA’s schools were ranked No.1 in the 60’s and had a normal property/affordability rate as well…. what happened?
What do you expect when you have waaaaaay overpaid state employees making $30 for standing by the raodside holding a stop sign while 4 other guys watch a fifth guy paving the street. Like it really needs to cost the taxpayers $150/hour for umans to pave a road. Golly! Some of this crap needs to be privatized. Maybe that way some of the problems will actually get fixed.
Should have said $30/hour…
Well it turns out most road construction is contracted out to private companies like Granite Construction, so it is already privatized. So blaim the contractors for high prices.
California has been living off infrastructure projects from the 1960s. Population has doubled. Traffic is very bad in every urban area. Very few freeways have been built in the last 30 years. There is great need for infrastructure.
Every bond issue passed because everyone thinks its free money and there is no tax increase.
Everyone wants something for nothing and are not willing to pay for it.
No, you can’t blame the high prices entirely on the contractors. In California, any contractor getting a public works contract is required by law (Labor Code and Public Contract Code) to pay “prevailing wages” to all employees for all work on the project. Trust me when I tell you that the “prevailing wages” (calculated by the Department of Industrial Relations) required are not “prevailing” in the industry; they are way higher. Thus, the law basically requires the state (and counties, cities, etc.) to overpay for all construction workers.
… every bond issue passed because everyone thinks its free money …
not everyone. isn’t that strange, people complain about broken infrastructure and when funding is approved to fix it they complain about spending.
I work for the state (UC system) and I can tell you it’s a mixed bag. I’ve worked with some of the sharpest, hardest working people out there. But there are also those folks who are just sharpening pencils for the next 2 to 5 yrs until they retire. If only they’d hurry and leave and let us young guns get back to making our organizations function instead of them making excuses for why things can never change.
Well said, I see it everyday as well.
Early forced retirement for the clockwatchers.
Ever heard of “great society”? California is now a socialist welfare state run by former flower children.
As long as that “flower” is ground out of spelt, they tell me it’s OK. So why do I still have an immediate allergic reaction. I.E. need to hurl?
Hmmm, maybe that’s why politicians of all stripes like centralized government. If states operated like France people would simply move. But without competition we’re forced to accept the inexorable expansion of the inevitable leviathan. Our government has type 2 diabetes and our economic spleen is looking like a bulging appendix.
Prop 13 happened.
Cote’ — That’s your cue to get back into the fray here!
Illegal immigration at unprecidented levels happened. That the crux whether you choose to believe it or not.
The first sign of anger found in our local Chico, CA paper today. This is a “call in” and briefly discuss a topic of interest, and they’ll print it in a column ….. I got a kick out of it and thought I’d share it…..
Home Ownership Is Sweet:
Enough about scare tactics on the housing market. We bought our first home in Chico in 1963 for 14k. We had an offer to sell for 25k in 1970, but decided to keep it 10 more years. We then sold it for 65k. Turned around and bought a new bigger home for 74k. Kept it 23 years and sold it for 250k. the 250k investment is now 450k. I’d like to say a home is a man’s castle. It represents his lifetime of work. Keep it clean in and out, you can’t go wrong. There is nothing sweeter than homeownership.
(I don’t have the heart to tell this guy, I’ve exceeded his gain on 2 houses in the last three years, and I’m happily renting. I don’t want him to feel his lifetime of work has been worth this little….)
Or that the 1st home he bought for 14K is now 450K also, some people don’t understand inflation……….
True …… If I bought back in to the housing prices now, no better off even at the current 7-10% decline ….. actually worse …. taxes and insurance way up. Cost me 8% to get out. I was simply banking on a steep decline over the next several years.
This is sad that an obviously OLDER clown has bought into the new value theory for his own house, and feels richer. Your own home is never an asset which can be sold for a “real” gain. Much like a spouse; if you sell the current one, the next is going to cost the same or more for the equivalent asset value ….. Cheaper to keep her! (and wiser too …..)
Ever had a mortgage 10X your annual income? Sweet!
I agree that buying at the right time has historically presented a great opportunity for many, but NOT right now. Right now, unless you have an income exceeding 200K a year in California, or a great deal of cash from a previous sale, inheritance etc, you cannot afford a decent home, and as a result of this prices will fall.
And what a sad legacy ……. the inheritance we should assume was hard earned by savvy relatives, saw 50% of it pissed away by giving it to me so I could blow on a 1M crack house in Palo Alto ……. not really so much about what you have, but what you are willing to spend for what you want. What we all want is a smart purchase.
