“Obviously, There’s A Correction Going On” In California
Some November numbers from Dataquick in California. “Southern California home sales remained at their slowest pace in nine years last month. A total of 20,388 new and resale homes sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 26.2 percent from 27,637 for November a year ago, according to DataQuick.”
“The median price paid for a Southland home was $487,000 last month. The median peaked at $493,000 last June.”
The LA Times. “Sales continued to tumble. In November, the number of homes sold was the fewest for any November since 1997, DataQuick said. ‘Obviously, there’s a correction going on, but it’s not going to collapse,’ said Delores Conway, at USC. ‘Even with prices flattening, it doesn’t mean that we’re in a serious housing downturn.’”
“The median price in Ventura County also depreciated, falling 8.2% year over year to $562,000 as sales slid 30.8%.”
The Union Tribune. “San Diego County housing prices slipped 6.9 percent last month, the biggest year-over-year drop on record, DataQuick reported. The median price stood at $482,000, the same as in August, but off $36,000 from November 2005’s $518,000, the all-time record.”
“Single-family resale homes rose $5,000 from October to November to $540,000 but were off 4.4 percent from year-ago levels and substantially behind the record of $569,500 set in May. Resale condos were down $24,000 from October to $375,000, representing a 5 percent drop from a year ago. The record of $400,000 was set in March.”
“Newly built houses and condos and newly sold condo conversions fell the most, down 13.8 percent from November 2005, but the $455,000 median was up $500 from October. The record of $527,750 was set a year ago, but analysts suspect the steep decline was likely caused by a large influx of lower-priced condo conversions.”
“Sales totaled 2,987 transactions, down 24.1 percent from a year ago, the 29th straight month of year-over-year declines.”
The Voice of San Diego. “The boom is over. In putting together their five-year financial forecast, Mayor Jerry Sanders’ staff recognized the housing market slowdown underway and expressly worried about the possibility that next year, in 2007, the median price of a single-family home in San Diego County could drop to as low as $550,000.”
“Unfortunately for the mayor’s projections, we’re already there. There are two major local surveyors of home prices: the firm DataQuick Information Systems and the San Diego Association of Realtors. DataQuick puts the median price of a single-family home in San Diego County at $535,000. The Realtors put it at $550,000.”
“The housing market may be correcting itself even faster than the mayor’s gloomy predictions envision.”
The Orange County Register. “After 113 months,- nine-plus years, Orange County housing didn’t produce annualized profits last month. DataQuick’s monthly home-sales recap shows that O.C.’s median home sales price for all residences in November was $616,000, equal to the year-ago mark. It was the first time that there was no year-over-year gain for O.C. housing since May 1997.”
“It was also the fifth straight month home sales fell since a record high of $646,000 was set in June. It’s the longest such monthly losing streak in DataQuick’s 19-year history of O.C. real estate transactions.”
“David Dunn felt as if Christmas were stolen from him when prices for neighboring homes in his new subdivision fell by about $140,000. Now, he says, his home is worth less than he owes, making it next to impossible to refinance before his $3,000-a-month payment doubles. Eleven neighbors who bought before the price cuts are in the same boat.”
“‘They put us in a bad financial situation by lowering the price,’ said Dunn. ‘Some of (the buyers) did 100 percent financing, so they’re completely over their head right now.’”
“Ads offering big discounts and concessions on new homes have been rolling off the press for weeks as builders race to clear inventory before the end of the year. In the case of one KB Home development – up to $70,000 off the purchase price.”
“Wally Welter, an Irvine home shopper, said salesmen for several builders at Ladera Ranch offered concessions worth $100,000 or more. ‘I’ve had salespeople say, ‘Make an offer,’ which you never hear the builder say,’ said Welter. ‘Now, they’re willing to listen.’”
“Most homebuilders are reporting that 40 percent or more of their buyers are canceling this year. Often, cancellations result in the builder getting stuck with an empty home that’s already under construction. The closer the home gets to being finished, said KB Home’s Irvine-based regional manager, Jay Moss, ‘the more anxious the homebuilder gets to make the deal.’”
