“Would-Be Home Sellers Shaking Heads In Disbelief”
The Fresno Bee reports from California. “Housing sales in the Fresno area this year are at their lowest level since 1999. The steep drop-off in activity combined with a glut of houses for sale has left would-be home sellers shaking their heads in disbelief.”
“‘Some sellers have been stuck on March 2006 prices and are still there,’ said Ken Neufeld of London Properties. ‘Those do need to fall.’”
“Investors and so-called equity refugees from the Bay Area and elsewhere who helped drive up values in the Valley have left the scene, which has contributed to the slowing market. And prices have not fallen to the point where first-time home buyers can enter with enough force to make a difference. ‘Most of us couldn’t afford the house we are living in,’ Neufeld said.”
The LA Times. “A Times review of approximately 100 residential and commercial developments downtown shows that about 20% are behind schedule. ‘It has gotten to the point where with … huge construction costs combined with huge land costs and a flat sell-out rate, it just doesn’t pencil out anymore,’ said Mark Tarczynski, a senior VP at CB Richard Ellis.”
“Some experts are skeptical about several huge projects announced with much fanfare, including a 50-story condo development near the Civic Center and twin residential towers near the Harbor Freeway.”
“The delays and cost fluctuations mean that Related will not pre-sell condominiums in the first phase until at least mid-2008. ‘I’d rather that it be then than today,’ said Bill Witte, president of Related California. ‘Clearly there’s a slowdown, not just in downtown…. People are on the sidelines waiting to see where the market is going to go.’”
“Witte said Related officials have told city and county leaders that the hotel in Phase One ‘is completely unfeasible’ without a 20-year rebate of the city’s hotel tax. ‘I want to ask, ‘Do the people of South-Central, East L.A. and the Valley have to subsidize yuppie housing downtown?’ said Joel Kotkin, a Southland author.”
The Voice of San Diego. “More than 2,800 new housing units have flooded downtown since July 2004, upping the neighborhood’s housing stock by nearly 30 percent. And construction cranes still stand over the downtown landscape as builders hammer out the nearly 2,400 more due by the end of June 2007.”
“The addition of Petco Park and higher-end condo complexes to downtown has attracted the yuppie and investor crowds to the area, economist Murtaza Baxamusa said. For some of them, their primary residence is elsewhere in the county, ‘that’s why you see a lot of dark lights downtown at night,’ he said.”
The Contra Costa Times. “Contra Costa, Solano and San Joaquin counties have the dubious distinction of making the top 10 list for foreclosure activity in California as homeowners struggle with higher mortgage payments and a slowing housing market.”
“Borrowers who took out alternative loans a few years ago are getting hit with higher payments, said Dave Konesky, a Realtor (in) Tracy. ‘I think a lot of it has to do with 100 percent financing. I think we are seeing the brunt of that coming back on us. All of those loans are coming back to bite us,’ he said.”
From CNN Money. “Like many other California renters in early 2005, Nick Basile and his fiancée decided to act. They snapped up a house last summer in the San Joaquin Valley town of Visalia where prices had already spiked 40 percent in the prior 12 months.”
“‘We figured we better buy before things really got out of control,’ says Basile.”
“The Visalia homes were being sold in a lottery process. ‘It was unreal,’ says Basile. ‘There were 50 families packed into a model home. We were shaking.’ The last name drawn, theirs, gave them the right to buy a home.”
“The couple ended up spending $329,000, which they financed with an interest-only ARM with a home loan for the down payment. They knew their salaries would cover the monthly payments and they reasoned that if they ever got in trouble they could always sell, at a profit.”
“What they didn’t count on was that they soon began to miss their native East Coast. This past summer they decided to move back and they put the Visalia house on the market in August.”
“They first priced the house, a three-bed, two-bath 2,150 square foot contemporary, for $409,000. That price drew nothing more than a few chuckles from prospective buyers. One of the main problems was their builder was still churning out these homes and, to move inventory, he was undercutting Basile and Neuffer’s (and every other seller’s) price.”
“‘The builder can’t give away the houses,’ says Basile. ‘He’s selling them for $324,000 with swimming pools, granite counter tops, spas, landscaping - all things we didn’t get.’”
“They kept dropping the price in $10,000 increments as they only attracted showed two showings in three months. They held an open house and nobody attended the first day.”
“Even if they rented the place, the numbers wouldn’t add up. ‘Our payment is about $1,700 and we could only get about $1,500 for it,’ says Basile. That doesn’t even take into account property management fees, taxes, lawn service and other expenses. They’d be awash in red ink every month.”
“They hired a real estate broker and lowered the price to $364,900, which, even if they get, will probably still leave them with a net loss after commission and other closing costs. Plus, they’ll be out a total of about $10,000 in prepayment penalties for paying off their mortgage and home equity loan early.”
“Now, if their agent doesn’t come through, they’re considering trying to find a friend to rent it on a short-term basis and then put it back on the market during the spring selling season. The ordeal may have made them a little more real estate savvy but Basile is not exactly kicking himself. ‘I still think it was a good idea at the time,’ he says.”
‘After a lackluster three quarters in 2006, auto sales in California and Orange County will continue to hit the brakes through 2007. The slowing real estate market has also hurt sales by undercutting consumer confidence, Foltz said. San Diego, where home prices have been in decline, saw a 10 percent drop in new car sales through the first three quarters. ‘That could be the same thing happening here,’ said John Sackrison, executive director of the Orange County Automobile Dealers Association.’
‘Sluggish sales will have an economic ripple effect beyond auto showrooms, said Peter Welch, president of the Car Dealers Association. ‘Car dealers are the largest generator and collector of sales taxes,’ he said.’
‘As long as rates stay low, bullish housing analysts routinely tell us, home prices should hold up. So it seems reasonable to wonder whether uncooperative interest rates were at least partly responsible for the 90s downturn. The answer in this case is a resounding ‘no.’ The accompanying chart reveals that rates dropped right alongside home prices for the bulk of the housing correction.’
