“An Unrelenting Housing Slump” In California
The Contra Costa Times reports from California. “As the housing market slows down, many areas in the East Bay are showing a growing inventory of homes sitting on the market. Antioch’s inventory would take more than a year to catch up, while Rossmoor has close to 10 months of sales sitting on the market, according to the Contra Costa Association of Realtors.”
“The Contra Costa Association of Realtors also reported a 29 percent year-over-year drop in sales of attached, single-family homes, such as condos and townhomes, for October. The number of active listings also rose 76 percent, from 501 to 882 on the market, with the average price decreasing about 7 percent.”
“The number of listings has dropped since then to October’s 1,773 and is expected to drop a little further toward the end of the year. ‘It’s because most people don’t want their home on the market during the holidays,’ said real estate broker Rhene Montiel in Walnut Creek.”
“‘Some of (the listings) have been on the market a long time and the owners want to take a break,’ Montiel said. ‘And they’re hoping that in January and February the prices will rise again.’”
Inside Bay Area. “It was going to help revitalize Centerville’s historic district, boasting upscale retail shops and restaurants, and 110 town homes. But now Centerville Market Place is going back to the drawing board. Developer James Tong and city officials announced Wednesday they have agreed to scrap the project.”
“‘It’s nobody’s fault,’ added City Manager Fred Diaz. ‘It’s just bad timing.’ ‘My understanding is that they have an alternative plan,’ Vice Mayor Steve Cho added. ‘It’s a similar plan, but with no housing and all retail.’”
The San Francisco Chronicle. “As many as 30,000 condos are under construction, planned or proposed in San Francisco and about half of those units will probably wind up being built in the next five years, according to a consulting firm.”
“With developers taking deposits of just 3 to 5 percent for many of the most expensive units in the city, some economists question whether buyers will go through with their purchases a year or more from now when it’s time to close the deal.”
“Economists say that the presale practice raises concerns because buyers have too little at stake. ‘Such a small deposit is required that it makes it a very risky endeavor,’ said Ken Rosen, at UC Berkeley. ‘It’s a very, very flimsy view of what’s sold.’”
“Developers in other segments of the condo market are already offering incentives to compensate for the increased supply. Buildings such as the Beacon, the Lansing and the Palms are offering discounted mortgages in a bid to reel in new buyers.”
“‘They are offering those types of promotions because they are trying to hold the list price higher than it really should be,’ said Berkeley’s Rosen. ‘That shows weakening of demand already. There’s no way to know how much of the demand is real.’”
The North County Times. “Sales of apartment projects in North County and throughout San Diego County have fallen sharply this year over last, after condo-converting investors drove prices upward, according to a survey. The number of transactions fell for the seventh consecutive quarter.”
“‘Pricing for San Diego apartment properties became distorted as condominium converters paid unprecedented amounts in anticipation of profits from the sale of converted units,’ said George Carlson, apartment specialist. Carlson said the downward trend is evidence of a correction that will be followed by significant decreases in selling prices.”
The Record.net. “Commercial values have been holding steady in California based on income, Michael Yesk said…even as, separately, the single family housing market has gotten pounded. ‘We’re certainly not seeing dumping of buildings left and right like you do in single-family homes,’ he said.”
“The day before Thanksgiving, about 30 Stockton workers had no job, when Meek’s Lumber & Hardware, did not open for business.
“Don Woxberg, general manager at San Joaquin Lumber Co., wasn’t surprised, though. ‘The lumber market right now is in turmoil,” said Woxberg, who started in sales 35 years ago. After seven good years for lumber suppliers, he said, ‘everything started going south in January. Prices are cheaper now than they were five years ago.’”
The Sacramento Bee. “An unrelenting housing slump that has driven down the region’s home values and sent sales into a tailspin is expected to strike local governments next year, curbing the record growth rates in tax collections. From downtown Sacramento to rural Amador County, financial officials and county assessors say they’re watching a gathering storm that’s initially expected to blow into their budgets during the 2007-2008 fiscal year beginning July 1.”
“‘We will have perhaps the largest growth drop year to year we’ve seen in modern times,’ said Geoff Davey, Sacramento County’s chief financial officer.”
“New and existing home sales in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties have fallen by 24,000 this year compared with last year. Now begins the down cycle that Sacramento County officials feared in June 2005 when the property tax bonanza helped solve their financial problems.”
The Times Herald. “A higher percentage of homes in Solano County were in some stage of foreclosure in October than nearly anywhere else in California, new figures show. ‘I know we’ve been waiting to see what was going to happen with some of the creative financing done over the past four years or so,’ said Solano Association of Realtors President Sandy Vollmer.”
“Sinking real estate values and rising variable mortgage loans have driven foreclosures sky high, with the number of Solano County homes sent default notices rising 171 percent in September. The combination of factors also leaves some people owing more on their home than their home is worth, experts said.”
“‘We’re taking a hell of a hit, and no one’s really sure why,’ Vallejo Realtor Beth Brittenbach said.”
“As scary as the real estate situation is for some recent homeowners, it’s great news for potential buyers, Vollmer said. ‘Some people may be waiting for a huge price drop before they buy, but we don’t expect that. I think we’re approaching the bottom of the price decline,’ she said.”
