Price Declines A “Continuing Trend” In California
The North County Times reports from California. “Home sales in the San Diego region decreased 19.2 percent last month compared to the same period a year ago, while the median price of an existing home was down 4.5 percent to $574,530 from $601,850 in October 2005, a Realtors group reported.”
“In neighboring Orange County, sales were down 21.4 percent last month when compared to a year ago, while the median home price was off nearly 3 percent, to $681,340 from $701,520 in the year-ago period.”
The Orange County Register. “Sluggish housing sales and wobbly home prices have prompted developers to rethink projects that would have injected thousands of new condominiums into the county. With rising land prices and construction costs, developers would lose money if they lowered their prices, experts say.”
“They’re scrapping some projects and, in at least one high-profile case, reverting to apartments. Just six months after it entered a contract to sell condominiums in Orange, homebuilder K. Hovnanian Homes backed out in August because of slow sales in the spring and summer, said Brad Perozzi, managing director of developer Trammell Crow Residential.”
“‘I don’t think it’s any secret that the housing market is declining,’ said Jim Reichert, Orange’s economic development director. ‘It’s just part of a never-ending cycle.’”
“In Irvine Standard Pacific Corp. decided against building 445 condos at the corner of Main Street and Von Karman Avenue, according to the builder. Standard Pacific walked away after leaving a cash deposit.”
“Consultant Tim Strader said a handful of other builders, including Shea Homes, have dropped housing projects in the commercial hub near John Wayne Airport.”
“Walter Hahn, a real estate economist in Irvine, said more developers likely will continue to abandon expensive high-rise and condo projects across the county. ‘All their pro formas were based on rapid sell-outs,’ Hahn said. ‘They paid a bundle for the land.’”
“Speculators have abandoned the market and are selling whatever homes they still own. And buyers with the riskiest loans are trying to sell to avoid higher payments, Hahn said. The county is likely to see its next recession when the market corrects itself in about three years, Hahn said.”
“‘What we’ve seen in the past few years was a hyper market, with speculators and investors,’ said Mark Boud, owner of Real Estate Economics in Irvine. ‘Those kinds of buyers are completely gone.’”
The Daily Bulletin. “Ventura, Orange and San Diego counties all saw declines from October 2005. The Riverside/San Bernardino metropolitan area saw 37.6 percent fewer home sales last month than in the same period a year earlier. Five different cities saw prices tumble, with the 10.4 percent decline in Upland the largest among local cities.”
“Three factors continue to impact the market, as economist John Husing pointed out recently. Unsold inventory is at 7.2 months, more than double a year ago. Foreclosures are up from historic lows, with several thousand homeowners entering the process each month. Speculators are still in the market, pushing supply artificially higher.”
“‘Once those three factors are dealt with, the market will get back to normal,’ Husing said. What’s normal?”
The Pasadena Star News. “In a continuing trend, some San Gabriel Valley cities registered a decline in their median home price. The biggest occurred in Alhambra, where the median home price fell 10.6 percent to $474,000, compared with $530,000 in October of 2005.”
“Other cities with declines included Claremont (-5.1 percent), Monterey Park (-4.1 percent) and Rowland Heights (-3.6 percent).”
“Phyllis Fritz, owner of Coldwell Banker Millennium in Glendora, said the current housing market is better for buyers. Fritz said…media reports predicting a possible housing collapse have put some potential buyers on the sidelines. ‘That’s one of the things that I think is stalling the market a little bit,’ she said.”
“‘Right now, people with no money are able to find sellers who will cover their closing costs,’ said (broker) Marty Rodriguez, in Glendora. Rodriguez said about half of the offers under $600,000 involve 100 percent financing.”
The Tribune. “For the second month in a row, after eight years of year-over-year gains, the median price of San Luis Obispo County homes fell in October. The median price of an existing, single-family home was $560,980 in October, representing a 7 percent decline from October 2005, according to the California Association of Realtors.”
“September had been the first month the median price fell since December 1998.” “Further downward movement in home prices is likely in November as well in part because of the seasonal trend and because home prices were at lofty levels last fall, said Robert Kleinhenz, deputy chief economist at the California Association of Realtors.”
“Sales, meanwhile, continued their downward spiral, off 43 percent from October 2005 and down 39.9 percent from September 2006. ‘We’ve seen sales declines which are large, and in many cases, larger than what we have seen for the state as a whole,’ he said. ‘It is symptomatic of a decline in second-home purchases to longer-term normal levels.’”
The San Francisco Chronicle. “Retired tennis stars Andre Agassi and Steffi Graf finally have found a buyer for their Tiburon estate for $20 million, or about $3 million less than what they paid for it in 2001.”
“The property was put up for sale because Agassi and his family were using it infrequently and the tennis star’s financial advisers wanted him to dispose of it, said Bill Bullock, whose firm represents Agassi and Graf.”
“‘When they considered the annual cost of that property to sit there vacant, they decided that they needed a little inducement for the marketplace and they started reducing the price,’ Bullock said.”
“After initially listing the Agassi property at $24.5 million, the price was reduced several times before Agassi dropped it six months ago to $21 million. The tennis stars have branched out into real estate development and have invested in a condo hotel project in Idaho with Miami developer Bayview Financial.”
What a difference from this time last year!
The OC stories are the biggies for me - since I have family there - all I hear about is how they WILL NEVER GO DOWN! To which I say - NEVER SAY NEVER!
Just hear some more anecdotal stuff. A friend’s brother is a broker in OC and said they are getting about 400 foreclosures a day (heard through the friend, so not getting direct info). Can anyone verify this, or is it some kind of exaggeration?
3600 foreclosures a month just in Orange County? That can’t be right. Maybe he meant the entire state? Although even that seems kinda high this early in the correction, although by this time next year there will be a couple thousand “homeowners” getting kicked to the curb each month…
walt,
It does sound extremely high, and I doubt it is accurate, but I’ve been watching a whole lot of stressed “owners” who are just barely hanging on in San Diego. We already have a good number of foreclosures/REOs here. Best of all, even the banks can’t sell them.
Who is left to buy?