‘Banks are beginning to sell foreclosed homes at a discount amid a housing-market shift, said a report released Thursday. In Orange County, lenders sold homes for an average discount of 3.8 percent in the first half of this year.’
“Christopher Cagan, a research director who wrote the report, said the discount rate is the difference between the sale price and the value of a home based on a sophisticated computer model.”
Sophisticated like Zillow’s? An “average discount of 3.8 percent” is meaningless. It would be much more interesting if they published the net sales proceeds as a percentage of the outstanding loan balance.
Cagan is talking markdown from retail. It’s better to use dealer invoice.
‘Most of us couldn’t afford the house we are living in,’ Neufeld said.”
amen, finally someone said it. this sentence shows the truth of the RE bubble like no others. Neufeld is a hero. Forget John McCain, Neufeld for president.
“‘Most of us couldn’t afford the house we are living in,’ Neufeld said.”
Don’t buy until this saying goes out of fashion.
That story is just the first of many who were wrapped up in the ‘if I get into trouble…I will just sell for a profit’.
Not only can mortgage payments cramp your style…but not being able to get out of a house can make relocations very hard or impossible. That great job opportunity comes around…but you can’t take it because you are trapped in your ‘tract home’.
Oh well…that is why manias often turn into ‘bubbles’.
Find out how to find an honest appraiser in your area…got a new post up.
SoCalMtgGuy
http://www.housingbubblecasualty.com
Yes, they (Basile) “Got Stucco”!
And not being able to get out of a house can make financial dislocations very probable.
Wait a second! Who the hell moves from the East Coast to Visalia. Personally, I kinda like Visalia. But an eastcoaster moving into the southern San Joaquin? Just…no…sense…at…all.
You’d be surprised - my parents who live in Long Island were telling me last summer that they wanted to move to Sacramento. Why? Lots of Chinese folks were moving there (they’re Chinese), property values are going up like crazy - must be a great place.
“Wisdom of the crowds”
There has been much talk about how this is going to geographically lock a lot of people into place. Sad. Cest la vie. I expect to have to move. Do I like the idea? No. Do I want to move to another area? *ell no. Would I? Possibly. I’ll do the numbers.
Neil
A lot of people? Virtually everyone that hasn’t paid off their place. Hope they like their neighbors!
“And prices have not fallen to the point where first-time home buyers can enter with enough force to make a difference.”
Did he say interest rates haven’t fallen enough to make a difference?
No, Skippy, repeat after me…he said PRICES!
Been said a million times here……with the fed at 1%, the lending rate was about 5%. Now with the Fed at 5.25%, the lending rate is at ….5.25% ?!?!!
You’re right phillygal, no where left to go but lower prices, game over for lower interest rates helping ….
I live about an hour’s drive from Visalia and was there last week and, just off of hwy 198, the graders were doing their final touches on yet another housing project not needed, (are they secretly keeping the pennant co’s in business?) this one, around 50 houses. There are something like 2,000 houses for sale in Visalia, a city of around 100,000 people. Why would a hb continue building and complete the houses, when faced with such numbers?
Have no fear! All these FB’s will be rescued as soon as the spring flowers appear. The Realtors are saying it will happen. The FB’s are taking their over-priced junk off the market until spring because with the flowers comes hope. Everything is going to change as soon as spring arrives. You should buy now before spring arrives or you’ll be too late. First time buyers will be lining up to put their names down. FB’s who are currently underwater will be fighting off buyers who outbid each other. Happy times will be here again! We just saw boom, boom, boom, boom, boom for 6 years followed by a a little bust in 2006, then we will see boom, boom, boom, boom for the next 20 years! Think I’m wrong? You have the Brokers, realtors and David Learah’s word on it.
I am sure the everyone on this site and around the nation will suddenly want to ditch their inexpensive rentals for a home that looses them tens of thousands of dollars every year. I can’t wait until next April to give some idiot all my savings. April 1st will be the day I’ll make my offer! Lets all make him an offer!
Due to cash-flow issues, I’d rather wait til the end of that month. That’s right, April 31. Circle the date. April 31. I’ll be storming into the office of some lucky realtor next April 31 because it’ll be time to buy, buy, BUY!! With luck you’ll run into me on that day, April 31!
greetings aladinesane,
Looks to Me(i am no expert) but there is a whole lot of wide open good irrigated farmland and groves to the east of Visalia, which the owners may be selling out to Hb’s. Are you seeing much new HB activity springing up in exeter,Farmersville,woodland, ivahoe, ect? Is Lemon cove still a 10-building hamlet, with maybe 20 souls total?
It is a nice country drive from visalia all way to 3 rivers: i hate to have my annual drive up there despoiled by tons of newly-built cookie-cutter tract housing.
BTW, have you thought about doing a transverse along the high sierra trail all way to Mt Whitney(if you have done it yet), or alternately go xcountry over harrison gap(class 3, ice axe required even in summer) and come out to kings canyon. Have fantasized about doing that route: one of my ‘might have been ruiminations’. Looks good on topo Map anyhow!
Hello Peter,
There is boucoup land all over the central valley and Visalia is i’d say one of the most prosperous and better looking cities, in the central valley, which is not saying it’s downright beautiful, moreso the competition is fairly skanky…
Farmersville & Ivanhoe are mostly Hispanic, friends bought in Farmersville about 5 years ago for $98k, realized they were one of 3 non Hispanic families in their housing development and sold it for $180k, in a bidding duel a few years ago and split for Utah.
Somebody told me that Exeter has more millionaires per capita, than any other city of a certain size, (think there’s 9,000 people in town) in our country, strikes me as strange, as they are just farmers/ranchers, like everybody else around~
I’ve walked across the Sierra 4 times, 3 on the High Sierra Trail and once coming from Cottonwood Lakes, via Pants Pass (another fun class 3 off trail route) to Crescent Meadow.