The Orange County Register. “O.C. housing got off to a slow start in November. Fresh stats from DataQuick hint that this will be the 13th straight month that total sales can’t keep pace with the previous year’s pace.”
“Renters nationwide say they are most thankful for the maintenance-free lifestyle provided by landlords, a survey found. ‘What is the number one reason you’re thankful to be a renter?’ 43.6% Maintenance-free living. 23.6% Less expensive than home ownership. 19.4% Flexibility/No long-term commitment.”
“As scary as the real estate situation is for some recent homeowners, it’s great news for potential buyers, Vollmer said. ‘Some people may be waiting for a huge price drop before they buy, but we don’t expect that. I think we’re approaching the bottom of the price decline,’ she said.”
I am sure she’s putting her finances where her mouth is by buying a house. Right?
Depends on the area and market. Here’s my recent experience (last week). In East Texas, I made a cash offer to the seller, who was also the builder. I gave him a reasonable, although nowhere near his asking price, offer and a closing date of two weeks. He would not lower his price a dime below 99% of asking price so we parted ways. The house went under contract the next day at full asking price.
Says who? The builder? Did he then offer you another box at full price?
Good question and one I would have asked myself……
The answer is:
No, I confirmed the contract through my other sources. I do my homework; LOTS of it. I knew the house began as a custom, what the deposit was from the “buyer”, when the buyer defaulted, and so on. I always confirm everything so there’s no doubt as to what I post as being accurate and factual. There’s a lot of opinions, which is great, but I’m “in the market” so to speak so what I share is first hand, and again, accurate.
Hope that helps clarify…..
Where in East Texas? Tyler?
TxChick,
I passed on Tyler (Smith County) because of the USW strike and pretty sure closing of the Goodyear plant in Tyler. The projected economic impact of the plant closing is estimated at $950M on the overall economy so it’s not the time to make a move in that market. Now, a few years down the road, it might be a whole different ballgame; but too much of a risk to buy there now.
Smith County is also dry.
by dry, do you mean no wells or no whiskey?
Dan, check out Anthony, NM. Texas homeowners are relocating there to escape the property taxes, esp in El Paso. Article about this in the El Paso Times.
Anthony is not far from EP, south of Las Cruces. Acreage & custom homes.
~Misstrial
Thanks Misstrail! I’ve been looking for your posts and info.
BTW, I got a new listing from LC, I believe in your neighborhood…..freakin’ $629k for a little over 3k sq ft !!!!
I’ll check out Anthony and see what’s on the market. You are on target as far as taxes in Texas. I think they might have to rename the stat to “Taxas”. The range I’ve found runs from 2.02% to 3.6%. The state is playing a game on tax reform by passing a limit to the annual increase but a backdoor for the local districts to raise rates WITHOUT an election.
Thanks again; I really appreciate your input on that area.
Dan: lol! “Taxas”
You are spot on re my neighborhood. Very nice homes, but simply NOT worth what is being asked. Especially, *especially* with all of the flooding. Check out the back issues of the LC Sun-News - there are photos of the flooding in Picacho Hills. Streets are named & addresses given.
FEMA flood maps have been redrawn for LC and surrounding areas. Apparently, the levees for the Rio Grande do not meet federal standards. “Revised maps that will be released by the Federal Emergency Management Agency next year will increase the number of Doña Ana County residents living in the flood plain, forcing them to buy flood insurance if they’ve got a home mortgage. A 131-mile levee system along the Rio Grande doesn’t meet FEMA standards so it won’t count as flood control on the revised maps, FEMA Region VI spokeswoman Susie Webb said.” (10/7/2006, LC Sun-News)
Let me know if there is anything you need, like newspapers. Ben has my e-mail address.
:/ Misstrial
Misstrail,
Again, thanks for the help!
When I was in LC in August, the floods were hitting the area. One town to the west of LC was completely flooded and emergency operations were underway. Several houses in the “Hills” over by the golf course south of the Interstate had their mud flowing into their downhill neighbor’s house; who’s mud was flowing into THEIR downhill neighbor’s house…and so on. It was quite revealing and *IF* we had not been there at that time, we would have had no idea the issue existed. There is absolutely no water runoff mgt consideration. No, heavy rainfall is somewhat rare, but if they don’t plan for it, when it does arrive, it is a huge mess and erosion is rampant.
I’ve got a couple more areas I’m researching but will absolutely take you up on your email offer; communicated through Ben.
Each of us on the Blog have superior, firsthand knowledge of specific areas and can be a source of honest info to each other.
I had dinner tonight with a real estate wannabe in the New Orleans area so I “primed the pump”. I’ll see her again so I’ll have my list of questions and inquiries to see what I can learn. She made some statements tonight that made me wonder if she really knew what she was doing or maybe had “one too many”. She spoke of projects that were astounding but I’ve got to get a much greater handle on her competence and info before posting anything.
On thing is for sure, you never know who you might run into and what you can learn with a few well taylored questions.
Yep, Dan, my conclusion is that NM gov’t takes its cues from Mexico. Nuevo Mexico.