“Concessions, said housing consultant John Burns, are ‘the talk of the industry. On a completed home, it can be substantial.’”
“But residents of Garden Grove’s Heritage subdivision maintain that their builder, Brandywine Homes of Irvine, has cut prices well below market values.”
“The homeowners said that the price cuts began in November, just months after the first dozen buyers closed escrow, paying from $770,000 to $888,500 for their homes. The average price was $825,000, property records show. After the builder dropped prices by more than $100,000, all but five of the homes sold in a matter of weeks.”
“‘Usually builders keep their prices up. They try to keep their buyers happy,’ said Christie Vu, who paid almost $870,000 for the home she and her husband, Philip Luu, share with their two young sons. ‘In this case, it’s just the opposite.’”
“The builder’s representatives said during a recent meeting that they are being forced to price the homes to sell and maintain they are getting ‘zero profit’ from the project, homeowners said.”
“Keyvan Samini, an attorney for some of the buyers, said the purchasers relied on the lender and its appraiser to confirm the homes’ $800,000-plus price tags. But appraisers ended up using homes about three miles away as a guide for the first appraisal, and subsequent loan appraisals were based on the first one, Samini said.”
“The appraisals ‘were way too high,’ Samini said. ‘I believe that the builder knew they were too high, or should have known. And it’s not the fault of the buyers. They rely on the expertise of those appraisers.’”
“One of Samini’s clients said he’s facing the possibility of foreclosure because of the price cuts. Dunn said he’s in a financial bind because he’s using an exotic mortgage called an Option ARM, an adjustable-rate loan in which the homeowner can pick his monthly payment from a variety of options.”
“Eventually, he’ll be responsible for making full payments of $6,000 a month, he said, adding, ‘I don’t know how we’ll be able to pay that.’”
“‘It’s not just the financial aspect. It’s the emotional,’ Dunn said. ‘We can’t eat, can’t sleep. I can’t concentrate on work. This is all I think about.’”
The Daily Pilot:
‘Despite a sluggish real estate market, Costa Mesa has been attracting more new home developments, with some ready to sell and others due. Developers of new homes in Costa Mesa don’t seem fazed by weak sales reports, but some have had to lower prices as it has become a buyer’s market.’
‘Kurt Galitski, vice president of Weichman Associates-Realtors in Costa Mesa, said Richmond American solicited the help of local Realtors by adding their projects to the MLS that Realtors use. ‘This is how you can tell things are turning on builders, is when they start agreeing to pay us and other realtors in the area a commission,’ Galitski said.’
‘But what some call a sluggish market, Galitski would characterize as one that favors buyers. ‘The buyer can still afford to be as picky as they want to be, and what we’re really seeing right now is that they are being very, very fussy buyers,’ Galitski said.’
The funny things is that innundating the MLS listings with more new home entries would probably have a chilling effect, as folks saw even more new homes with lowering prices showing up in their searches.
Would be interesting to see if the developers approach would be to list their homes at a low “base” price to bring in prospects - and then try to upsell extra features — or, if the approach is to list high, with lots of features included, to help keep the appearance of non-plummeting prices (and then “deal” from there accepting lower offers and adding extras).
Posted from Thread topic ““The median price in Ventura County also depreciated, falling 8.2% year over year to $562,000 as sales slid 30.8%.”
They are still building at a strong clip out here in Ventura/Oxnard/Simi Valley and Chatsworth (just in LA County). Happy as Mud Larks as far as I can see? AZ. Vegas and Floriada might as well be the Moon!
I have posted in the past Calif…… LA …. was 6 months behind the curve. I was wrong. Make that 1 full year. We have slipped but the sellers are hanging tough…. The only real problem is the Lack of Transcations. I am sure this is blamed on the season…… so my dear readers once more into the breach this Spring/Summer before the big poo-poo hits the big fan in the sky!
Every time I think perhaps I am really wrong about this whole housing deal, I just think about all the nutty loans out there and they will not go away.
For now I wait for my time and my day to rebuy.
Yep, prices have not moved in the Westside either. Lots of inventory but no real news. Who knows who will blink first. If the government does something to reinflate the bubble, as some here have suggested, we might see another round of frenzied buying.