We have about 6 different groves of Giant Sequoia trees, just 10-15 miles from our backdoor and some to a lot off offtrail is required to get to them. To be in the presence of a 2,000 year old living goliaths and to have them all to yourselves, is an amazing feeling. Imagine something that lives 27 to 40 times as long as you and is the largest living thing, as an added bonus?
“I’ve walked across the Sierra 4 times, 3 on the High Sierra Trail and once coming from Cottonwood Lakes, via Pants Pass (another fun class 3 off trail route) to Crescent Meadow.”
That one i had marked om my topo as a xcountry route going up over kern-kaweah col(pants pass) and coming down passing gallat lk and connecting to cloud cyn trail. Never did it but that upper headwaters basin of kern -kaweah looks like a magnificent isolated high-sierra area.
I know that there are some isolated groves of Sequioas down in the lower slopes away from the beaten tract. I always admire these giants more in a natural setting than in the tourist-clogged areas of giant forest/grant grove.
I imagine that you can almost start from your residence and hike up the trail along the middle fork all the way till it connects to the HST(don’t tell me you,ve done this too!)
The Kern/Kaweah basin is amazing, I have fond memories of being there, really beautiful…
We parked our car @ Atwell Mill and walked home a few months ago, via Hockett Mdw, to the Garfield Grove, around 30 miles, about 1/2 of which was walking through Giant Sequoia groves…
The Middle Fork is a great April-June spot and we’ve been on it many times, but it’s 15 driving miles away, so never walked to it, yet.
One of the best quotes I’ve read in a long time:
‘We figured we better buy before things really got out of control,’ says Basile (despite the fact that prices had already spiked 40% in the prior 12 months and they were buying the home through a lottery process because there were so many buyers).
This stuff never ceases to amaze me. And you gotta think there are countless other Basiles out there in the world.
What a farking moron.
What this person does not understand is that the builders and financiers were smarter than he. Lottery-style sale, prepayment penalty, tut tut They might actually have to stop spending at Nordstrom and see what’s on sale at JC Penney’s.
There isn’t a Nordstrom in Visalia. JC Penny’s and Gottshalk’s are the high end there.
“they’re considering trying to find a friend to rent it on a short-term basis and then put it back on the market during the spring selling season.”
Let the pigeons loose! This may well be the most original idea ever conceived by the human mind. I believe the whole world will weep with joy as word of this fresh and clever thought is made known.
LMAO
“they’re considering trying to find a friend to rent it on a short-term basis”
Sounds like a sure thing to me.
out, damn boldface!
Friend: An idiot who just may be stupid enough pay $1,700 a month.
Housing bubble hall of shame candidates for sure. They’ve got all the ailments — bad timing, overpaid, lottery sale, bad loan, bad expectations, inability to sell, can’t rent, still in denial, upside down mortgage, take cash to closing.
Excellent find Ben! Perfect samples from the population of GFs.
Don’t forget, not knowing market conditions had shifted, they were Sell By Owner. That is root cause of their problem not knowing what they were doing.
I must ask “Do friends give you a lower rent?”
I do. I’ve had a friend in my condo for about two years, about 15% lower than market right now.
Of course, they pay in cash as well…
Don’t forget: honey, I’m bored. Nothing on TV. Hey, I know, let’s move back east right now
Basile sounds like the kind of guy who would stand in line to get kicked in the nuts.
Exactly, as long as there was a line of morons in front of him.
The ordeal may have made them a little more real estate savvy but Basile is not exactly kicking himself. ‘I still think it was a good idea at the time,’ he says.”
Where? In bizarro world?
They’re kids. Casey’s age. That explains a lot.
No, they put no money down, so what do they care? People walked away in the 90s after having put down their own money, let’s see how many walk this time.
It was good at the time. Now it is a good time to file for bankruptcy and walk away from the house. Let the manager of the bank lose his shirt for being so stupid.
One vote for Jim, comedy writer of the day…..
me too I vote for jim!
I’m definitely voting for Jim. Funniest thing I’ve read in awhile. LOL.
LOL Funny!
Prolly stood in line for a PS3, too. Big news story this morning that someone sold a PS3 on eBay for $30k…$30,000.00. What the…..?
BayQT~
Yeah, and wait until he gets paid with a money order from Budapest.
And I bet he would say getting kicked in the nuts was a good idea at the time…
My wife and I went through this while looking to buy in Vegas in 2004. We checked out tons of new developments and heard nothing but “waiting list”, “lottery”, “limited release”… When we were told that there would be a lottery, at 7am on a Saturday morning in June (when it would probably already be 90 degrees out), for about 8 homes, and that there were 35 people already in the lottery, well, we pretty much agreed to pack it in and keep renting.
The whole thing smelled like a scam to me at the time.
Awesome article, the CNN Money one. It describes the main reason we have a bubble, even in flyover land.
‘We figured we better buy before things really got out of control,’ says Basile
And this is why even “non-bubble land” is in trouble. Like Montana, where I live. It’s not that we had a ton of people buy second homes, or out of state speculators. It’s that young people, especially, figured they better buy now before it got too crazy.
I’m super rational when it comes to financial decisions, but even I wavered a bit when considering how little my down payment might be worth in four years. Better buy that $100,000 house before it turns into a $160,000 house.
Because of that indirect speculation, housing is now unaffordable. A correction must follow.
What is clear now is they ended up buying AFTER things got out of control.
I am sure many of us on this board have bought stock at its peak, speculating that it still would climb.
If we are all so great at recognizing a peak in a market, we would all be billionaires.
The stupidity of some people just amazes me.
I wonder if they were shopping for those
video game machines that people went
crazy over this week.
The ordeal may have made them a little more real estate savvy but Basile is not exactly kicking himself. ‘I still think it was a good idea at the time,’ he says.”
Ahhh… the infinite human capacity to rationalize any mistake, no matter how stupid or costly.
Why not just cancle plans to move back east ? Is that too simple a solution ?