And the Governor of All This plans on running for the White House in ‘08. God help us.
~Misstrial
This matches my ABQ experience as well. NM has such boring weather, they get caught flatfooted whenever anything unusual (like significant rain, or snow, or wind) happens.
I think it is important to remember that sellers often offer rebates or other incentives in which they don’t subtract from the “selling price”.
This has been going on, big time, for the last 12 months.
I am very familiar with east texas (grew up in longview), the local real estate market in east texas has not slowed a bit…..in fact, prices still going up. Also, raw land prices have probably doubled in the last 2-3 years….some 4-5 times….I know this because i bot some prop there 3 years ago (timberland) and cannot find anything else worth looking at. I think this area was late to the party, but it is not slow right now…..and i wish it was as i believe we have major national issues. Will just take another year or two and will make the I-30 corridor of the 80’s look like play time.
Dan, how familar are you with Deep East Texas: Nacogdoches, Sabine, and Jasper counties? I’m new to the area and it seems to be a very difficult area to reasearch. I would prefer to rent for a awhile to be on the safe side, but spousal presure will prevent that. My impression is that there has been little price appreciation here the last few years, and that any decline would be minimal.
M
No doubt she is trying hard to protect her pocket book from the coming “cold shower” of the spring selling season. Imagine what will happen to resale inventory when homesellers taking a break from open houses for the holidays wake up in January (laden with holiday HELOC debt) and all decide to put their homes back on the market in the same week. Let’s face it the “spring rebound” will likely be a couple years in coming. She thinks homeowners are scared now!
You must mean the “spring rebound” of 2012.
2012? That’ll be the dead cat bounce. Look for 2020.
OT but you just reminded me of last month or so that while flicking through, I happen to catch Jim Cramer drawing a line in the sand (box) and saying housing would not go lower.
And just to back up his statement he said he was going to buy an investment property immediately to prove it.
Just think, in 50 years from now when looking at those “time line of collapse” graphs like they have for 1929/30’s I’ll get to tell my great grand kids, “ya, I remember watching Jimmy say that. TV was full of those idiots back then. Just like we have on VR today”
Cramer also has a habit of recommending very risky biotechnology firms. Having worked off-and-on biotechnology for a number of years, this is one investment area that I shy away from. As Don Bauder has documented, first as financial editor of the San Diego Union Tribune and now of the San Diego Reader, many of these firms are little more than storefronts used by con-artists to fleece the unwary.
I have a feeling that Cramer knows about as much about the housing market as he does about biotech firms.
These “the worst is behind us” people are in for a very rude awakening.
That bit about lumber prices going down reinforces my previous argument that new home builders will be the “form of the destructor” that will crash the existing home market. This means the home builders will keep on building, profitably. This means more and more houses on the market. The Fed will be afraid to raise interest rates because that will wipe out a higher percentage of ARM holders in the coming year.
This means all the new houses being built will be cheap, and affordable. Anyone holding onto a house they purchased after 2000 might as well sart calling it, “The Hindenberg” because it will be crashing and burning soon enough.
The “worst is behind us” folks are just the same people who change their tune with each housing report. Previously these were the “Buy now or be priced out forever,” and the “there is no bubble,” and the “soft landing,” and the “great time for buyers” folks.
As for continued building, permits and lumber numbers would argue differently. I do agree that the builders will kill the existing and new markets. The glut of prevoiusly build new homes (and new flipped homes) will drive the median down in the short term. Buyers won;t buy and it will a continuing standoff.
“Experts” say that 15,000 of the 30,000 condos planned for SF get built next year. I’d bet on less than 10,000.
There are three condo towers right at the base of the bay bridge in SF. Watermark is recently completed, and from what I hear the sales are not going too well. One Rincon Hill has units that are within spitting distance of the bridge, and the other one’s name escapes me at the moment. I do not believe for one second that there is sufficient demand for all these units. Any SF residents here that could provide some insight?
There is not likely not enough demand from local residents for all these projects that are now having trouble selling, being built, or for those proposed.
At least at present price levels.
When pricing comes down significantly in the coming years, there will be plenty of demand.
As for the “existing demand”, or recent demand, I expect most builders thought that it would come - or would have come from - “all those” Googlers or other techies, wealthy foreigners and those already retired or semi-retired boomers from suburbs locally, or around the country, who suddenly have a thirst for part-time urban living.
[Which also begs the question: I'm not an expert on any of these groups, but why would a snot-nosed 20-something or 30-something Googler want to be surrouned by empty units owned by seasonal visitor bluehairs?]
One interesting part of the hi-rise developments in SF by the Bay bridge is that they are all near the CalTrain station. I guess the model is to sell to those that work down the line in Silicon Valley.
Sadly the commute ends at the station. SC County Transporation is not that great. Aside from that very few managers are willing to employ SF residence. The opposite is also true SF employers are reluctant to employ SJ/SC resident.
Yes, spitting distance is being kind. $600K condo with Bay Bridge noise and pollution while you sit on your deck looking at the beautiful view of Oakland shipyard paying $800 month assocation fee. Nightmare. Rent don’t buy even the SF 49ers don’t want to live in SF anymore.