With “no look no tell quals” anybody who wanted to buy…already did.
Could he be talking about notice of defaults as opposed to properties actually going back to the lenders?
Andy,
Yes, I’m thinking along the same lines. Still, quite a few homedebtors out there just hanging by a thread. This won’t look good by Q3, 2007, IMHO. I believe it’s quite possible to see 25% down from peak by next fall.
Front row seats right here at Ben’s blog!
““After initially listing the Agassi property at $24.5 million, the price was reduced several times before Agassi dropped it six months ago to $21 million. The tennis stars have branched out into real estate development and have invested in a condo hotel project in Idaho with Miami developer Bayview Financial.””
Hmmmm what’s wrong with this picture?
Yeah, how the heck do you lose money on a 2001 purchase?!
How many people (even in Marin) could even conceive of affording a $20M+ house? I lived in Tiburon from 1992-4. I wonder how far that house is from the one we rented (435 Round Hill Rd).
Well, they say CA has the highest concentration of millionaires than any other state, and I suppose Marin is as good as anywhere else here. When you start talking about houses above 10M, you’re not talking about real people with jobs any more, the only ones who can even consider a price that high are movie stars, CEOs and athletes.
Putting your $$$ into a condo-tel project in Idaho, in today’s RE market? Way to go, sport.
$20M in 2001 = $26M in 2006 dollars.
$2M in taxes from 2001 through 2006.
$2M in upkeep.
—————–
$30M in current dollars
-$21M sale price
—————–
$9M loss in current dollars.
=============
Mr. Aggassi, fire your financial advisor and put all your money in BRK-A. Enjoy retirement.
I don’t see the realtor fees listed ??????????
20,000,000 x .05= 1M
No Realtor made 5 points on 20 Million. More than likely unless they were relatives or good personal friends their fee was around .5 to 1%. 100 to 200k.
Who is their “financial advisor”? That kid from the iamfacing foreclosure blog.
LOL crispy&cole.
Not at all surprising that celebrities lose so much money when they try to do something creative with it. Look at all of the celebrities that got taken with “Planet Hollywood”.
The problem is that since they didn’t make their money from a business endeavor then they do not have the business skills to know what to do with it. So they become high-dollar customers of the “finacial services industy,” and they get raped (financially).
And now the Agassis are doing this industiral strength stupid thing with this 35 story condo deal in Idaho. I think they hate their money and love their advisors.
I agree — since they are ridiculously overpaid (athletes, actors, musicians), they think they are invincible. No doubt this is the same reason many of them think they are experts on geo-political issues as well, and that we all want to hear what they have to say.
Great. I’ve been looking to invest money in a minimum 35 story condo/hotel in Idaho, preferably Pocatello, and now Andre is stepping to the plate for me. Thanks Andre. Since the Agassis are investing I don’t care where it is. It will make money. Where do I sign up?
OK….Do we have any Idaho posters here ??? I want to know more about this J/V they are doing with Bayview….Where is it ?? Has it started ??
It’s in Tamarack Resort near Donnelly and McCall where Pres Bush visited in 2005. Last year they said that they sold 129 condo units at ~ a million a piece there. They expect it to be the next Sun Valley. My guess is it was 99% specuvestors who will cancel their contracts.
Rule no. 1 of real estate investing: Buy low, sell high.
Funny how that works, that’s my strategy for all investing…
It’s also fun to sell short and buy to cover.
Oh, gee, is that how it works? I thought it was buy at any price by any means at any time. I mean, that is what we were taught in David Lereah Real Estate Investing 101. After all, prices only go up. Hmmm. Gosh, I am gonna have to ask him about all of these condos I bought at $900 per square foot. I may give him a call after dinner. Tonight I am having the leftover leather from the passenger seat of my Hummer. It is wonderful slow boiled…
LOL!
Sounds tasty! How about the wood console? Think it’ll keep you warm on a cold night if you toss it in the fireplace, along with your Drexel Heritage furniture?
Second Rule: Collect early, Pay late (but no late charges)
The doctor syndrome, having gone through college they look for instant gratification and keep screwing up
The Pasadena Star News. “In a continuing trend, some San Gabriel Valley cities registered a decline in their median home price. The biggest occurred in Alhambra, where the median home price fell 10.6 percent to $474,000, compared with $530,000 in October of 2005.”
My old hometown
–nice to see Alhambra’s leading the charge back to sanity. More stories like this to come, I’m sure.
So, you moved out?
Some houses near mine hear in Alhmabra are still way overpriced. Asking over a million just because its ‘near’ San Marino.
Inventory is rising fast here, but the sellers did not get the memo yet.
Hey, Mr. Vincent. Haven’t seen you around Patrick’s in quite a while –you should stop by sometime.
Yeah, I left Alhambra and moved a few miles northeast. But… still renting! And pleased to pay ~40% of the owner’s monthly carrying costs :-). I agree most sellers have definitely *not* gotten the memo, but that should change over the next 3-4 years. For now, -10.6% will have to do.
What is so great about living near Dan Marino? Does he come over and play flag football every night, if you buy one of those places?
It’s better than having Phil Spectre firing off rounds into B-movie floozies on your front yard at 3 in the morning.
I howled when I read the story about Agassi in this morning’s SF Chronicle. And if that loss weren’t sobering enough, they’ve “branched out” into RE investment??? LOL.
The tennis stars have branched out into real estate development and have invested in a condo hotel project in Idaho with Miami developer Bayview Financial.”
condo hotel?!?
I shake my head.
Neil
Does anyone remember the stories about Barbra Streisand daytrading in 1999?
See any parallels?
Of course! It’s the same crop of dolts parading around pretending they are intelligent investors/developers. Agassi’s whole skill set revolves around hitting a ball over a net, for pete’s sake!
Now he wants to do what? Parade around some condo project like he has any friggin idea what is happening around him? Now we find out he can’t even make money on his own residence? Hehehe. I can hardly wait for more stories of famous people trying their hand at the RE game!