People don’t want to be told “no,” they can’t do something.
I’d need a whole freezer full of trouts for these idiots.
ROFLMAO! Comedy writer, first runner up.
Frozen trout inflict the most damage and leave the greater scar or bruise, but I am addicted to the imagined sound of a fresh 20-pounder slapped against the jaw of an open-mouthed “what the F?” happy home shopper.
I think we all evision that moment with delight -
Awww, but they’re homesick… Boo freakin’ hoo!
Now I’m really ROFLMAO!
Uh, no, it was not a good idea at the time, Basile. Your mortgage payments were more than you would have paid in rent for a comparable home, and you are now facing an additional loss in the 10s of thousands of dollars. Buying in at the height of a bubble is never a good idea.
HARM, you are correct - it is amazing how people simply cannot get themselves to admit that they made a mistake, even when it is staring them right in the face (and, in this case, will likely cost him around $40-50K after he lowers his price more and pays his closing costs, commissions, and prepayment penalties).
Hopefully after we go through the historic residential real estate bubble and collapse of the early 21st century, it will be driven into EVERY home buyer’s head that you have to compare rent and purchase price. If you can’t break even by renting it out–on a 30 year fixed payment–then it costs too much. Geez, this guy can’t even come close to breaking even with an interest only loan.
Yeh, I’m sure that you’ll be able to sell it for more than the builder’s selling price in the spring… when things pick up.
‘Geez, this guy can’t even come close to breaking even with an interest only loan. ‘
The real last final word on this idiot bubble. Another ‘Damn it. don’t tell me the price - what are the monthly payments’ gambit gone horribly wrong.
Hate to reply to my own post, but need to correct that loss number. Probably closer to $100-120K, since he’s already looking at $20-30K now IF he got his wishing price of $365K. But, considering the builder is selling them for $325K, with pools, landscaping, granite, etc., he’s going to have to knock another $60-70K off of that wishing price to even have a hope of selling. (He’s $40K over the builder’s price, and the builder is throwing in lots of incentives that would probably be worth at least $20-30K to some knife-catching GF).
You also forgot, if he waits another 6 -12 months the builder might be selling for 250K, then what? Just walk away probably!
Here is what your house is worth Nick:
324k-30k(pool)-5k(granite)-6k(spa)-20k(landscape) = 263k
Oops, almost forgot the minimum 15% resale discount since I don’t get to pick out all my own bling, -40k; for a grand total of 223k. Sweet!
minus another 6% for the realtor commish…
From what I saw in the 1990’s in Cali the buyer will just walk away and in 5 years have a nice new house back east… like nothing happened. Thats why people were so quick to buy with no money down, theres’ really no downside. I hope this time Mortgage lenders get blown up for their bad loans.
He’s at an auction where people are bidding insanely and he thinks this “was a good idea at the time”?
Auctions with no buyers: bargain
Auctions with idiot buyers, throwing money around: bubble
The Visalia homes were being sold in a lottery process.
Congratulations.
He “won” that lottery alright.
With winners like this, who need losers.
A Shirley Jackson lottery.
As the bloggers begin picking up rocks and slowly close in.
And it’s probably likely that a fair percent of the other ‘winners’ are in the same leaking boat.
Probably a hundred thousand dollar freaking loss +. Peoples hopes and dreams are pinned on winning 100k on a lottery ticket every day, and very few do. Yet, tens of thousands of people are losing 100k on RE investments this year. 100k is a lot of money.
“‘The builder can’t give away the houses,’ says Basile. ‘He’s selling them for $324,000 with swimming pools, granite counter tops, spas, landscaping - all things we didn’t get.’”
Now, that’s my definition of a Fckd Seller.
Correction
“The ordeal may have made them a little more real estate savvy but Basile is not exactly kicking himself. ‘I still think it was a good idea at the time,’ he says.”
A really dumb Fckd Seller.
Or a really in-denial F’d Seller.
Someone posted this before, and I think it bears repeating: in America, the very worst thing you can be (aside from being a child molester) is a financial idiot. No one wants to admit they’re made a costly financial mistake, no matter how obvious, because being stupid with money is the modern-day Scarlet Letter. The pain of actually losing money isn’t as bad to most people as admitting it was their own fault.
Agreed. I hate to sound like a motivational poster, but making mistakes is not a bad thing as long as you learn from them. I’ve made my fair share of blunderhead financial mistakes, but I make sure I remember them and what led me into them and do my best not to let myself get led into those same mistakes again.
(One of my biggest mistakes, and one most people don’t think is a mistake at all, is to take on debt. I’m debt-free, including the house, and will never go back into debt unless my life or my family’s lives depended on it. Another important one is not to make any financial decision that you aren’t comfortable enough that you could explain the matter in detail to someone else. That is, if you’re not familiar with what goes into buying a house - the assortment of annual payments, closing costs, mortgage specifics, commissions, and so on - don’t buy one until you’ve done the research where you know the stuff pat. Ditto for investing of any kind.)
There is nothing wrong with debt, or leverage, as long as what you are buying is within your means and has reasonable, rational, economic value. In fact, having debt is a hedge against inflation, something any economist in the world can show you is an ever present risk.
When do you not want to be leveraged? When what you’re buying is has been bid up far out of proportion to its relationships with other assets or fundamental economic factors.
In other words, you have to understand that the best time to leverage yourself is probably when it “looks” like the worst time (with costly, high rates). And, as what has transpired lately, the worst time to leverage yourself is when rates are artificially low and assets are (consequently) artificially high in price.
Its a cruel fact; when it’s “easy” to “invest” its probably the worst time to “invest” and when its hard, its probably the best time to invest. Unfortunately, investing (to minimize risk at least) is counterintuitive.
“One of my biggest mistakes, and one most people don’t think is a mistake at all, is to take on debt. I’m debt-free, including the house, and will never go back into debt unless my life or my family’s lives depended on it.”