I agree, many of these units will come down significantly in price to the point where demand comes back. I’m wondering when the builders of these towers secured their materials. Could these projects wind up underwater for the developer? I’m thinking material costs, labor, carrying costs as the units don’t sell, etc.
30,000 condos ….
Aside from buy now or be priced out forever. Buyers were always told there was not enough land to build anymore homes… so where will the 30.000 be built. I sure hope they DO build all of them. Look back and say they dont make land anymore.
The Fed does not set the 10 year rate. The Fed can lower overnight rates or raise those rates neither has a direct effect on the 10 year or Libor which is a market driven rate.
“The Fed does not set the 10 year rate.”
How do you know “the market” sets it? Did you ever hear of exchange rate intervention? If this is possible, then how can you rule out long-term T-bond yield intervention from the menu of unofficial policy options?
They may at some point adopt such measures. But foreign buying of GSE paper and Gov’t bonds are what is driving the 10 and 30 year bonds.
There is another way the FED underwrites all interest rates. The implicit guarantee that any and all financial crisis will be bailed out with free money and lowering of interest rates. A risk-free environment guaranteed by the FED. Thanks to the egomanic Alan Greenspan.
“worst is behind us” folks in for a rude awakening …
I tend to agree with Backstage, who implies that the “worst is behind us” folks are just liars, and/or mouthpieces for REIC. It is not these folks who will be in for a rude awakening: Beth Brittenbach probably knows perfectly well what is going on, but they have to talk a few buyers to coming in the door, if they can. Those who ARE buying now, who number greater than zero, will be in for the rude awakening.
Worst may behind. Depends on the forecolesure market. Sellars are holding tight. I don’t search Craig’s list much, but I bet we see a lot of adds to share homes to pay for half of rise in ARMs.
Bozonian, You are right on target. The home builders’ costs are dropping daily. See the statement below, posted on Sacramento Landing (http://tinyurl.com/yzo9xk) by a construction superintendant:
Semi-open letter to all subs of Lennar Corporation from VP (or Ceo) Jeffries:
“Effective immediately we expect an across the board bid reduction of at least 10% in ALL markets and 20-30% in “some” markets. Failure to meet these price reductions will force us to NO LONGER CONSIDER YOU AS A TRADE PARTNER”
I assume “some” markets includes California-AZ-FL and DC metro….
–A Serrano superintendent…
It does not matter how many homes the builders build and sell next year. If they build one and sell it at 40% off the 2005 price, bingo….new market values. And they will either build and sell or they will die….so your call is right on.
Thanks for the post, JR. IMO, it speaks to the desperation of the HBs. I believe they are hurting far more than they let on (although they are now being a bit more honest, finally!).
Vallejo Realtor Beth Brittenbach and other Solano county realtors claim to be “real estate” professionals according to the newspaper article. I think this is an oxymoron. They have been players in one in what some have called the largerst Ponzi scheme in recent memory. What other time in history could people making $40,000 / yr qualify for a $400,000 house.
“Economists say that the presale practice raises concerns because buyers have too little at stake. ‘Such a small deposit is required that it makes it a very risky endeavor,’ said Ken Rosen, at UC Berkeley. ‘It’s a very, very flimsy view of what’s sold.’”
Hummm… I wonder if small (or no) downpayment requirement might make home buying a very risky endeavor as well?
And then there is talk about relaxing margin requirements for stock market participants who borrow to raise the stake they are gambling with (er, I mean, investing)…
Why can’t these lessons be learned once and for all? Instead, we seem eternally doomed to a future of reliving past mistakes…
The problem is that these “mistakes” benefit the few at the expense of the many so there is motivation to keep making them when it benefits the decision makers. The decision to lower interest rates after the NASDAQ crashed was probably done to make sure the Great Depression wasn’t repeated (and make sure Greenspan’s historical legacy was preserved). Once the shock was averted, rates should have risen more rapidly but apparently the Fed Reserve chiefs don’t know how to use Excel and goofed it.
The U.S. population refuses to pay more taxes, or cut government spending so the government takes the solution of borrowing money, i.e. putting more dollars into the system this lowering the value of each dollar i.e. inflation. Once again, the mistake is being repeated because it benefits the politicians who don’t want to be kicked out of office of raising taxes or cutting spending so they take the sneaky way out and simply print up the dollars.
Nice.
We are so screwed.
Greenspan needed to save his ass after the NASDAQ crashed so he lowered the rates knowing full well the piper would have to be paid down the line. He may yet be labelled the Destructor of America when all this is over.
I’ve read somewhere that… was it not possible that the FFR was kept so low, from mid-2003 to mid-2004, in part to ensure AG didn’t face the same situation of more than 10 years earlier… in that earlier time with another Bush president?
Does anyone recall that Bush 41 used to complain that AG did not lower rates fast/quick enough in response to the aftereffects of the ‘91 recession? Did not Bush Sr. blame his loss, in part, to Slick Willie on that?
I’m no political theorist, nor have an axe to grind here, but it appears possible that throughout 2003 and 2004 AG likely didn’t want to be blamed again for another situation such as that.