Eh, what do you expect these sports stars to do? They’re ultra-competitive, have loads of money, and just sitting around and sipping Pina Colatas on a beach all day doesn’t quench their drive. I’m not surprised in the least. If it weren’t RE, it would be something else - the stock market, owning another sports team, starting their own apparel line, etc.
How true, it is hard to leave the action and limelight.
I would have no problem leaving the action and limelight of a library for beaches and pina colidas w/my wife.
I would have no problem leaving the action and limelight of a library for beaches and pina colatas w/my wife.
Newly wed?
Newly wed?
echo… echo… echo
now batting… batting… batting
Manny Mota… Mota… Mota
Which Statement is true (from the SLO story):
(1)September had been the first month the median price fell since December 1998.
(2)”We typically see a seasonal pattern that prices either hold steady or fall through February. I expect similar activity in San Luis Obispo this year,” Kleinhenz said.
But yesterday the CAR said average prices were going up for the state as a whole….maybe California has 20 counties I’ve never heard of?
Yeah, from the equity locusts throwing their money around I guess they have names like Oregon, Arizona and Nevada.
Yeah, but the prices there are falling as well. And you forgot New Mexico and Texas.
Proud to be one of your equity locusts who moved out of Calif. and took my inflated housing dollars. Sold in summer of 2005 and bought a great little farm for 1/3 of California inflated prices. As a retired mortgage broker when true lending standards were common, I saw what the private banks were setting up defineing all laws of ecomomics and common sense for “greed”. The “lobsters ” are now in boiling water and those that can, will walk on the credit treadmill for life and be at the mercy of their rich bank “friends” who promise them the good life. This was all planned out ahead and few if any told of the pitfalls of debt and toxic loans that were push by all of the rich players involved. The money profits were everything and “no one” question the wisdom or why mortgage standards were altered/changed to make everyone slaves to these loan payments for life.
Yes, I saved my family and if I am one of your California equity locusts, so be it. I sleep at nights and was buying gold/silver buillon years ago. No store of value and promise of future trust with colored paper money for me.
Here here Jerry. Good for you. How sobering to know that this things wa in the works all the time. How sad as you pointed ouot no one questioned the change in fundamentals for buying. Just plain greed on everyone’s part.
This’ll give you a flavor of what he is alluding too.
http://news.goldseek.com/CliveMaund/1164816180.php
Lots more where that came from
“The money profits were everything and “no one” question the wisdom or why mortgage standards were altered/changed to make everyone slaves to these loan payments for life.”
Not a peep from the regulators who should have been looking out for the taxpayer’s future liabilities.
crispy&cole:
Both are true, of course, assuming that both statements were made by a Realtor, who know that it is a good time to buy AND to sell.
“Phyllis Fritz, owner of Coldwell Banker Millennium in Glendora, said the current housing market is better for buyers. Fritz said…media reports predicting a possible housing collapse have put some potential buyers on the sidelines. ‘That’s one of the things that I think is stalling the market a little bit,’ she said.”
Ok, skipping by the “blame the media” comment…
If prices were affordable, people would buy, no matter the news. There is a reason why when mortgage payments drop to 25% of income home prices become sticky… at that point enough people can buy what they want the market hits a natural equilibrium.
With LA/OC home mortgages at an amazing 55% of income…
Get to the sidelines!
Neli
So Neil, are you forecasting (55-25)/55 X 100% = 55% price declines in LA/OC, provided that interest rates don’t go up as the dollar goes down?
Or that incomes don’t change.
I’m forcasting a 30% to 60% price drop for LA/OC. Huge!
55% is toward the upper bound and quite feasable. That assumes the drop happens fast enough to keep the realtors ™ employed and inflation of academic interest.
But it won’t happen that way. I think we’ll have both inflation and declining salaries in LA! But that doesn’t help me narrow my forecast.
Only Florida will be uglier than California.
Neil
Neil, I have to agree with you. Here in the rancho Santa Margarita, Mission Viejo, lake Forest, Foothill Ranch area the homes are going for 600-800K on average. Some are in the high 400’s. However, my point is the average working guy or guy and gal making even top end 100K combined is not going to be able to swing these payments. Housing must come down to at least 300-400K on average to make these numbers work. I realize that a lot of the oldtimers couldn’t afford to buy there house now, but what makes them think they can sell it now, then? Prices here in South OC are still way out of whack. GS, I don’t think Neil is too far off, however, I think this may take little more time because I get the sense people will try to hang on to the bitter end more than other areas. For example, I know if I was in that situation I would more readily hang on in South OC than if I was in the same situation in the IE.
“GS, I don’t think Neil is too far off, however, I think this may take little more time because I get the sense people will try to hang on to the bitter end more than other areas.”
They always try to hang on in the down leg of the RE cycle. The big question is how many will not be able to, either because of suicide financing or overreaching (say, buying five investment homes instead of just one). My guess is that there will be many more forced sales this time than in previous busts, due to a toxic combination of euphoric delusion and easy money.
History dictates that Florida, Arizona and Texas will be worse than California and it seems to be playing out that way again.
“Rodriguez said about half of the offers under $600,000 involve 100 percent financing.”
Amazing this is still possible.
Someone gets it . . .
Please don’t get me started about 100% financing… Its going to create too much pain for all of us. I too am amazed its still happening. Grrrr…
Neil
“History dictates that Florida, Arizona and Texas will be worse than California”
Doubt it. FL, maybe. You are missing the key point:
It’s one of scale. There’s a huge difference between 50% of $1M and 50% of $250K. Percentage decline is irrelevant unless price is the same. CA HAS THE NATION’S LOWEST AFFORABILITY, BY A LONG SHOT AND THE HIGHEST USE OF HUGE SUICIDE LOANS.
CA will get flattened - CREAMED. May spill over into the rest of the nation as it creates an economic black hole, but bet on CA TOPPING THE COLLAPSE.
And history? During the ‘91 bust CA led by a long shot there too.
Last time CA went into the tank Salt Lake City had a nice run-up.
I think TX has a shot at doing better than CA, AZ, and FL.
As I mentioned before and the previous poster mentioned, a 25% hit in $200k is much easier to deal with than a taking the same hit on $700k
“Only Florida will be uglier than California.”