The massive 700- acre Riverpark community in Oxnard has only 15-20% of it’s homes completed. The rest is still graded dirt. With the Ventura county 8.2% yoy decline in median prices i wonder if the developers will actually complete all the planned units, or just stretch out/delay the remaining phases?
Camarillo has the Brookshire/kensington court planned community almost fully completed. There is still plenty of open truck-garden farmland in Oxnard/Ventura: I wonder how long it will be before the farmers sell out to developers, or maybe Ventura county has strict laws limiting massive conversion of farmland into tract housing?
The City of Ventura has strong no growth policies. Oxnard, on the other hand, is more or less a free for all. As for LA’s Westside, I’ve said it before and I’ll say it again, this market’s barely budging.
I’ll third that.
I’m tracking about 80 places all over Westside, and this week - 10 went inactive and only 1 had a price reduction (about 3%, nothing to write home about).
I’m also seeing less and less stuff coming on the MLS - mainly minute beach houses in Santa Monica for around 1 million, and some garganutan 5000+ sq ft villas in Calabasas and Pacific Pallisades that are so expensive they make me chuckle - many of them have asking prices double even what Zillow thinks they’re worth - like 4.5 million, and Zillow says 2.2 million. Very unlikely for them to be ’snapped up!!’ in a hurry..
So - less inventory from withdrawals and lots of inactives - falling inventory (for now) but no price reductions to speak of.
What! You have no rampant foreclosures, price reductions and FB stories to report!? You are obviously a troll, or worse yet, a realt-whore! Off with your head! LOL
‘What! You have no rampant foreclosures, price reductions and FB stories to report!? You are obviously a troll, or worse yet, a realt-whore!’
No, we love it. Especially those of us who lived in Santa Monica preceeding and during the last collapse. The west side is different. It was totally different in 1990…. and the median income is up above even $80,000 now. Yeah, totally!
There was another guy here who posted something the other day about the Bay area that couples with incomes of $300K are common. I lived there too, had that perspective. When one looks at census data, one realizes that if you live among the 1% your perspective gets a bit skewed!
Ventura County has SOAR so the voters can vote on housing projects planned on Farmland. Thats why it doesn’t look like Orange County yet.
Every realtor in Ventura County talks about SOAR. There are loopholes, ways to get around SOAR. The voters do not have more power than developers in Ventura County. A big developer of a ginormous tract near Simi paved the way within a year after SOAR passed and Oxnard is one endless tract.
‘Obviously, there’s a correction going on, but it’s not going to collapse,’ said Delores Conway, at USC. ‘Even with prices flattening, it doesn’t mean that we’re in a serious housing downturn.’”
Just wait….
Once California falls so will the rest of the nation.
‘Obviously, there’s a correction going on, but it’s not going to collapse,’ said Delores Conway, at USC. ‘Even with prices flattening, it doesn’t mean that we’re in a serious housing downturn.’”
Try this for an answer………..
http://www.rte.ie/business/2006/1213/worldbank.html
From Luvs_footie’s link:
“World Bank fears US house crash
December 13, 2006 07:35
The World Bank has warned that the global economy has reached a potentially dangerous ‘turning point’ with the US at risk of recession if the housing market crashes.”
Thank you for that quote, GS.
I think a housing correction (i.e.:’crash’) would be ~*great*~ for the economies of all nations. Shelter would finally again be in alignment with incomes. The only ones hurt would be the speculators.
BTW, thanks to all who’ve rec’ed Shiller’s book, “Irrational Exuberance.” I recently bought the 2006 edition with chapters on the real estate bubble. Its excellent!
~Misstrial
Jim Roger’s, commodies guru, said at a Goldman Sachs luncheon gathering yesterday, that the US is already in a recession.
Not too many in attendance were pleased at that pronouncement.
I have been suggesting this for at least a month now. Glad to hear the big boyz are getting their heads out of the sand.
…and I’ve been beating that drum for over a year now. GS, since it took you until last month, how long do you think it’ll take for everyone else??
If the US economy is currently in a “recession,” then every country should be so lucky, to be afflicted with such a “recession.”