Actually prices did tumble in early 90’s but so did interest rates. Did Bush 41/and conservatives complain its still too high. Yes..I do recall this.
I thought we just kicked a bunch of politicians out of office a few weeks ago.
yes, that caught my eye too. Here’s another “first” and new angle to this particular downturn that we have not had in the past. I wonder to what degree the inability to use historical statistics on downpayment vs. actual buys will leave developers with way more inventory than projected.
I am reading the current issue of CFO Magazine and the Toll Brothers CFO blames Hurrince Katrina for the slowdown? LOL. Also, he claims Va was the first to slow and is now moving up again??
Also he issues the following statement:
“it is still a good time to buy a house”
“It is always a good time to buy a house…”
Stamped on the forehead of every realtor in San Francisco.
crispy: remember last year when Bob Toll was saying that we would all wind up living with our parents until age 40 because homes would be $4M? Talk about hilarious statements! Hurricane Katrina? WTF? I would love to see this guy caught up in the backdating scandal. I call them Tool Brothers.
I would too. They are scammers who are just trying a PR campaign to pump the market back up.
Need to finish selling off all their stock before total market melt down. In my area Toll is pounding out units like there is no tomorrow. Most are condo/townhome, but some McMansions. I would estimate they will have 750 or so units to sell unless the buyers miraculously appear. One of the buildings has been exposed OSB since summer and now its starting to rain. This cannot be a good thing, and I don’t see any stucco workers out there. Should be interesting to watch.
I saw an ad in one of the builder magazines about a spray-on product that would prevent mold on exposed wood. The right product for the right time, huh?
Troll Brothers
crispy,
I know I’m late with the news but Carl Cole retired claiming he wanted to spend more time with his family. Our realtor friend here in bakersfield was relieved to have sold a house 1 in the last two months and she is highly advertised. what part of baked town do stay in? I live by Pin Oak Park and sold a condo on Gosford 2 months ago/
sorrty for those of you who aren’t aware crispycole derives his name from Crisp and Cole Realestate David Crisp the younger of the two having 5 bodyguards and liken himself to Steve Wynn of you guessed in Wynn Casinos how embarrassing for Bakersfield.
Also embarrassing for Dr. David Crisp the JPL atmospheric scientist, who may have an insane devotion to a certain method of optimizing the simulation of line-by-line radiative transfer calculation, but who is otherwise respectaable.
LOL!
Carl Cole news on my blog. The whole thing is a scam. I heard from the “horses mouth” the real story!
http://bakersfieldbubble.blogspot.com
Which agency does your friend work for? Watson? I live in SW Bakersfield. (I dont want to say too much)
Scott Rivera. I’ve been trying to communicate with you for some time. I’ve been on the blog for a while mostly reading people’s comments. I agree with many posters–declines of as much as %50. But I know some really smart people who have bought in on home builders. This money manager–Bill Nygren was referenced to me by a multi-millionaire who cares nothing except for my well being.
Rivera goes on TV every week claiming he sells 2-3 houses per day. I think that is a load of crap.
I don’t make stock recommendations. But Short Term trading has proved positive on these HB’s recently. Will this hold up Long Term - I doubt it. IMO
C&C - if you ever come out to the coast, let me know and I’ll buy you a drink.
NorVA is dead. Our long-time realtor friend there has probably netted (taxable income after expenses) in the low six figures each of the last 15 years. Has had just ONE closing so far this year, which was early in the year. Told us the RE company is now demanding that each realtor’s accumulated monthly charges be paid every month, since there are no commission checks in the pipeline to deduct these charges from. That’s gonna shake out the “amateurs” and part-timers real quick. Also sounds like the RE company is running into cash flow problems.
If it’s a good time to buy then Toll should buy up all those McMansions for sale in Florida and California to sell for a profit next spring
Right, and he should also personally by back the gazillion dollars worth of company stock he sold at the peak in August 2005, since the building industry is going to rebound after bottoming out in 2007…
“Some of (the listings) have been on the market a long time and the owners want to take a break,” Montiel said. “And they’re hoping that in January and February the prices will rise again.”
I showed my wife the West County Times piece. Her comment on the hoped-for January-February 07 price resurrection was funny and to the point: “Good luck with that…”
You’re a lucky man to have a bubblehead for a wife! The spring re-list group think will assure failure. Then we’ll get to hear the “experts” saying how surprised they were by the lack of sales.
She is only a bubblehead to the extent that she has common sense, which is admittedly a rather dear commodity these days…
Re: common sense. It is so much easier to just follow the herd. I find myself staying home more often these days because of the fact that it is a rare commodity, as you said.
Was it Ben Franklin who said “common sense isn’t so common?”
Its going to be a spring chill, not a spring bounce. Too many want to sell then. Too many have based their wealth.
I still remember High School where they were very clear, “Hope is not a method.”
Neil
‘”There is a totally inaccurate belief that holidays are a bad (time) to sell real estate,” said David Sutton, an agent with Prudential California Realty in Walnut Creek.
He said fewer homes mean more opportunities for sellers: “Would you rather be 1 in 100 homes for sale or 1 in 1,000?”
Montiel said many homeowners will be entertaining and don’t want visitors during that time, while others just want to take November and December off.’