Naturally.
Don’t forget Michigan, with the incredible shrinking economy.
At least CA/FL don’t have to worry about serious depopulation.
“I think we’ll have both inflation and declining salaries in LA!”
Stagflation is a bitter dilemma for working class folks.
“‘Right now, people with no money are able to find sellers who will cover their closing costs,’ said (broker) Marty Rodriguez, in Glendora. Rodriguez said about half of the offers under $600,000 involve 100 percent financing.”
Right now we are in the exhausted phase of the market where everyone with a pulse who wants a lone has one and their are just a slow trickle of exhausted greater fools coming on stream now that the big horde of GF is depleted. The fun will really start when the 100% financing deals go away. This will probably happen after the first blowup in the MBS market. Then, voaila, half the bidders under 600k go away in an already bad market and the bottom will totally fall out of the market.
“‘I don’t think it’s any secret that the housing market is declining,’ said Jim Reichert, Orange’s economic development director. ‘It’s just part of a never-ending cycle.’”
Last year’s REIC conventional wisdom:
“Price increases are in the bag.”
“Real estate always goes up.”
“Buy now or get priced out forever.”
This year’s updated wisdom:
“Price declines were anticipated.”
“This is a normal part of the real estate cycle.”
“Price appreciation will resume again in 2007.”
Where oh where has my Gary Watts gone? I thought it was in the bag. However, the slide in OC as you can see is going to take little longer than the rest. Oh we will get hit and hit hard, mark my words, but it will take a little linger than the other counties. I am amazed at Alhambra. I used to work in that town. I can’t even believe avg. home price got over 1/2 a mil. Man, this bubble was/is crazy. Some areas of the town are nice, but there are some, doozies, that aren’t worth 150K.
I follow the Central Valley, CA MIS’s fairly close, and the inventory ‘drop’ touted by the REIC has seemingly bottomed at about 10 to 12 times monthly sales. This is a large base to build on for spring. Should current sales hold anywhere close, 2-3 years of SFH inventory is a real possibility by March.
The Central Valley, more than perhaps any other area of California, is toast. My old neighborhood down there is already down by 21%–and home sales are still very few and far between.
An Okie in the Central Valley wouldn’t have had a prayer of buying a house in Santa Monica in 1999. Now every house in the Central Valley is priced at 1999 Santa Monica levels, or higher. Incomes have barely budged in the past 6-7 years. You do the math.
2-3 years inventory by March! The response to this catastrophe is to extend zero-down, no-interest loans? What! Everything I have read on this blog is comming true. I don’t think you are uniquely brillant but your insight is shared by the ruling elite who plot to betray America - but maybe too clever by half - God is stirring!
God bless America!
Leave your imaginary friend out of this.
Here’s a little irony for you. This pic (towards bottom of page) shows a billboard in FL that managed to withstand hurricane Charley. However, the advertisement that was there (ironically enough, the caveman still visible on the left side of the billboard is the Homevesters character, “Ug” who buys ugly houses) was peeled back to reveal an earlier message:
http://www.snopes.com/photos/signs/charley.asp
Anybody got any intel on Valley Center in the San Diego area? Have all those nice acreage properties been torn up and sold to shitbox builders?
I don’t know about Valley Center, but you wouldn’t like what you saw if you visited San Diego again. Pretty much every hilltop has been leveled and has cookie cutter houses all the way out to the edge.
Yeah, it’s not pretty and the traffic in the North County is worse than LA. Seriously! We left San Diego on the day before Thanksgiving at 1:50 in the afternoon and we arrived at Dodger Stadium at 9:20 that evening. And that was with no stops at all!
I sold a house in late 2003 that I bought in 1989 in Valley Center and am renting in nearby San Marcos. What I hear from those I know still there is that it is very slooooow.
They put a new golf course in on the main drag and built a bunch of 2500-3500 sq ft homes over the last three years. A couple of months ago, I drove through and many new ones were for sale and many were empty.
I left because I was I was ready to downsize, but also because after they built a few Casinos on the reservation land on the other side, the traffic going through on that little road was horrible. They have been widening the road for three years now, and at the rate they are moving it will be three more before they are done.
When you ask, “have all those nice acreage properties been tore up….” I am not sure over what time frame you mean, but for the most part, most of the building has been at a relatively moderate pace of individual builders, along with a couple Crews developements on two acre parcels, and the Golf course development on smaller lots.
High School was built on Cole Grade back in roughly 1998.
Still not a bad place to live for North County except for the traffic/commute time. They are still fighting over whether to have a sewer or not which holds up proposed supermarket, retail and condo projects.
TX,
Since they still haven’t resolved the sewer/septic debate, they have rather large lots (min requirements for septic systems is 1/2 acre, I believe???). Last I heard, they also have min 2 ac parcel, per their zoning & they really, really want to keep it rural. Still very “small town” feeling.
Thanks for all the comments. I remember how much I liked it there.
I hope that they don’t build there, that is the nearest organic farm to LA/OC. It is where I buy my produce directly from the farmers for delivery in LA/OC.
It is appalling that this is the nearest local ag center to LA/OC.
SSBG,
Just FYI, and I have no idea if this has been resolved or not, but Valley Center might have a problem with soil or water contamination which might be a cause of a potential cancer cluster there.
This is an old article, so don’t know what’s happened since. You might want to check it out. If I see anything else about it, I’ll post here.
http://www.safe2use.com/ca-ipm/02-02-01.htm
txchick57 I don’t know how long ago you were in VC, but did you know that both Fat Ivors and the old historic liquor store across the street were both destroyed in seperate fires. They rebuilt Fats, but did not let them make it any larger, so it is still crowed. We hire them every Christmas to drag one of their large barbeque trailers down the hill and cook up some ribs and beans.
“Sluggish housing sales and wobbly home prices have prompted developers to rethink projects that would have injected thousands of new condominiums into the county. With rising land prices and construction costs, developers would lose money if they lowered their prices, experts say.”