It’s possible, but not certain, there will be a recession in 2007, but to say “we’ve been in a recession for the last year” is silly.
Silly? Check the facts before you finish your next glass of koolaid.
Shadow Government Statistics
UnRealtor,
If you consider the only thing that has “brought us out” of the ~2000/2001 (dot com) recession has been a housing market built on a credit/debt bubble, I’d say we’ve been in a recession since 2000/2001. The credit bubble has masked the effects, but lets face it, people make less money now than they did in 2000, or thereabouts. If consumers represent ~70% of the economy (GDP), how well do you think our economy would look if not for the credit bubble?
An economy as unwieldy as ours is today, what with it being so disportionately supported by J6P buying everything in sight on credit, has never been tested by a severe financial crisis - yet. There’s plenty of bears out there who know what’s coming next and they see right through the smoke and mirrors of the past decade. The effects of any serious downturn on a service based, hyper-consumptive economy will be devastating. Good posts, bears - they’re the only ones that make sense.
Denial.
ot-sorry
ny wont it is different here
listen to the crap some shill posted on a message board against the rentvs. own in the wsj
another poster called renters chicken shit losers as well
looks like we are entering the anger stage for brokers in nyc
todaysmart investor” likes to distort facts apparently to make himself feel “smart” - for example, 50% cheaper to rent - lets see- maybe in miami hotshot but not in manhattan (ps the focus of this blog is nyc)…in manhattan the cost of owning and renting is extremely close…in fact, according to a REIS report publish in September, owning is only 8.7% more expensive than renting in manhattan. and it should be more expensive given that you are locking in the majority of your rental expense going forward…
also, amateur journalists need to stop comparing the cost of renting to the cost of owning by using a monthly mortgage expense (e.g. 15 year fixed) that includes ammortization of principal…seriously, get it right or dont play the game
here is an example
This Trump 2BR/2BA 1362sf condo is for sale for $1.95M on the UWS of Manhattan overlooking the Hudson River.
http://www.corcoran.com/property/listing.aspx?Region=NYC&ListingID=919576
Assuming 10% down, Total Monthly Payment of mortgage w/ maintenance and tax abatement is: $12,611 a month. those taxes WILL go up tremendously.
The EXACT same apartment is for rent in the same building for $5,450 a month
http://www.corcoran.com/property/listing.aspx?Region=NYC&ListingID=919146
So in the rent vs. buy calculation, here it costs 231% more to own than to rent. I have nt taken any tax deductions, but lets assume anyone earning enough to swing this place is getting taxed up the wazzoo.
They put us in a bad financial situation by lowering the price,’ said Dunn. ‘Some of (the buyers) did 100 percent financing, so they’re completely over their head right now.’”
Can I have dumbs**t for $100 Chuck……
You meant to say, “Can I have dumbsh*t for 140K, Chuck?”
“Dunn said he’s in a financial bind because he’s using an exotic mortgage called an Option ARM, an adjustable-rate loan in which the homeowner can pick his monthly payment from a variety of options. Eventually, he’ll be responsible for making full payments of $6,000 a month, he said, adding, ‘I don’t know how we’ll be able to pay that.’”
I’m sorry, but I can’t resist…
HA HA HA!!!
HA HA HA HA!!!
Ooohhhh…..
HA HA HA!!!
You mean money borrowed, regardless of structure, needs to be paid back someday? But..but..
Yes, the appraisal of the home and the terms of the loan you chose are related how exactly?
To borrow from Sammy Schadenfreude…
You have to have a heart of stone not to laugh.
You meant to say, “Can I have dumbsh*t for 1.40M, Chuck?”
Why is it these buyers are so generous with flinging blame on others, from neighbors who sell “below comps” to builders? Instead of realizing that nothing is guaranteed with any investment?
This guy Dunn said the potential $6K a month payments are keeping him in wreck status emotionally. Why buy if you’re just one turned-down refi away from foreclosure? Back in the day, your first loan was sometimes your only loan. Who wants to be on a first-name basis with a mortgage broker every six months? That alone would keep me happily renting.