On the other hand, buyers are so desperate to hurry up and buy a home that they will be foregoing all holiday activities in order to search day-in and day-out? This makes no sense whatever.
The supposed ten-fold drop in the number of sellers is probably more than matched by the drop in the number of buyers, especially when the market is softening. The problem for both sides of the market during the holiday season is a reduction in the number of choices. The quality of the average match between buyer and seller is reduced when there are fewer homes and fewer buyers on the market.
Once again, full blown schizoid delusion.
Buyers are not in a hurry. They are staying away in droves.
Said Berkeley’s Rosen: “There’s no way to know how much of the demand is real.’”
I normally object to quotes taken out of context, but doesn’t this comment pretty much perfectly sum up the status of the entire US market???
Actually, I don’t blame the home builders. They are building things of value, something we see so little of nowdays in the U.S. I hope they keep going at a brisk pace. This will hasten the destruction of the financial parasites (mortgage lenders) who, being the first to receive the extra money the Fed pumps into the system, get most of the benefit for DOING NOTHING. When the defaults start happening this industry will lose it’s credibility.
It’s disgusting that this country is losing the ablity and infrastructure to produce things of value, and is increasingly making it’s living being the traffic cop for a bunch of paper (dollars) flying around the world.
“They are building things of value”
Time will tell. I can say that the one property I owned in California had serious construction defects. One of the problems with a mania is that there is a big moral hazard problem in the temptation to build on the cheap, as crazed buyers with little to choose from will accept substandard quality.
How can we compete when the Chinese pay their workers $1/day and both political parties are on the payroll of the multinational corporations? The 40% of the population that are registered Democrats are morons. The 38% of the population that are registered Republicans are morons. So there you have it….78% of the population is too stupid to think independently. They rely on talking points sent out by the party leaders. It’s no different from the Communist or Nazi Parties and their BS propaganda. Perhaps political parties should be banned and people should have to run based on their own ideas instead of a D or R behind their name on the ballot. I know that 78% of the population will be dazed and confused, but the smarter independents will then be in control.
In some states one must be registered R or D to have a chance of voting in a primary. It may not get you what you want but it seems worth a try sometimes.
“They are building things of value”
Sort of. Definitely more than people that just shuffle money around and take a cut from the transaction. Unfortunately, they build houses rather thoughtlessly these days. I hope that they will not keep going at a brisk pace, but rather pause and consider how they might grow through innovation rather than brute force.
I wouldn’t mind seeing more thoughtfully designed houses on the market today. For example, small starter homes with good construction quality and design, but that are easy on the gimmicks so they could be upgraded and expanded over time. Yes, the market votes with their pocketbooks, but we only get to choose from the choices the homogeneous corporate builders offer. It would be nice to see some independent builders give the corporate builders some real competition…
Personally, I’d like to see the builders sell the lots and their building services. Let the buyers choose the types of houses they want, and the builders handle all the details (permits, engineers, architects, materials, contractors, etc.). And the buyers should be able to choose which services they want to use.
Custom homes for the middle-class…gee, what a concept. BTW, I’d like to see “thematic” developments like “off-grid” and “green” developments. All the sites should be double-plumbed for water recycling and should have rainwater catchment, etc. Just something I’d like to see.
Here is what I would like to see - houses that save on energy, sent from a kit using sustainable forests and then the builder just assembles them! (see - Enertia)
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I’m one of those potential buyers “staying away in droves.” This is a terrible time to buy a house no matter who says otherwise. I’m renting after just moving to California from Washington state where my house is still on the market. So, I’m playing both sides of the game right now. I imagine within the next year I will get the house sold. As far as buying, sellers in Rancho Cucamonga and the rest of the inland empire have got to get serious about dropping their prices. I’m thinking about another 10-20% drop would start to get me looking again. The current prices here are ridiculous. Yeah, interest rates are low, the economy is doing well, jobless rate is down. There’s only one problem, guys: people can’t afford houses this expensive. A cookie and a shopping spree at the local mall isn’t going to do it. I’m sure the prices will come down significantly, it just is a matter of when.
House prices have tripled in So Cal since 1995. It’s ridiculous. I sold in 2000 after a 70% price rise in my Corona house originally bought for 220,000 and bought in Lake Arrowhead for 150,000 (the bubble had not reached there). Now I have a bubble house in Lake Arrowhead worth about 350,000. I’m sort of stuck in the middle. I want to sell but I want to buy also. Houses that were selling here for 300,000 in 2000 are now going for 800,000. It’s ridiculous and totally speculation driven which means when the prices stop rising, the speculators will bail and the whole house of cards will collapse like the floor of an Israeli wedding reception.
I’m not going to buy until this thing bottoms out. I expect at least a 60% shave off the top before it’s all over.
I’m not buying anytime soon in the Inland Empire. Sellers need to get off their duffs and drop their prices 10-20% before I’ll be interested.
Nate,
Please save yourself and do not buy in the IE. It’s the biggest armpit of SoCal. What are you thinking?
10-20% isn’t nearly enough, either — you can get that now.
“Unrelenting Housing Slump”
For some time I’ve been trying to think of the appropriate word that best describes housing downturns because of the illiquid nature of homes.