Prudence says we should all wait for prices to fall. We owe it to our families (past and future) and each other!
Here’s a quote from Jim Link (SRAR),
“I don’t want to lie and say the local real estate market is great, but we’re really not that far off a normal market sales pace,” Link said. “And, while prices have softened and activity is concentrated in lower price ranges, there is absolutely no sign that the bottom has fallen out of residential real estate.”
Every business experiences peaks and valleys of sales activity, Link said.
“For real estate, it’s the peaks that are abnormal, those periods when sales go absolutely berserk,” he said, “not the periods like today of adjustment and relatively calm, deliberate homebuying.”
Wanna guess when he said it? January 1992, just as things were really falling apart around here. The SRAR has a great archive of annual real estate commentary from 1988 to present. It’s pretty funny to scan through and see that the same things are said to the public over and over.
Here’s where you can find it:
http://www.srar.com/Statistics/SF_stats.php
Whoever maintains that list of headlines from the LA Times from 1988 through 1995 should post it every day. Realtors lie, they lie every day, they will call a bottom every month for the next 5 years. Why? Because it works, every time they say we’re at the bottom they’ll con some more buyers into buying, which gives them their commissions, which is all they care about. Can you imagine them actually saying “We’re a LONG way from the bottom, no one should buy at these prices.” No, instead we get “It’s a great time to buy or sell”.
Which is why prospective buyers need due diligence when making the biggest purchase of a lifetime, for most! People forget that agents have a vested interest in the outcome here. However, most just accept what they say. Ironically, the same people when told a child will never walk because of an injury or birth defect, will look for 2nd, 3rd, or even 4th opinions and then aren’t as surprised when their child actually does walk again! No disrespect to those who have suffered. Just trying to make the point that in major decisions in life, get more than 1 or even 2 opinions! Also, look at what kind of interest the salesman, or even the doctor, has in your decision. It isn’t that hard to seek more advice. Bottom line, people are too lazy.
It is on Marinite’s Housing blog on Marin.
She did the research and compiled the quotes.
They would actually make more money if the knife dropped to the bottom quickly, than if they lose all credibility over the next five years by constantly insisting that prices are going to start reflating against all evidence.
isn’t that what everyone does. play dumb.
That link is great!
Sales of existing housing fell 12.7 percent in 1992 even as optimistic signs emerged in the closing months of the year that suggested the worst of the recession may be over.
“Unlike the recession of a decade ago, low interest rates, continued demand for housing, especially among first-time buyers, and falling resale prices have tempered the effects of this recession,” said Lon Adams, the 1993 president of the San Fernando Valley Board of Realtors.
“With only 5 percent to 7 percent of listed properties selling each month, this certainly is not a great time to sell unless you intend to trade up to a better home,” Adams said, “but it is a fantastic time to be a buyer.”
Let’s see, the bottom was in 1996…
We have a ways to go.
Neil
I lived in HB from 1987 until 1995. I saw haircuts of about 35% from 1988 (top) to when I sold (1995). It was a painful lesson in the physics of gravity…
That’s nearly a 50% real drop if you assume 3% annual inflation. There is reason to hope for even bigger drops this time around, because last time, prices didn’t triple before peaking.
Spot on! I believe inflation-adjusted prices have to drop 50%+ to realign with SoCal incomes, but the idea is so far outside the realm of the plausible to most folks that I don’t even bring it up — not even with my wife, who “gets” the bubble thingee except for the magnitude thereof.
The only reason for me to doubt my hunch on this is that it is quite likely that at least some of our nation’s top economic policy makers have a vested interest in reinstating a high rate of home price inflation, rather than face the pain of the bubble’s demise — especially the ones with a limited remaining term in office, and also the ones who will bear culpability on the morning after. Even so, it is increasingly obvious that that the record oversupply of McMansion inventory will only get worse if they respike, and the guiding principle should be to slowly release air from the balloon, rather than to pump it up with more and more hydrogen until it pops like the Hindenberg.
P.S. A historical footnote:
“The Hindenburg was originally intended to be filled with helium, but a United States military embargo on helium led the Germans to modify the design of the ship to use flammable hydrogen as the lift gas.[1] This also gave the craft approximately 8% higher lifting capacity.”
http://en.wikipedia.org/wiki/Hindenburg_disaster
Thanks deb-this was exactly what I was looking for.Wanted the stats for the valley.
Deb:
Always appreciate your insights. Any new insider reports for the valley?
Great to see you post Deb. I can see in my mind that brick building on the corner of Balboa and Sherman Way that houses the office this guy is “quoted” from. Beautiful Van Nuys , oh excuse me, “Lake Balboa”! The spin never ends. Defiantly puts it in perspective for me.