It might turn out to be a mistake to think that one policy serves all seasons. I’m debt free too right now, but with interest rates at these ridiculous levels it seems likely that lenders are going to take it in the shorts. There are different ways to hedge currency risk and debt is one of them. Over priced assets is not, which many in the housing arena are presently learning. Good luck to all who follow this board.
When you are young you are stupid. Blame the bank!
“In fact, having debt is a hedge against inflation, something any economist in the world can show you is an ever present risk.”
Debt is the CAUSE of inflation. Money does not exist until it is borrowed (debt) into existence. You cause inflation with every loan you sign, every swipe of your credit card…
Amen brother. I’ve had 6 figure debt, and now I have zero debt. I find that life is so much more fun with zero debt, than lots of debt. No pressure and all that.
No one wants to admit they’re made a costly financial mistake, no matter how obvious, because being stupid with money is the modern-day Scarlet Letter.
::::daring to try italics::::
Might make a good weekend topic: True confessions of worst financial mistakes. I know I’ve got several.
::::daring to close italics:::
Ughhh…. AtomicRobotWoman,
Please “::::dare to close::::” your italics thusly:
</i>
Thanks for the tip, Harm. I’m not very computer literate. I apologize.
But you’re a robot! What gives?
Spilled coffee destroyed my circuitry, thanks to arroyo_grande and his post about the lowball police.
They snapped up a house last summer in the San Joaquin Valley town of Visalia where prices had already spiked 40 percent in the prior 12 months.”
————————————————————————–
I hate that phrase “snapped up a house” ….sounds like these two are now going to be the 1st course meal for the alligator they just snapped up.
“Even if they rented the place, the numbers wouldn’t add up. ‘Our payment is about $1,700 and we could only get about $1,500 for it,’ says Basile. That doesn’t even take into account property management fees, taxes, lawn service and other expenses. They’d be awash in red ink every month.”
Uh, not to mention the payment when the ARM resets.
What the shit do they think is going to change things so much by spring that would suddenly make their asking price seem viable??
I absolutely CANNOT WAIT for spring, seriously. I’m going to watch with sick fascination as inventory grows and nobody is buying and this whole debacle unfolds. It really is like watching a slow-moving train wreck.
Lets see; I want to sell my house and I’m reading how “everyone is waiting for spring” so what should I do?
Why wouldn’t I “jump the gun” a bit? Why not put the house out FIRST, before spring? Beat the competition?
And once everyone who wants to sell sees other’s “jumping the gun” and (perhaps) offering lower prices….will fence sitting sellers continue to fence sit? Or will they want to get “out there”?
I have a feeling spring will come early this year…like January 1.
This year Christmas comes in spring.
They must have heard about the much anticipated, greatly hoped for, it better happen or I’m really F@%ked Spring Bounce of 2007.
That’s when a whole mess of buyers will suddenly materialize, and by June 2007, will have soaked up that excess, oh what is it, 48 months worth of inventory.
Boo-yah
“They must have heard about the much anticipated, greatly hoped for, it better happen or I’m really F@%ked Spring Bounce of 2007.”
I love it! LOL.
Chad- Don’t you know, Spring is the best time for baking cupcakes. Coupled with your St.Joseph, it is guaranteed to make anyone go gaga in love with your dream house where they’ll outbidding themselves to sign on the spot. Houses only go up.
Maybe they’ll start distilling grain alcohol now so that they’ll have an easier time convincing the new GF.
Wanna drinkie poo?
I drank moonshine for the first time the other night.
It had quite a kick, but I don’t know that it would convince me to buy a house right now.
If someone buries a St. Joseph statue in their yard and you buy the house and the value goes down, can you sue the Catholic Church for malfeasance? Also, does the St. Joseph magic stop once you buy, or will people keep coming to what is now your door offering you ever-larger buckets of money for the house?
Just curious…
The Catholic Church is out of money. All the child molestee former altar boys grabbed it first.
Burying St Joseph statues has nothing to do with Catholic teaching- where on earth did that association come from?
There was a PERFECT rant on this topic from another poster a couple of months ago.
It started with “It is theologically dubious that God is on the sellers side.”
I wish I had of saved it so I could repost. Oh well.
If we’re talking inland and/or central Cali, maybe a little meth in those cupcakes to get potential buyers “motivated”?
They are not Fcked at all….they used a 100% loan and borrowed for the down payment. They will move back east, stop paying on the mortgage and declare bankruptcy…viola! An dif they are smart, they will charge the move on their credit cards so that debt will also be wiped clean by the bankruptcy.
Do you even have an inkling of the new BK laws ?
No probleml. Calif a non-recourse state. If they just give keys to the bank, they don’t even have to do BK.
UNLESS YOU REFINANCE! If you RE-Fi all bets are off!
True, if they never refinanced or HELOC’d, they can just mail the keys back to the MBS holders.
Even so, they’re still on the hook for federal income taxes on the amount “forgiven” by the lender (difference between what they borrowed and what the bagholder eventually re-sells the property for).
And their credit history will be trashed. Good luck renting in a non-slum (let alone buying) in that case.
If the bank sells the house for less than the mortgage the bank cannot come back and ask for the difference, IF the bank agrees to accept the keys back. I researched this when a realitor suggested this idea, sell my present house and buy a new one with nothing down and if it goes down in price etc. Well the bank doesn’t have to accept the keys.
Not so fast . . . they’ll need to wait a few months before trying that move.
Plus if they are anything more highly employed than burger flippers, they won’t qualify for Chapter 7.
Median income in CA is $50,000. That’s one well-paid burger flipper. Dollars to donuts pretty much everybody in the Central Valley (who’s not an agribusiness titan or grossly overpaid prison guard) will qualify for Chapter 7, even under the new rules.
If they move for a job relocation, they can write off their expenses. What I’m wondering however is, if their sudden change of heart has to do with one of them losing their jobs, and they’re too proud to admit it. It could be possible that they are moving in with family back East.