Unrelenting describes it perfectly. Stock prices adjust relatively quickly but with housing it is akin to death by 1,000 cuts. It is slow and painful as many are about to find out.
Yep, as a condo owner in S. Cal during the late 80’s to late 90’s downturn, that pretty well describes it: A 1000 cuts and so unrelenting. Year after year after year of dropping equity and then more years of dropping below the orgininal purchase price. Once the downturn started in 1989 it took five years for the price to bottom out 30% below my original purchase price and then another six years to rise back equal to my original purchase price. It is now valued three times my original purchase price. Shot up right after I sold in 1999. When it comes to realestate, watch me, and then do the opposite.
posted ” Yep, as a condo owner in S. Cal during the late 80’s to late 90’s downturn, that pretty well describes it: A 1000 cuts and so unrelenting. Year after year after year of dropping equity and then more years of dropping below the orgininal purchase price. Once the downturn started in 1989 it took five years for the price to bottom out 30% below my original purchase price and then another six years to rise back equal to my original purchase price.”
I tryed to explaine this very thing to the young realtor that listed and sold my condo in late 05′. He was a very nice guy about the age od my son. I could tell he was just humoring me, he also owned a unit that was my size in the same development. The “kid” had drunk mightly from the kool-aid and be in the biz only about 4 years (straight-up) all go-go-go.
I sold at 445k he was going to wait till 500k which never came he finally got out at 440k (he also had a over priced house) the NUT was killing him and only going to get worse.
Fast foward to now last qt. of 06′ he has not sold squat, many people are leaving RE. The last listing for my sized unit was 420k they will not get full price if even an offer.
We are last to fall here in So. Calif. but we have “tipped” look out below. BTY this area was a very good area of Simi Valley Calif.
“‘We’re taking a hell of a hit, and no one’s really sure why,’ Vallejo Realtor Beth Brittenbach said.”
Dear Beth, you aint seen nothing yet………and if you don’t know why all this is happening best you get yourself up to speed.
Ya know…. So what, if buyers *do* come back this spring?? With inventory levels higher than they were in spring 2006, there is no reason for prices to go back up to where they were. The trickle of new buyers, will just pick off some of the discounted inventory that will have been sitting all winter.
People who accept this “rebound in the spring” hooey, are not using critical reasoning. They’re just parroting what they hope will happen.
I’m looking forward to watching these fools eat crow in 4 months. What excuse will they come up with then?
totally in agreement. why buy now if the gen consensus is that prices will not go up but could definetly go down. even for the moderate bull there is no reason not to delay purchase untill the mortgage reset is fully realized in ‘07. It surprises how many on this board is so bearish about everything. Read John Train to find out that capital is waisted so that civilization progresses. Ultimately, homes will be more affordable, bad loans written off and more discretionary income for consumers to purchase more things–things which are backed by u.s. equities will come to happen. My personal view of the world is that corporations are becoming more and more profitable, wages have gone sideways and so the profits are realized on the owners’/equity holder’s balance sheet. Guys, please don’t make the mistake of selling everything and buying property on top of a mountain to withstand this financial hurricane simply because of this real estate crash. Gov’t cannot stop the madness of crowds i.e. bubbles but they can and do curtail the aftermath.
“‘We’re taking a hell of a hit, and no one’s really sure why,’ Vallejo Realtor Beth Brittenbach said.”
“As scary as the real estate situation is for some recent homeowners, it’s great news for potential buyers, Vollmer said. ‘Some people may be waiting for a huge price drop before they buy, but we don’t expect that. I think we’re approaching the bottom of the price decline,’ she said.”
DAH!!!! Where did you go to school! If you did How in the hell did they graduate you? Very few people can afford the present homes on the market with the salaries they make. Unless we get a substantial increase in wages and salaries the only way people are going to be able to buy is with BIG PRICE DECLINES! Like 40% to 50%.
She probably went to school in Calif. No offense to any natives who may be posting here.
I just wanted to take a minute and say I give thanks for this blog. Over the past 24 months, it has been difficult to swim against the tide. Actually, denial about the housing crash is so strong here in Southern California that I’ve been in something of a state of psychological siege for the past year or two and don’t even talk about the absurdity in public anymore. If people can be in such deep denial about something so obvious and public, then what is to stop something like the Nazi killing machine from rising again (even if we’ve sent the current crop of murderous DC goons crawling back under the rocks that spawned them)?
What saves me and keeps me going on a weekly basis is data (I’ve tracked trustee sale notices in the Ventura County Star and they’ve gone from 2 in 7/05 to 9 in 12/05 to 16 in 4/06 to 39 today) and the common sense I find here and few other places. The foreclosure flood has barely begun and will accelerate dramatically in 2007 and 2008. Comps are meaningless and home prices are in free fall in all but the trendiest areas of California. Where I live in Westlake Village, a home that would have sold for $975K immediately in 2005 has been on the market for two months at $775K with no movement. Enrollment in the Conejo Valley and Las Virgenes (blue ribbon) School districts is now falling from 8-10% per year because families are moving to other states. Amgen has stopped growing here and Countrywide is fried. My own coworkers telecommute from Arizona and Colorado at an increasing rate. Home prices have already corrected by more than 10% and the 2007 correction is not going to be 5% in Southern Cal as some of the REIC people who regularly post here want us to expect, but much much more. Prices will correct so that the ownership monthly costs to median income ratio rests at a sustainable level, probably what it was in 1999 or so. Income may rise a bit, but the hokey financing schemes that drove this madness are going to see a big backlash and be regulated out of existence when the MBS portolios go belly up. And without hokey financing schemes, the single digit affordibility index is what will impact demand even as supply increases accelerate.