I live and work in the OC and today I heard an ad on the radio where Pulte, which is one of the largest HB anywhere, is offering “$100,000 in incentives” if you close on a house in 2006.
Another large HB looking for ways to dump their inventory. 2007 is going to be a bloodbath, but is the OC different???
No. OC is no different. Things here take a little longer, but one anecdote. Co worker wants out so bad. He and the girlfriend have had the house on the market for a month, A MONTH HELLO, and he is griping to me about low ball offers and how the market is really slow. WAHHHHHHHH! They are looking at the possibility of making 400K, so I have no sympathy for him. Lower the price by a 100K, take a 300K profit and run to Washington, which is where he wants to go.
Lip’s mention of Pulte brings to mind a conversation w/ my cousin, who is slightly dyslexic and always calls Pulte “Pluto”. This suggested to me that we call Beazer “Beelzebub” and maybe Toll Bros “Troll Brothers”. Think of any other apt alterations?
Okay, I’ll give it a try. I don’t claim to be a genius at this sort of thing.
Centex = Sin tax
Hovnanian = Have none of ‘em
(Rearrange some letters)
Meritage Homes = Home game tires
Ryland Homes = Darn my holes
Pulte Homes = The mule POS
Toll Brothers = Be short Toll
KB Homes = KY Homes
I have yet to meet a KB Home buyer who can sit down comfortably.
Hey what happened to Bubbles the Clown and his ambigrams of David Lereah pronouncements.
If you are out there Bubbles, please come back!!!!!
yes, he was a funny guy!
Hmmm… my posts aren’t showing up. Anybody else having the same problem?
apparently not
My analysis … Ben runs a clean game here. Refrain from outright cussing. If you add a link, expect it to take time so a person can check it out and make sure it’s not to some lunatic fringe situation. Seems fair enough to me.
Either way, don’t repost. 99.999999% of the time you’ll end up with 3+ posts and feel like a dolt. Just my experience.
Has anyone noticed how many more rentals we have in the oc? It seems like inventory is growing. I also saw incentives for apts.
Yeah, I’ve noticed. Unfortunately, I haven’t seen much in the way of rents moving down on SFRs. I’m in an apartment and would like to get into an SFR, but just can’t get myself to fork over an extra $750/month or more. While I could afford it, I just think that by not paying it, I’m saving an extra $9K/yr (and, yes, I am actually saving that money; gonna need it for when I do buy in a couple of years).
I had the same situation. Duplex in Sunset Beach. Sucked loud neighbors.
After 3-4 months of looking at OC Register’s rentals and Craig’s list rentals, found a great deal on a beach SFH with a long time owner not interested in selling (has ridden out 2 bear cycles).
Be patient, keep looking, your deal will come.
I’ve notice this in n. ca also. I’ve had old timers tell me a glut of rentals will bring down rents and lower rents = lower sales price.
Really? I think rent here in OC is getting ridiculous. My landlord proposed for everyone in this building complex to pay an extra $125 for the 1 bedroom apts…and I ain’t the only one pissed about this rent hike! I guess other states are beginning to look more attractive to my husband and I. The problem is that when you make 6 figure it is hard to find a job in a smaller city….unless we go to New York, SF or Chicago…all expensive places to live (maybe Chicago is less so, but still not worth moving)
Don’t rent in a complex, rent from small time landlords where turnover really hurts.
They won’t raise the rent as aggressively.
The large complexes plan on churning their units to ensure highest possible rents.
“The problem is that when you make 6 figure it is hard to find a job in a smaller city….unless we go to New York, SF or Chicago…”
You might be looking at the situation in the wrong way. Many cities in the southeast and midwest cost less than 100k. Some as low as 65k in fact. It doesn’t take much in the way of saving your 6 figure Cali income before you could A: buy your home in another state outright B: get a job that might not pay as much as you make now, but will afford you a better quality of life than you currently have, renting a place in LA. C: Since your home will be paid for, you can start to contribute towards retirement.
NYC, Chicago.. Boston.. they’re just cold versions of California except in NYC’s case- even MORE expensive.
Look at alternative plans. Practically every Californian I’ve met here only considers a tiny list of cities- the ones you mentioned in fact- when in fact these are just a narrow selection of cities you have at your disposal.
Same thing is happening here in L.A. seeing more and more for rent signs.
Talked to a friend last night,she told me that she got a rent raise of $170 a month,after only been there a year in Seattle .Its only a 1 bd. apt. She talked them out of it.
So how did she do that?