WHat get me Revocering is they blame the builder. Too bad! You paid for the house, don’t have buyer’s remorse now. Just because I paid 20K for a car and my neighbor got the same car from the same dealer for 2K less, doesn’t mean I should bitchand whine about it, does it? These people should get a clue. Property goes up and it goes down, just like everything else in life. Knuckleheads. Would you like some cheese with that whine?
Exactly.
““The appraisals ‘were way too high,’ Samini said. ‘I believe that the builder knew they were too high, or should have known. And it’s not the fault of the buyers. They rely on the expertise of those appraisers.’”
A house is worth whatever you can get someone to pay for it. The houses the builder sold were priced exactly right: There was one knucklehead buyer for each of them.
“They put us in a bad financial situation by lowering the price,” said Dunn, 33. “Some of (the buyers) did 100 percent financing, so they’re completely over their head right now.”
No, No, No - rephrase that dummy:
“We put ourselves in a bad financial position by being stupid when we borrowed too much money because we bought into the lie that real estate always goes up.”
Rob
Exactly.
““The appraisals ‘were way too high,’ Samini said. ‘I believe that the builder knew they were too high, or should have known. And it’s not the fault of the buyers. They rely on the expertise of those appraisers.’”
A house is worth whatever you can get someone to pay for it. The houses the builder sold were priced exactly right: There was one knucklehead buyer for each of them.
Thomas that is the problem with people today. They don’t understand economics and the value of “stuff.” Sometimes I want to blame the education system, sometimes parents. In the end, however, it is always the same story. I overpaid and now I want to go back on the deal. Well, you should have counted the cost before you started. Knuckleheads, every one of them. Don’t complain that you overpaid. In the same sentence, conversely, I can say that those who bought for 600K were saavy shoppers, although I think they still way overpaid, also!
“They rely on the expertise of those appraisers.’”
Focus on the word “expertise” here. What most appraisers have become is experts in the art of deception. You give them a subject property, and they’ll find the three to five comps they need to support the value that they have to hit. Ignore the true comps and grab the ones you need. The key is to be good at it. To be able to pound a square pegs into a round holes and call them a perfect fit, and have everyone buy it, is indeed “expertise”.
I feel sorry for you appraisers who still do an honest wage. You don’t have a prayer.
I feel sorry for you appraisers who still do an honest wage. You don’t have a prayer.
That would be me…I was pretty much run out of the biz in 2002 after starting in 1983.
I’m not cryin’ though…I’m happy as hell my name isn’t on any 1004’s in this crazed mania.
Appraiser’s as a entity are a totally disorganized group.
Professionalism went into the tank with the hordes who emerged in the wake of Federal licensing.
They will be scapegoat cannon fodder for the avalanche of lawsuits coming.
E&O insurance providers will be collapsing like a house of cards.
Thats only part of the problem. The bigger issue is this -
“Eventually, he’ll be responsible for making full payments of $6,000 a month, he said, adding, ‘I don’t know how we’ll be able to pay that.’
He bought way more than he could. Because, he had to buy the house, you know. It would be a catastrophe to rent or buy within his means. Can’t have that, can we ?
It has become the predominant cultural attitude that everyone has a right to have everything, that they earned the right to have it. God forbid petty problems like “spend more than you earn” putting a crimp on their fundamental rights.
McMansion ? check.
BMW/hummer? check.
Flat screen? check.
Boat and trailer? check.
All these bums are going to learn the hard way the old paradigm of living within one’s means. Pretty soon the real American values of thrift and industry will be in vogue.
Bubbagump I would just like to know where this attitude came from. I know I could blame it on say, sin or vice or
trying to keep up with the Jones’, whoever they are, or Madison Ave. However, I think there is more to that since this attitude of entitlement is so pervasive and embedded in our nation’s attitude and belief system right now. When, where, and how did it get this massive and out of control, I guess, is the question I am asking.
Bubbagump:
“McMansion ? check.
BMW/hummer? check.
Flat screen? check.
Boat and trailer? check.”