Aren’t lumber mills closing up shop or laying off thousands? Hasn’t copper taken a huge dive this year? Isn’t cement half the price it was in 2005? Then how the hell are they still getting away with the lie that “construction costs are increasing?” Journalists are supposed to skeptical aren’t they? Maybe, ask some questions now and again? Or are they too busy at the latest Dunkin Donuts grand opening? Grrrrrrrrrr.
You must mean Krispy Kreme!
copper and a lot of the base metals are around their old highs.
As long as subcontractors are busy, construction costs will fall slowly. Once the subcontractors and contractors start worrying about how they are going to afford Christmas, materials costs will be passed onto developers more readily.
http://www.kitcometals.com/charts/copper_historical_large.html#5years
Copper has dropped a bit in the last couple of months, but is still near its 5-year highs.
Lumber is way down and mills are closing. But we are exporting lots of concrete to China and the price is firm. Commericial construction is still strong and it is taking up some of the slack and keeping prices firm on metals (not much lumber used there).
Copper Falls as U.S. Housing Slowdown Erodes Demand for Metal
http://www.bloomberg.com/apps/news?pid=20601012&sid=afmQKg.4EihY&refer=commodities
Background: I’m a purchasing agent for one of the larger union electrical contractors in Sacramento, FWIW.
Copper was trading at around $2.00/lb this time last year. It peaked in April at a little over $4.00/lb and hasn’t been below $3.00/lb since February. It closed today at around $3.10/lb, IIRC. As recently as the end of 2003, it was less than a $1.00/lb.
Copper demand is being driven by growing demand in Asia and production problems in Latin America. Commercial and industrial construction throughout most of the US has not been affected. Domestic residential construction is receding, but its not enough to offset the increase overseas. Several months ago I thought we’d be back to near $2.50/lb by the end of the year. Now, I’m not so sure. $3.00/lb seems to be the new floor
About a month ago Credit Suisse predicted that copper would increase another 66% by mid-2007. I think that’s a worse-case scenario, but it wouldn’t surprise me if $4.00/lb became the norm come 2010. Worth keeping in mind that Credit Suisse correctly predicted the 2006 copper market back in early 2005.
I’ve brought up that we need to start monitoring it in Euros rather than USD to drown out some of the inflation noise, although the senior management of my company think that’s unfounded. At this point. I suspect that they’ll feel differently come 2008…
Good post, thanks.
Walt, great post. Good to have it on the ground level. Can’t beat that. Thank you so much.
“In neighboring Orange County, sales were down 21.4 percent last month when compared to a year ago, while the median home price was off nearly 3 percent, to $681,340 from $701,520 in the year-ago period.”
How will guru Gary “In the Bag” Watts spin these difficult numbers to his Realtor (TM) disciples?
the market will invert any day now….
Gary wants 15% percent in the bag.
The people in H&ll want ice water.
He is currently blaming bloggers! Thanks Gary - didn’t know we had that much power.
We are an easy target, as we happen to have correctly predicted what Gary did not: Declining prices in the OC for all of 2006!
Target? Oh no… Gary, pay up now or wait for our 2007 campaign!
The San Diego CCDC release a new project list this month. It shows that most projects are slipping their timeline out 4 months or so. If it were me I would be speeding them up!!!
Agree. I posted earlier this year that I thought builders would push through their plans at break-neck speed in order to get in front of the market. Seems like there’s no definite trend in this respect. A lot more builders walking away from land than I had expected at this point, though, which tells me this will be a tough market for a long, long time. I think the NAR’s hope for a quick rebound is most definitely not “in the bag”.
“‘Once those three factors are dealt with, the market will get back to normal,’ Husing said. What’s normal?”
1) Homes sell at prices where they pencil out as rentals (price = 100 to 120 times monthly rent).
2) Homes sell at prices which are affordable with traditional financing, including a fixed amortization schedule and a downpayment.
3) Homes sell at median prices which are less than six times median income (for SD, that would be around $390K, which is $184,530, or 32% less than the October 2006 median of $574,530, and $211,850, or 35% less than the October 2005 median of $601,850).
Just get on with it already. Bring South Orange County homes down to the 200-250K range and you will see inventory move. The REIC just doesn’t get it. Average people do not make 123K per year, esp. if only 1 person is working or the household IS 1 PERSON! Geez, if the avg. income in OC is 60K, then housing should be 180-250K (tops) for the average home. I am nottalking about those real mansions or beachside homes, rather Rancho Santa Margarita, Lake Forest, Mission Viejo, Foothill Ranch.
When North Laguna Beach drops from $1200/sq ft to $450/sq ft, I’m in. I’m thinking a 2-on-a-lot, or triplex, generating a net cash flow. I’ll be living up in Redondo, of course. Laguna is a nice place to visit, but…
Strike $450/sf, make it $400. Yea, that’s the ticket!
“Retired tennis stars Andre Agassi and Steffi Graf finally have found a buyer for their Tiburon estate for $20 million, or about $3 million less than what they paid for it in 2001.”
Certainly Tiburon prices peaked well after 2001? If they took a 13% haircut off the 2001 price, don’t you wonder how far Tiburon is off the peak? It must be huge!
Andre had a good service game…….
Now it looks like he just took one
Or they overpaid by about $8M in 2001?
Clearly he overpaid in 2001. And let’s not forget what his holding costs have been on his $23 million 5-year ‘investment’…perhaps another $1.5 million in taxes and insurance?
Good point. And seeing as how he had it on the market for a while, and rarely visited, he was speculating IMO. There aren’t any hotels in SF?
Rich people don’t like to stay in hotels when they travel, they want their own “pied-a-terre.” Lots of luxury properties above the heads of locals are even marketed that way here. Same thing in NYC. Celebrity equivalent of keeping up with the Joneses.
Pics of that place would be appreciated
Check it out here:
http://www.socketsite.com
Good thing he and Steffie won so many tournaments, because $4.5 mil is a lot of dough to throw away in five year’s time.
They need losses to offset the gains expected from the Idaho condo deal Real Soon Now …
“Three factors continue to impact the market, as economist John Husing pointed out recently. Unsold inventory is at 7.2 months, more than double a year ago. Foreclosures are up from historic lows, with several thousand homeowners entering the process each month. Speculators are still in the market, pushing supply artificially higher.”