Ben,
Remember the ol days… you would have maybe 30, 40 posts…. look at you now!!!!! I’ve been soooo busy and it’s hard to keep up with your blog. Now I skim.
Good job Ben. You’ve come a long way baby!!!!
She has M.S.and on budget
“A Return To Reality, Not A Market Crisis”?
From the veiwpoint of this op ed, it’s more than a market crises…
Class Struggle
American workers have a chance to be heard.
BY JIM WEBB
Wednesday, November 15, 2006 12:01 a.m. EST
Wall Street Journal, November 15, 2006
The most important–and unfortunately the least debated–issue in politics today is our society’s steady drift toward a class-based system, the likes of which we have not seen since the 19th century. America’s top tier has grown infinitely richer and more removed over the past 25 years. It is not unfair to say that they are literally living in a different country. Few among them send their children to public schools; fewer still send their loved ones to fight our wars. They own most of our stocks, making the stock market an unreliable indicator of the economic health of working people. The top 1% now takes in an astounding 16% of national income, up from 8% in 1980. The tax codes protect them, just as they protect corporate America, through a vast system of loopholes.
Incestuous corporate boards regularly approve compensation packages for chief executives and others that are out of logic’s range. As this newspaper has reported, the average CEO of a sizeable corporation makes more than $10 million a year, while the minimum wage for workers amounts to about $10,000 a year, and has not been raised in nearly a decade. When I graduated from college in the 1960s, the average CEO made 20 times what the average worker made. Today, that CEO makes 400 times as much.
In the age of globalization and outsourcing, and with a vast underground labor pool from illegal immigration, the average American worker is seeing a different life and a troubling future. Trickle-down economics didn’t happen. Despite the vaunted all-time highs of the stock market, wages and salaries are at all-time lows as a percentage of the national wealth. At the same time, medical costs have risen 73% in the last six years alone. Half of that increase comes from wage-earners’ pockets rather than from insurance, and 47 million Americans have no medical insurance at all.
Manufacturing jobs are disappearing. Many earned pension programs have collapsed in the wake of corporate “reorganization.” And workers’ ability to negotiate their futures has been eviscerated by the twin threats of modern corporate America: If they complain too loudly, their jobs might either be outsourced overseas or given to illegal immigrants…..
more
Welln here in southern NH homes are still selling at high prices and the sky isn’t falling? “Wait a few months” is starting to sound foolish. I’ve been hearing this now for 2 years. i wanted to believe in some sorta major correction but I just don’t believe it. Mind you I firmly believe housing is rediculously overpriced, debt through the roof, and the USA has serious economic problems and I even own gold.
But the powers that be won’t give up and the present system won’t give until something unexpected happens in the world. Housing won’t collapse on its own. Just look at those low rates-talk about power in central banks!
Charlotte NC is one of the exact opposites of the country. 1998 to 2002 charlotte actually went down. from 02 to now, we barely broke even with inflation or maybe we lost a little ground to inflation. Now the whole country is talking bust with borrowers and builders taking losses, and we are merrily rolling along in the same pathetic state we were in from 2002. So if your gloom and doom predictions seem out of context to you in NH … I have been confused for 4 years and getting worse. They said boom … I said where … they are saying bust … I say where … I have been saying bust bust bust for years and starting to sound really stupid.
Cool.
Cow_tipping.
What’s interesting is that I can’t tell you how many Californians who I hear who are moving or planning on Moving to NC. I’m not sure who does your state’s PR, but that’s seriously what I hear all the freakin’ time. Look at it this way- People in CA can’t afford. People in NC can. That’s a big difference that most people in the Southeast take for granted.
Realtors are complete Idiots starting with the leader of the herd - Liareah.
“That 40 million dollar ad and “Now is a great time to buy and sell a home” WTF … and comepletely needless to mention sell because there is no shortage of sellers. “Now is a great time to buy a home” while blatantly untrue would have fitted the current market better. No shortage of sellers.
Then here is the kicker. They are calling 5% a down turn, in fact if the market drags out a 50% loss over 10 years from the 2005 highs the realtors will starve to death. Slow drop will kill sales volume. Instead if they start cheering and supporting the drop, and it drops 50% in 1 year. That 1 year will be death for them, but promptly sales will pick back up - the F**ked homedebtors can walk away or lose their ass … but the shorter drop will help the realtors a lot. They dont quite care about sale $$$. OK they make more per sale, but volume is more critical. They’d have to sell 2 to do the same income, but guess what, if volume stays at last years level, big deal. There was plenty to go around.
Cool.
Cow_tipping.