I like this quote, which we’ve been hearing ad nauseam: “Clearly there’s a slowdown, not just in downtown…. People are on the sidelines waiting to see where the market is going to go.”
People aren’t on the sidelines waiting to see where the market is going. People are on the sidelines because they KNOW which way the market is going.
well said. ALMOST everyone knows
Slight correction: everyone here knows. Your average American (Joe & Jane Howmuchamonth) still has *no clue* about what’s going on, or how it’s going to end.
Hell, I’m sitting on the sidelines with a bucket of popcorn waiting for the carnage to start.
I’m bringing the butter and cheese to sprinkle on!
Or they’re on the sidelines because they can’t sell shitbox no. 1 to buy shitbox no. 2 OR
There isn’t anyone left dumb enough to buy into this!
Or they allready bought shitbox #2 before they sold shitbox #1 and now cant sell #1 or #2.
No one I know, personally, is sitting on the sidelines for this reason. I am, but most around me are still delusional. I’m still very much in the minority when this topic is brought up in my circles.
They’re not on the sidelines. They went into the locker room, showered and changed, and have left the stadium.
I AM OUT OF THE MARKET FOR THE FORESEEABLE FUTURE!!! Don’t lump me in with the people sitting on the fence or waiting on the sidelines. Thank You.
It’s a standoff between sellers and sellers, to see who will lower their price first. In case that one comes up again.
I wish they would change that to
“The smart people are sitting on the sidelines because they were raised right and know that it is finacially irresponsible to buy a house with I/O ARM 100% financing” I just don’t understand how people can be so stupid as to not look at the what if’s.
Isn’t there a second toxic issue with I/O ARMs in that if value of property is 110% of loan, doesn’t the mortgee have to stump up a money payment ? In past that was negative amortization. What happens if value of asset declines ?
Uhm, Got that the other way around but i think you get the jist. Having a loan >> underlying asset’s worth triggers a call to top up the equity.
Nothing as long as the mortgage gets paid.$$$$
This is a qyestion better left to mortgage experts like SoCalMtgGuy, but as I understand it, every neg-am or option-ARM contains a maximum cap on the amount the principal owed can reach –usually somewhere between 100-130% of the original balance. Once that point is reached, the payments MUST begin to amortize (borrower must begin to pa back FULL interest + some of principal owed), which is how “quaint” conventional mortgages used to work back in the Dark Ages of lending (pre-2001).
Fom SF Gate (http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2005/06/21/BUG6JDBOSR1.DTL&type=business):
“If borrowers continue to make the minimum payment, their loan balance will grow, and if interest rates rise, it will grow even faster, up to a point. When the balance reaches a certain point — usually 110, 115 or 125 percent of the original balance, depending on the loan — the loan is “recast” and the minimum payment goes up.”
Well all the geunises in S. Cali told me ” nobody lives in a house for more than 5 years anyway” “After 5 years before loan re-set sell and buy a bigger one using the same savy no money down interest loan… so you will have cash flow to go to Starbucks.”
I sold my house in Cali (June 2006 )and moved to Phoenix and rent which was considered a lunatic move as I’ll never be able to move back. At this point I still don’t know who will be right? Will the Government bail out these RE buyers? Same Government allowed massive RE inflation so anything is possible?
lunatic move as I’ll never be able to move back
I haven’t noticed any shortage of people moving to California for the first time. If they can do it, then obviously you can move back.
‘We figured we better buy before things really got out of control,’ says Basile.
Clearly a candidate for the dumbest college graduates of the year. Why did they buy when they were clearly getting in over their heads? And worse, why did they buy if they were not even sure they were going to stay in that part of the country? Stupid, stupid, stupid.
They were gambling in real estate. The reason for their move is beside the point.
Yogism? “That place is so packed, no one goes there anymore”
First of all, Visalia? What the hell is out there in Visalia? Repeat after me: The only reason to move into the Central Valley was LOW home prices. Once the LOW home prices were gone (coming back in 2008), so were the buyers.
And what is this spring 2007 crap? Repeat after me, again: There has NEVER been a bubble that has deflated and come back within a few years. There have been plenty of bubbles where the prices crashed (down to normal logical levels) and then STAYED there.
Correct. Why would anyone believe that Visalia could support a $409,000 home price. There is no reason to live in Visalia unless (1) you’re the mayor, or (2) you work for the CHP.
As for their lottery win, I personally would not be surprised if the builder placed a bunch of shills in the group of bidders.
Correct. Why would anyone believe that Visalia could support a $409,000 home price.
Because real estate always goes up!
Spring ‘07 will be an interesting season. There is an awful lot of people out there who’ve pulled their listings in anticipation of selling in the spring/summer season.
At the rate that GDP growth has been going we could even be in a recession by then. There could be quite a few layoffs in homebuilding, mortgages, and real estate between now and summer. I wonder who those clowns are going to sell to. The other clowns who can’t sell their own homes? I really really doubt we are going to see a home price runup by then. Much more likely the other way around. The Basiles’ home may very well end up REO.
If nothing else, it should be interesting!
Just how many buyers are “waiting on the sidelines?” Didn’t all those buyers already buy? Is there yet another pool of buyers who can juuuust afford a house with an I/O if only the price dropped, say, ~8%? I think we’re going to see an even worse bloodbath in the spring when sellers realize just how few buyers are on the sidelines. It’s going to be a race against time — can you snag one of the few remaining buyers before your I/O turns into PITI?
Question: “$10,000 in prepayment penalties for paying off their mortgage and home equity loan early.” I paid off my college loan in full early and didn’t see any penalty at all. Is a pre-payment penalty the norm, or do they hit you only when you pay in full with a refinance?
Pre-pay penalties are often built into the worst kind of mortgages - insult to injury, if you will. It’s a mechanism to MAKE SURE the lender makes money.