“‘Once those three factors are dealt with, the market will get back to normal,’ Husing said. What’s normal?”
The biggest inventory problem in America as I see it is the number of stupid economists. The place seems to be awash with them.
“In a region with a strong economy, plenty of jobs and explosive population growth, normal is strong demand and steadily rising prices, although maybe not at the 15-20 percent a year of the last few years.”
What about in a region with consumption largely fueled by home equity ATM cashout financing and employment heavily dependent on the real estate sector set against a backdrop of falling home prices?
footie: so true. It is as though the media seeks out the lamest hacks they can find. How come it is only NOW that they are chirping up about the crappy loans, the overbuilding, the speculators, etc? The economist you mentioned left an escape though by saying the market will get back to normal once the speculation, foreclosures, and spiking inventory are dealt with. He doesn’t say when that might be, so he cannot be proven wrong! What a great job! The economists calling for a bottom in the next 2-3 years are either lying or just plain stupid.
Normal, John?…
What about “normal” things such as affordibility, down payments, 30 year fixed mortgages, spending less than 60% 0f your income on housing cost?
Prices in the Inland Empire (for you out-of-the-”empire” folks, the Inland Empire consists of the far-out and the WAY-far-out commutes from LA and San Diego) appreciated (on average) 300% from 2000 to 2005. John, is that the normal you are looking to get back to?
Sure we have jobs too! Yep, lots of retail, construction, warehouse jobs, etc… You know, the high paying ones. Most Inland Empire folks are actually professional commuters (they just don’t put that on their resumes.)
Why, oh, why, are they comparing the price drops from October of last year when the higher prices were recorder later? I mean, are they trying to skew the numbers by showing a lower % drop than has actually occurred?
I know its a silly question, but it should be pointed out. Here in SMF, I have already seen some houses drop 20%. I sold my 1297 sq.ft. home in 12/2003 for $245K. The high someone paid for the same model was $379K. Now you can easily find them at $300K, they were $330K in the summer, and the low for this model in now $265K.
What the hell is SMF? Everytime I think I have all the acronyms worked out there is a new one. Half the time it’s a typo.
Anyhoo, yeah, in San Diego my condo has gone from $392->$316. But we’ve only experienced a what, 3% drop, right?
May I ask you which part of San Diego your condo is located at?
Sabre Springs, Hilltop complex.
The price change is according to Zillow.
Feepness, you’re a fine one to question “smf” about SMF. What the heck is “feepness” ?!?!?!?!
I guess SMF is: San Mateo Feepness or
Santa Maria Feepness or San Miguel Feepness or
Santa Margarita Feepness or San Martin Feepness,
if not Sado Masochistic Fulkfest.
SMF=Sacra tomato
There is a lot of noise and clutter in the data. Also it sure seems like the incentives, fraud and cah backs are keeping things afloat.
We are still in the early phase where sales are collapsing. There will be a bounce in the spring as people think they are getting bargins but the numbers will be too low to hold down inventory. Then all the comps will be gone… then its free fall time.
smf:
Deb (a former SFV realtor) warned us that this would happen. She saw this going on during the 90s decline as a way to mask the severity of the correction. Just like the median price could be said to “increase” for quite a while (despite monthly price declines), by using the YOY data.
Don’t forget that the same will happen after the bottom is reached. The smart investors will have bought all the bargains while bloggers chortle over how bad RE still is, basing their view on YOY figures.
Nah, that will never happen. You see, us bloggers and the smart money are one and the same.
In reality, the bloggers will be screaming “BUY!!” when the MSM and everybody else is fixated on what a terrible investment RE is and that it never goes up.
Why, oh, why, are they comparing the price drops from October of last year when the higher prices were recorder later?
—————————
Because there is definitely seasonality in the trends. I also questioned this tactic when I first started closely tracking the market a few years ago. Since watching housing like a hawk for a few years, I see the logic.
BTW, from what I’ve seen, if you want to sell a house for top dollar, list around the first of February. If you want to buy a house for a good price, buy in November-ish. Noticed these trends in So Cal, so other places might well be different, and this was also during the past few years in a bull-to-stagnant market condition. FWIW…
How will guru Gary “In the Bag” Watts spin these difficult numbers to his Realtor ™ disciples?
——————————————————————————
He’ll argue that this is all a freak “it’s never happened before” anamoly caused in large part by the media, which he claims “likes to highlight bad news to bolster declining sales revenue”.
I’m looking forward in Spring ‘07 to laughing in the face of the next RE agent that pulls out and starts quoting their “Gary Watt’s Economic Forecast”. I’m already starting to see 10-15% declines in asking prices in many of the more desireable neighborhoods in OC.
Congratulations Ben,
You’re blog is where it’s at.
http://www.pbs.org/mediashift/2006/11/digging_deepernewspaper_bubble.html
“Your”…….damn
“But Inman’s Carter .
“These sites are guilty of the same sin they accuse the real estate industry of: presenting only one side of the story,” Carter said. “They highlight the most dismal news from the most stressed markets — that foreclosures are up, inventories are rising, and prices falling — without providing any context. A lot of these blogs would have you believe that all of the runup in prices was artificial, fueled by speculation and the easy availability of credit. The fact is, housing prices remain stable or continue to appreciate in areas where jobs are plentiful and housing is scarce. There are sound fundamentals in some markets,……………………………
So Inman’s point man makes a ton of accussations with absolute
NO REFRENCES. Where are these markets where jobs are plentiful and housing is scarce?? Give me a city so I can check it out. You might be right, and I am willing to give you the benefit of the doubt, just point me in the right direction.
London?
Manhattan?
Hong Kong?
YEP, and all very affordable
Madrid?
Capetown?
Sydney?
East St. Louis?
Gary, Indiana?
Toledo?
Oh hell, that’s easy.
Singapore.
Bohai, PRC.
Abu Dabai, UAE.
I think these markets are poised for rapid price appreciation.
Flint, MI
Green Bay, WI
Oildale, CA
Buy now, or be priced out for ever(tm) !