Forrest: ‘Mama always told me, “Stupid is as stupid does.”‘
I have no sure answer to that, but candidates include
1) We’re in the decadence stage of Wesley’s paradox. Religion->ethics and hardwork->wealth->luxury->decadence
(to be followed by ->poverty->reliogin )
2)The empire is awash in debt and this is just bread and circus
3) Loose credit has resulted in gaming money being the primary industry in this country. This is well supported if you look at what is the primary business of this country today - financial services.
I would take (3) as the particular reason [and maybe (1) as the general philosophical grounds for it]. Many blame Keynesian econ, for causing this, but Keynes would have strongly opposed this madness. If alive, *in my belief*, he would have vehemently opposed the Feds bubble policy. His statement on speculation describes the state of this country’s enterprise spot on.
“Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.”
i think it is deep seated in avg joe feeling inadequate. force fed ads, etc of conspicious consumption and realizing he is a loser compared with neighbors (who are also losers - but we all know who the joke is on!) so he completely goes for it even though one of his few braincells may say not to do it.
avg joe must have acoutrements. a peacock must have his feathers. it all comes down to inadequacy and - you guessed it - access to sex. lol
-freud
By the time I left Cali it seemed half the state was drinking the RE koolaid, Buy now or else be priced out forever the payments seem hard now but will get better as your wage goes up. All this has been true there for 50 years. I think its broken now though, that state is burning under pension debt and proposition funding. SDI is what? 700 per week tax free? Most of it being claimed by state workers. haha. Free Koolaid for everyone in Cali.
To bubbagump:
“All these bums are going to learn the hard way the old paradigm of living within one’s means. Pretty soon the real American values of thrift and industry will be in vogue.”
Great sentiment, I wholeheartedly hope it is possible to go back to those values, but can we? Can this economy - rather this society - survive the shock it will take bring those virtues back into vogue? My concern is that the roots of the conspicuous consumption we see around us go down far deeper than most will ever want to dig.
Same reason I never discuss ticket prices on a plane. There’s always some maroon that paid full boat for a econ seat - then bitches that he got taken. You pays yer money and you takes yer chances.
For all its shortcomings, capitalism only works when people play by the rules. That means taking advantage of the upside and accepting the losses when they happen because they are implied in the word “risk”. It really irks me when people only want the upside and scream bloody murder when they get stung by market realities. This goes for all those FB’s out there, but also for those lenders who are so cold blooded that they can look at someone straight in the eye and tell them that they are not buying a house, they are “investing” in a house.
“Same reason I never discuss ticket prices on a plane. There’s always some maroon that paid full boat for a econ seat - then bitches that he got taken. You pays yer money and you takes yer chances”
Yah I can relate. I did that once and my ticket was hundreds cheaper than the next guy. Also recently at the office, some had already bought tickets to Asia +$200 more than I paid. DOH
This same FB would be boasting at a cocktail party about his financial acumen if prices had instead gone up 20%. Now that it’s gone down this bagholder blames everyone but himself. Let him rot.
“The homeowners said that the price cuts began in November, just months after the first dozen buyers closed escrow, paying from $770,000 to $888,500 for their homes. The average price was $825,000, property records show”
Let me state for the record that paying these prices for a home in Garden Grove is absolute lunacy! GG is a plain vanilla uninteresting flat densely populated increasingly immigrant suburb, with no ocean access, horrible commutes along the GG frway, and without even one interesting or notable historic section at all. It is what you would call a 100% featureless expanse of dull cookie-cutter Sfh’s and apts galore. These buyers should wear the dunce cap for overpaying such a rediculous price in the first place, instead of blaming the developers for ‘lowering the comps’in their development. Paying $6000 a month for a mortgage in GG?
Scal RE is truly up a creek, with the FB’s rowing without a paddle.
a.k.a. Garbage Grove
For 800K they could have gone a little further down the 405 and bought in Irvine. Some of the best schools and lowest crime in the nation. They probably would have ended up with an older home but at least they wouldn’t be living in Garbage Grove.