I found a pre-pay buried in a conventional mortgage at a closing once - pitched an obsolute fit - yelled, screamed, carried on, until the loan officer agreed to strike it. Criminal bastards. And my pre-pay was 1% of principal, effective for the first 12 months only - after that, no penalty.
Never, ever agree to that sh*t, and get in writing ahead of closing there will be none in the mortgage docs!
You should not have a prepayment penalty unless you get something for it. Some banks give you .125% lower rate if you choose a prepayment penalty that lasts 3 years. The lower rate can last the life of the loan on a 15 year loan.
Pre-payment penalties are typically a negotiated term (i.e., you can negotiate to have the term in or out of the loan). They typically allow you to pre-pay a portion (say, up to 20% of principal in any year), but you pay the penalty if pre-pay more than that. So, they kick in when you re-finance or sell. They’ve become much more common in recent years because mortgage brokers got a higher fee from the lender if they inserted the clause, and the FBs were too stupid to educate themselves.
dtLA has a fatal flaw. it will never be a ny, sd, sf, seattle, or even a providence ri/portland or. each of these has a beautiful water’s edge whether ocean or river. once you leave the confines of bunker hill, you merge with the grimy jewelry , garment and then produce districts. travelling in any other direction gives equally dismal results results. a good downtown needs natural barriers.
What, the LA River, the Elysian Hills, and the 110 don’t count? (Still trying to think of a “natural boundary” on the south side.)
The 10 fwy?
“dtLA has a fatal flaw. it will never be a ny, sd, sf, seattle, or even a providence ri/portland or. each of these has a beautiful water’s edge whether ocean or river. once you leave the confines of bunker hill…”
The LA core DWTN is surrounded like a beseiged fortress by a ring of slovenly gritty blighted burgs such as pico-union to the west, chinatown to the north,boyle hts to the east. and scentral to the south. Fwys barriers such as 110 to the west, 101 on the north, 5 on the east, and 10 on the south further tighten the noose around the dtwn with a concrete rampart, causing the dwtn to resemble a gigantic mass of concrete ramps, with condos and offices sticking up thru the pavement like frowning fortress towers.
La Dwtn is Souless, except for some 1920,s neo-classical restored buildings(pacific building on 523 w 6th). After dark the dwtn is vacated and turned over to the homeless and vagabonds. What would improve the LAdntn is to raze and level pico-union(already in process),parts of the grimy warehouse district, and some areas near the 10 fwy and turn them into green space.
I have watched the dwtn building binge up close for about a year now, and knew that it would run into red-tape overruns. They are paying unions and contractors top-scale wages, the work is very slow, and the Market is waning. There is little question that there will be a glut of overpriced dntwn condos over next several yrs, for the city planners and big shot developers do not have a coherent vision of LA, and cannot alter the essential facts about dwtn(souless, too much concrete and unwalkable streets, overwhealming aboundance of impoverished immigrants, lack of parks, ect.
I wouldn’t buy in downtown LA unless there was a Whole Foods accross the street. Is there?
The LA dwtn needs a suburban-type supermarket like Vons or Ralphs so that the homeless can get an endless supply of fresh shopping carts.
I owned a retail business in Santa Monica from 1993 to 1995, on Wilshire Blvd @ 7th, ground zero for homeless sightings, my favorite being “Lipstick Mary”, who applied lipstick, to a wide area of her mouth (and beyond) and pushed 14 shopping carts full of junk up and down Wilshire Blvd. It’d take her 1/2 and hour just to go a block~
Wonder what she had in em’?
“Now, if their agent doesn’t come through, they’re considering trying to find a friend to rent it on a short-term basis and then put it back on the market during the spring selling season…”
I am hearing about sellers who are waiting until Spring to sell their homes, but have yet to hear of a buyer who is waiting until Spring to purchase a home.
Spring ‘08. I promised G(irl)F(riend) any place she wants. Damn.
I’ve been able to bypass next spring and spring of ‘08. But by Fall of ‘08, I might be on the hook with my fiance’… Oops! At least I have some time.
Until then, pass the popcorn. I’m on the sidelines watching this meltdown.
attempt to close italics
Test
Maybe by 2008 both of your girlfriends will see that renting is more sensible.
they forgot to finish his statement.
“The delays and cost fluctuations mean that Related will not pre-sell condominiums in the first phase until at least mid-2008. ‘I’d rather that it be then than today,’ said Bill Witte, president of Related California.”…..as hopefully by then I will have sold all my position in this company and can watch the train wreck from the sidelines.
“Witte said Related officials have told city and county leaders that the hotel in Phase One ‘is completely unfeasible’ without a 20-year rebate of the city’s hotel tax. ‘I want to ask, ‘Do the people of South-Central, East L.A. and the Valley have to subsidize yuppie housing downtown?’ said Joel Kotkin, a Southland author.”
I’m telling you. The LA downtown Brahmins pull this bullsh#t every 20 years. Trying to get the rest of the city to subsidize the rehabilitation of their real estate holdings. NOBODY WANTS TO LIVE THERE! Get it through your heads. You have already built TOO MUCH as it is!
The Young professionals and Paris Hilton Hipster wannabes move down there to be cool… and after about 6 months the move right back out, cause it aint cool. It’s a Sh#thole, Stank pit! Interesting and even fun on an occasional day trip. (Olvera Street, Fashion Distric, Historical Building Tours, Central Library, etc.) But live there? Are you nuts?
Now they want tax breaks? This Angeleno says….FU#K YOU!
“$2-billion downtown overhaul in the red
Developers say they need tax aid before starting the Grand Avenue project….. The complex is to include eight high-rises and retail pavilions around Gehry’s landmark Walt Disney Concert Hall.
How the hell do they squeeze 8 hi-rises+ retail pavilions on to that 1=block plot betwween grand & hope and btwn 1st &2nd. Right now there is nothing there but the old parking lot, though there seems to be a bit of construction activity going on. The city and county owned that plot and leased it to the developers and got 50 million as upfront lease pmts. Now the dev complains that cost overruns will threaten the project unless the city rebates or reduces 14%hotels taxes and 10% parking taxes.