Atlantis?
Oz?
Narnia?
Looking for real estate on the cheap?
A couple of months ago the el lay times had an article on Trona, easily the nastiest bit of California, I can think of…
A noxious chemical plant, winds that never stop and meth labs, here, there, everywhere, await you.
I think they said in the article there are a number of houses for sale for around $30-40k
Inman said:
“A lot of these blogs would have you believe that all of the runup in prices was artificial, fueled by speculation and the easy availability of credit.”
IS INMAN FOR REAL?????? Then what the hell was it fueled by? Banks NOT giving out loans? Speculators NOT buying properties by the truckload? People NOT overbidding? Credit NOT being easy?
WHERE THE !!** HAS THIS GUY BEEN FOR THE PAST 5 YEARS? And besides..who the hell is this loser anyway?
Inman is nutso! That ios the only way to describe it. Too much Kool-Aid. Like I have been saying if these jobs that earn 200K+/year are so easy to find why doesn’t he provide a list so we can all apply for some when they become available. Just flat out lying sac ‘o sheit is what he is. The reporter, if (s)he had any balls would have called this guy to the carpet, but NOOOOOOOO! Just accept whatever they tell you. They could say the sky is red and some of these reporters would believe it.
Inman means China’s and India’ cities where American jobs are moving…
Lansner: “The most energetic real estate bloggers are decidedly bearish in their outlook. They feel traditional media outlets are too pro-real estate — something I think they’re wrong about — so [readers] flock to ‘bubble’ sites where they can rant in unison.”
Did he say this before or after OC price declines were in the bag?
People are seeking out the bearish sites only because a growing number of potential buyers are **finally** starting to question the wisdom of “being priced out…FOREVER!” and “real estate only goes up!”. I suppose some are waking up after the years-long credit/debt party and asking if a $80K income-earner (stated, of course) can REALLY afford that $600K house in Compton.
Yep. People can read what NAR says in the mainstream media, but it probably doesn’t sit well with what they see going on around them. One look at a blog, offering a vastly different perspective and and logical analysis of the housing bubble, and they’ll probably be interested and read more.
People, especially GS (you have been around here long enough to remember these):
Remember Jon Lansner is the ONLY MSM reporter to go toe to toe with Ben’s Bloggers right here.
Read it for yourselves, cut Lansner some slack.
http://thehousingbubbleblog.com/?p=248
http://thehousingbubbleblog.com/?p=277
That he did, but why use terms like “rant in unison” to describe ‘bubble’ bloggers? In a way he is showing his colors as an REIC cheerleader when he does this. It diminishes the perceived value of bearish RE blog information by painting all housing bear bloggers and anything they may contribute as bombastic (pompous) and preachy. I would have hoped that he would have taken away a different picture of what Ben’s blog and fellow bloggers were saying which is essentially balanced, truthfull and informative on this topic. This in contrast to the blatent falsehoods we see spewed by NAR, CAR, and His royal lowness, Gary Watts. Oh, was that bombastic? Sorry bout that.
“Fritz said…media reports predicting a possible housing collapse have put some potential buyers on the sidelines. ‘That’s one of the things that I think is stalling the market a little bit,’ she said.”
the thought of losing $250,000 tends to be somewhat of a pesky little detail.
San Diego is in real trouble:
http://tinyurl.com/create.php
I have a dream…of a blog that allows edits…
http://tinyurl.com/ylh33r
You have my interest piqued! But when I click the link, I see:
“Forbidden
Error 403″
Yeah, neither of the last two mentioned tinyurl’s works for me
HIt refresh and it should come up.
“You have my interest piqued! But when I click the link, I see: Forbidden Error 403″
Hmmm, Firefox didn’t like it, but IE did. I hate computers.
Inman said:
“A lot of these blogs would have you believe that all of the runup in prices was artificial, fueled by speculation and the easy availability of credit.”
IS INMAN FOR REAL?????? Then what the hell was it fueled by? Banks NOT giving out loans? Speculators NOT buying properties by the truckload? People NOT overbidding? Credit NOT being easy?
WHERE THE !!** HAS THIS GUY BEEN FOR THE PAST 5 YEARS? And besides..who the hell is this loser anyway??
What does he care. Probably sold right before halftime, made a bundle, paid cash for some place in Idaho. Now he doesn’t care how people have gotten these loans, let alone how they are gonna make ‘em work out. His attitude is “I got mine and it’s paid for, screw you!”
“the runup in prices was artificial, fueled by speculation and the easy availability of credit.”
Yep. That about sums it up.
Lansner: “The most energetic real estate bloggers are decidedly bearish in their outlook. They feel traditional media outlets are too pro-real estate — something I think they’re wrong about — so [readers] flock to ‘bubble’ sites where they can rant in unison.”
——————————————————————————
I’ve never quite trusted Lansner - always felt his heart is with the REIC. My impression is that his bullish comments and topics get prominantly displayed in the OC Register business section whereas bearish comments get downplayed or relegated to background. My opinion for what its worth.
If “we” the renter-ranters are responsible for the Buyers’ Strike, we deserve heartfelt thanks from everyone.
“Speculators have abandoned the market and are selling whatever homes they still own.”
GMAFB. Right up until Q2 2006 specuvestors were gobbling up everything in sight. That’s at least a million plus of homes this year alone, something up to maybe 2.5 million last year and some declining fraction going back several years at least. The floppers are not out. Not mathematically possble. They are stuck and they know it. Abandon the market? How? I was sweating bullets in April for my last non-personal use property to close. Trust me, it was the last lifeboat on my part of the ship. I think 4 houses sold in that zip code last month, about 15 years’ inventory. Every single one of them has been bleeding equity since then. Somewhere between 7 an 9 trillion will be bled off before this is over. That means that EVERY residential property purchased in the last 4-5 years with anything less than 20% down at the time is a bad investment and most are liable to “option calls.”
Robert,
That is exactly why I see a big incentive for the Fed to create more inflation. If they could only do that without encouraging the building of more ghost tract home developments out in the middle of the desert, it would be a slam dunk!