I just wanted to take a minute and say I give thanks for this blog. Over the past 24 months, it has been difficult to swim against the tide. Actually, denial about the housing crash is so strong here in Southern California that I’ve been in something of a state of psychological siege for the past year or two and don’t even talk about the absurdity in public anymore. If people can be in such deep denial about something so obvious and public, then what is to stop something like the Nazi killing machine from rising again (even if we’ve sent the current crop of murderous DC goons crawling back under the rocks that spawned them)?
What saves me and keeps me going on a weekly basis is data (I’ve tracked trustee sale notices in the Ventura County Star and they’ve gone from 2 in 7/05 to 9 in 12/05 to 16 in 4/06 to 39 today) and the common sense I find here and few other places. The foreclosure flood has barely begun and will accelerate dramatically in 2007 and 2008. Comps are meaningless and home prices are in free fall in all but the trendiest areas of California. Where I live in Westlake Village, a home that would have sold for $975K immediately in 2005 has been on the market for two months at $775K with no movement. Enrollment in the Conejo Valley and Las Virgenes (blue ribbon) School districts is now falling from 8-10% per year because families are moving to other states. Amgen has stopped growing here and Countrywide is fried. My own coworkers telecommute from Arizona and Colorado at an increasing rate. Home prices have already corrected by more than 10% and the 2007 correction is not going to be 5% in Southern Cal as some of the REIC people who regularly post here want us to expect, but much much more. Prices will correct so that the ownership monthly costs to median income ratio rests at a sustainable level, probably what it was in 1999 or so. Income may rise a bit, but the hokey financing schemes that drove this madness are going to see a big backlash and be regulated out of existence when the MBS portfolios go belly up. And without hokey financing schemes, the single digit affordibility index is what will impact demand even as supply increases accelerate.
I took a job at a tech company in Calabasas last year while waiting for housing prices to come down. I commuted from Lake Arrowhead and spent the week in a hotel nearby. We had many employees who had to commute long distances because they could not afford the local home prices. All three of the people hired when I was hired (including myself) had to quit because living in a hotell just wasn’t working out and there was no hope for housing relief on the horizon.
Companies that stay in So Cal are not doing their bottom line any favors as they have to pay the employess more just to meet the living expenses.
Bubble Rubble,
That was a lovely post. Know that you are not alone in your thinking.
Ben, thank you for this blog; and thanks to all the posters who make it such an informative, educational and entertaining site.
Happy Thanksgiving, all (a bit belated)!!!
Ooops. I’m doubly thankful… and a wee bit drunk.
Happy turkey day!
Did wonder if I was seeing double, but it’s a good post anyway. All of us have a lot of associates with whom we cannot speak the truth.
I too am thankful for this blog. Gave me an agreement of insanity when I thought everyone else was insane (and they thought that of me since I refused to drink the funny stuff in California).
You, it seems like the real bubble heads in all this are the young people who don’t have any idea about relative house prices. If 500,000 for a POS tract home doesn’t seem unreasonable to you, you haven’t been around. That junk in Temecula selling for 500k and up was 100-150k back in 1995 when I was shopping there. Salaries haven’t gone up much since then so what does that say?
Oh gee … its an unrelenting slump is it … and prices have gone down 7% … gee that must really hurt. Let me spell it out you morons. the insane prices from 98-2005 is what craeted a whole industry. Its called out sourcing. I know because I am a victim. before that - there was in sourcing. Where for the pitiful wages they paid they never could find natives to work there, so they legally imported from india and china and illegally imported people from mexico and wherever else people were clueless and dragged them over. I know because I was the beneficiary of that. When people in thouse countries established a network in this country and clued themselves in, they promptly left for better living conditions. The still left over immigrant and native population who could not leave, or didn’t get a clue drove pirces to 5 times what they were in 98 when they were already hideously over priced. That meant companies had to pony up a lot more or go where the talent was. AKA out sourcing.
Call me when the prices drop 75% and I’ll come in and laugh at you. And They’d still be over priced.
Cool.
Cow_tipping.
This housing market has WAY too much water in it and will fail the slump test. http://www.logicsphere.com/products/firstmix/hlp/html/work5xd0.htm
Be patient and hang on, the SoCA housing market going downward and when Spring approaches you will probably get sellers to deal more reasonably. Buyers are alert and they all know the houses are overpriced and they are no longer willing to pay the seller’s high price and sellers will have to wake up to that fact. Lower your prices or you wil not sell your homes, the later you wait the lower you will eventually have to go. The bubble has burst and the west coast market is finally going down.