Since ground hasn’t been broken on this project maybe the dev’s can simply crawl out of the deal and ask for return of the 50 million. But they won’t because they negotiated a sweetheart deal with the city/county for that parking lot. Problem is the dev’s always vastly underestimate the costs of developing in dwtn, and when the market changes and they find themselves running in the red, then they have to beg the city for tax rebates/tax relief. I know for a fact that asking the city, any city to reduce taxes or fees is like asking the IRS for a refund because you felt you were overtaxed. Never happens, unless a few beaucratic palms get greased.
Who wins between the Dwtn dev’s and city officials over this matter is still up in the air but i would not bet against the dev’s. They are so much more skilled in negotiating dwtn dev deals than the average city hacks that they will come out ahead, and Dwtn La is so abysmal a place to put in new housing and construction anyway that the city leaders will practically beg the dev’s to proceed, with closed door back-room deals and plenty of lubricant for both the civic leaders and the dev’s.
The Voice of San Diego. “More than 2,800 new housing units have flooded downtown since July 2004, upping the neighborhood’s housing stock by nearly 30 percent. And construction cranes still stand over the downtown landscape as builders hammer out the nearly 2,400 more due by the end of June 2007.”
Downtown San Diego is a collapse ready to happen. Was there just a few months ago and the number of high-rise condo complex in the downtown area near Petco Park is astounding. There are some many empty condos sitting on the shelf with hundreds more to come online by 2007 and 2008. The job market is San Diego is crap though. Try looking for a high paying job that would justify a $500k condo in downtown. These condos are apartments just waiting to be dump in prices….If people start getting foreclosed, the would be former home-owners can move across the street and sleep with the homeless in their cardboard boxes……downtown San Diego is still full of homeless, bums and pot-smokers…….great place to live for a fast life style…..NOT
Petco Park? Does that area have dogs running all over the place or are they near the company?
(In the meantime they’ll head to Saratoga Springs, which has not experienced the big price swings California markets have gone through and where the housing dollar stretches a bit further.)
do you people realize how not true that is? saratoga is one of the most expensive around the area. it’s not gone up crazy, maybe just 100% over the last few years.
plus, I am sure that saratoga springs is much much nicer than fresno.
here is the HPI for areas near saratoga springs, the median is not a whole lot different than fresno, I can probably say.
Glens Falls
http://www.housedata.info/NY/GlensFalls/
capital district
http://www.housedata.info/NY/Albany.Schenectady.Troy/
That couple sounds like a couple of rich kids that have parents to bail them out. Lets just move back to Saratoga and live there… no biggie.
Those of us who had to work through school and had a monster load of student loan debt didn’t do anything that stupid.
F them. No consequences for their actions.
Our friends the Basile’s broke the first rule: Only buy if you plan on staying long term, meaning at least 5 years, preferrably longer. This is because it costs 7 to 9% to sell a house (commissions, transfer taxes, title, escrow and more.) It also costs 1 to 3% to buy another place. They should have rented if they were unsure. However, they got caught up in the “fever.”
They are now underwater and have a problem. If they can afford the payments, the lender/loan owners may not approve a short pay. If the “homeowners” lose a job and have to move, it will look better to the lender. The homeowner/borrowers will have to fill out a financial statement, and apply their assets to any shortage. If they have other real estate, the lender may want to put a lien on it. If any debt is forgiven, a 1099 will be issued. So, there is no free lunch. The short-pay situation is starting to be big. I was viewing listings in my local MLS this week and was shocked at the number of “subject to short-pay” statements on the listing pages. Several of these homes were purchased in 2004 and 2005. I found one that amazed me and will post it when I get home, if any one wants to see it.
I’ll bet back in high school his pals called him ImBasile.
“‘The builder can’t give away the houses,’ says Basile. ‘He’s selling them for $324,000 with swimming pools, granite counter tops, spas, landscaping - all things we didn’t get.’”
I can’t believe everyone else here missed this.
The saddest thing isn’t that they missed out on the boom. It’s that they missed out on the granite countertops. Everyone else got them and they didn’t! Talked about F’d!
There’s nothing as humiliating as being bent over the tiled-over countertops.
‘I still think it was a good idea at the time,’ he says.”
aahhhh … ignorance is bliss.
The ordeal may have made them a little more real estate savvy but Basile is not exactly kicking himself. ‘I still think it was a good idea at the time,’ he says.”
I wonder if ass-hats like Basile have any idea that somewhere out there, a vibrant, growing sub-culture of housing bears is mocking them.
I think that the bearish housing blogs have absolutely had that kind of impact.
Look at the turnaround of Carol Lloyd at the SF Chron.
The entire REIC lurks here.
Sammy, you don’t think they are made up stories, do you? A couple of people agreeing to pose for CNN for $$? Who would get smeared like this without a payoff?
I’m still laughing picturing the guy standing in line for his kick.
“said Bill Witte, president of Related California. ‘Clearly there’s a slowdown, not just in downtown…. People are on the sidelines waiting to see where the market is going to go.’”
People are not even on the sidelines. They are completely out of the market.
I couldn’t resist, given that I used to live in Visalia, to try and find out exactly where the Basile’s live and whether their property taxes are in default.
Interestingly, there is no listing of Nick at the Tulare County database which has all the deeds, property transfers, etc. I’m assuming that the house is either under his fiances name, her parents, or perhaps an assumed name? The county is usually pretty good at listing this stuff.
If anyone else has any luck, post on here.
Right near the intersection of the 215 and 15 in Cajon pass, in Southern California I just saw a massive development being graded. We’re talking a piece of land probably 9 square miles in size. There are new roads visible from the 15 North that weren’t there last month.
Bring on the new houses! It will only serve to crash the prices already existing. We are heading into housing Armageddon. In the venerable words of John Travolta in Broken Arrow, “God Damn what a rush!!!”