I’ve been thinking about this for some time. Do you suppose that the FED will be able to engineer this with the dollar breaking down and “emergency” Chinese trips by Paulson and Heli-ben on the agenda? It seems to me the FED’s been on a hawkish jaw-boning exercise and pushing up the GDP numbers to look a little hotter for the benefit of the dollar holders.
IMHO, the FED would love to lower right now but can’t without the support of our Asian and Euro friends. If the Asians say no, then the answer is no and the FED will have to engineer much more inflation (hidden of course) and slightly-higher rates to appease investors. How they can pull this off without a mistake is anyone’s guess.
Anyone also notice in the revised GDP, that income inflation went from 7% to .7%!! That’s a heck of a revision. The FED is now turning totally schizo or there is some real desperation going on here. On the one hand they want to say that things are slowing down so they can cut, but on the other hand they are saying things are still moving along nicely so go ahead and buy these crappy bonds. Weird and spooky.
How many times does this have to be pointed out - inflation will not support house prices because wages won’t keep up with inflation. Inflation will just increase the cost of energy and all imported goods (i.e. just about everything), and less will be left over for housing.
Not to mention that the Chinese will not continuing loaning to the US at the current low rates if they think the Fed is going to tank the $.
But wouldn’t inflation make the value of all this debt sort of dissipate, so it could be paid back with cheaper dollars?
i sold in ny and moved to san ramon in conta costa co in early ‘06 im in a new apt complex across the street are hundreds and hundreds of new homes the oldest being built in ‘04. down -17% yoy. The main community out here Windemere is a joint venture made of of brookfield,centex, lennar. The community is half way complete and the rest are supposed to be done by ‘08. Builders are building like mad. They must have slashed prices big time but pricing does not show on community price sheet. there were problems with the permits on this land. It was originally purchased in the mid-late ’90s but sales did not begin until ‘04.
Builders will keep building to MR=MC. These FB’s are screwed. Even if prices come down to the 70% the tax base will be so decimated i think i’d be scared to live around here…in the middle of no where
I would love to see Gary hanging in a bag upside down from his feet in a highly visible place where all could see. Great symbolic gesture for this greatest of massive housing fraud ever perpetrated.
The wagons are circling…lol
Local home listing service to become nation’s second-biggest MLS
http://tinyurl.com/yadyvg
Alright, I was in a meeting recently with a group of people who are tasked with planning out some programs 2007 -2011.
One aspect involves the residential market.
They brought in a speaker from somewhere in the new home industry.
I was licking my chops getting ready to pummel him with my bearish facts.
Guess what, he was honest and described the situation as very bleak.
One example was a developer with 80 homes in May 2005 with 6 sold. Now in November still 80 homes with 6 sold.
He forecast dropping prices 9 months after the drop in sales volume and significant job losses at that point in time.
He said affordability was abysmal. It is NAHB’s LA index is at 1.8%.
He put a few hopeful tidbits out like greater LA isn’t building enough (he had to talk his book a bit) but basically said we are starting one hell of a hangover due to Easy Al’s 1% Fed Funds rate.
He mentioned that he knew people that have multiple spec homes all over the West and the big wildcard for the builders is the amount of speculators needing to liquidate or get foreclosed.
He said that the for sale inventory today is higher than it ever was in the 1990s plus all the hidden speculator inventory.
He literally flattened the room with these comments, most everybody looked a bit shell-shocked.
This dude might as well have been a poster here!
I don’t want to out myself or him so hopefully that is reasonably anonymous.
Okay, it was Gary Watts…lol..that must have been kind of an interesting meeting…
What do you do BTW?
I was with some of your co-workers.
Good info. Thanks, SSBG!
“I don’t want to out myself or him so hopefully that is reasonably anonymous.”
One of these days we can all come out of the closet…
“My name is [state your name], and I am a housing bubble believer”
Sales down 20% seems somehow wrong and would seem to indicate sales are still booming. Realtors I know are not talking 20%, they are talking dead, so where are all these sales comming from?
Excellent question GH! If sales are off 20%, who are the 80% that are buying?
Right, because if sales are still at 80% of their peak in 2005, then by any standards real estate is booming right now.
U.S. to freeze mortgage loan limit
From Bloomberg News
November 29, 2006
The Office of Federal Housing Enterprise Oversight said Tuesday that it would freeze the size of so-called conforming loans that carry lower interest rates after U.S. home prices fell in October for the first time in 13 years.
The average price of a U.S. single-family home fell 0.2% to $306,258 in October from a year earlier, the first decline since 1993, OFHEO said. The average home price is tallied by using data from 14,729 loans made by 82 different lenders.
OFHEO sets the limit of loans that can be bought by government-chartered mortgage finance companies Fannie Mae and Freddie Mac based on year-over-year changes in October home prices. The agency will freeze the conforming-loan limit at $417,000 and defer for one year the reduction mandated by law to reflect the October price decline, OFHEO Director James Lockhart said in a statement. The U.S. housing market is flooded with unsold properties because potential buyers are waiting until prices stop falling.
“We made this decision so as not to disrupt the end-of-the-year pipeline of mortgages or the market for mortgage-backed securities,” Lockhart said.
Home resales rose 0.5% in October to 6.24 million at an annualized pace, the National Assn. of Realtors said Tuesday.
The shit is hitting the fan:
The agency will freeze the conforming-loan limit at $417,000 and defer for one year the reduction mandated by law to reflect the October price decline, OFHEO Director James Lockhart said in a statement. The U.S. housing market is flooded with unsold properties because potential buyers are waiting until prices stop falling.
“waiting until prices stop falling” - I don’t necessarily need to see them STOP falling. Would be happy to see them START falling in a serious way. These little percentage declines are not bringing prices into a range that is reasonable compared to rents and incomes. If prices decline 35%-50%, I would consider buying even if they have not stopped falling.
Are you saying there aren’t price declines in AZ? From reading this blog, I thought they were rampant?
I agree. I doubt I could call the bottom, but I do know what I can afford and when it gets there I will jump off the fence and start looking around for something I can live in for the long haul. But these small reductions are nowhere near the haircut I need to see to be a buyer.