Or buy a nice pad in huntington beach about 3-5 miles away. For $800,000 i am sure that you can obtain a decent 3/2 shf in HB within 1 mile of the beach, in a way better neighborhood with better anemities than GG. North and east sections of HB bordering on westminister/fountainvalley may be plain vanilla cookie cutter, but the south sections closer to the beach near old main st dwtn area is actual;y fairly upscale thou not snobbish rich like newport coastal communities.
email sent to reporter
Enjoyed your recent article but I’d like to ask Mr. Dunn a question. I’m on the other side of the country or I would do it myself so if you would, could you ask him this:
If your house had gone up in value as you planned, would you give more money to the builder to compensate them for having sold it to you at such a low price?
He could reply directly to me or here:
http://thehousingbubbleblog.com/?p=1998#comments
“The boom is over. In putting together their five-year financial forecast, Mayor Jerry Sanders’ staff recognized the housing market slowdown underway and expressly worried about the possibility that next year, in 2007, the median price of a single-family home in San Diego County could drop to as low as $550,000.
Unfortunately for the mayor’s projections, we’re already there. There are two major local surveyors of home prices: the firm DataQuick Information Systems and the San Diego Association of Realtors. DataQuick puts the median price of a single-family home in San Diego County at $535,000. The Realtors put it at $550,000. The housing market may be correcting itself even faster than the mayor’s gloomy predictions envision.”
I thought the mayor was for affordable housing? If so, then he should be celebrating the drop in prices, not lamenting it.
Just curious…
What does a median home price of $500k or so, say about affordability in OC?
It says that the homes for sale in the OC are unattainable for a person that makes 125K a year!
It says I’ll be renting for a long time! That is okay though. Rather be a renter without the 6K mortgage and other headaches, plus all the benefits I have since selling!
thanks, but that’s not what I was trying to ask..
I was curious as to whether or not a $500k median home can be bought by a family with a median income? (without a suicide loan)
Sorry for the sarcasm. Well, using 3X income, that means that one would need to make $167K per year. Even if the median is 100K, OC is still way short. Bottom line we have a ways to go before this bubble sorts itself out!
Today’s OC register.com has enough Bear food for a long winter hibernation!
The bulls/soft landers are strangely silent on the blog over there.
HA HA in my best Nelson voice.
“Eventually, he’ll be responsible for making full payments of $6,000 a month, he said, adding, ‘I don’t know how we’ll be able to pay that.’”
“‘It’s not just the financial aspect. It’s the emotional,’ Dunn said. ‘We can’t eat, can’t sleep. I can’t concentrate on work. This is all I think about.’”
________________________________________________
Would the builder sue to receive some appreciation??
At 6K a month, this moron should be bringin home 18K, or 216K per annum. Doubt he is, but even he is, what dope would pay that much for those cooker-cutter homes? 200K, tops!
Especially in Garbage Grove for heaven’s sake!
Garbage Grove. Love that moniker. Very funny!
See also “Anaslime,” “Wasteminster,” “Costa Messy,” and “Newport B*tch”.
Oh, and Stanton — no modification needed.
Very nice Thomas.
How ’bout “Westmonster”
Wastemonster!
I grew up in Westmonster! That place is a Sh%thole!
Smell Segundo
Smell A
airport del rey, fontucky…..
Inglewatts
Fontucky is the funiest.
It’s “Costa Misery”.
posted How ’bout “Westmonster”
Perhaps “Westmobster”
:At 6K a month, this moron should be bringin home 18K, or 216K per annum. Doubt he is, but even he is, what dope would pay that much for those cooker-cutter homes? 200K, tops! ”
There cannot be a duller more uninteresting stretch of urban sprawl than Garden Grove, westminister,stanton,cypress,fountain valley, ect. This section of NW OC takes top honors for dullest place to own a home. These idiots just overpayed by at least $300,000.
“‘It’s not just the financial aspect. It’s the emotional,’ Dunn said. ‘We can’t eat, can’t sleep. I can’t concentrate on work. This is all I think about.’”
Ah, homeownership…..the American Dream. Ain’t it great!
but rents are up!
True, but you can walk away from rent and move on.
So true. Try selling in this market. Can’t drive that house to work, now can you?
I saw rents are up 5.8% somewhere I can’t recall. if it costs 50% less to rent than own, it would take over 12 years of that appreciation in rents to make it worth it to buy a home!
meanwhile, if your ARM adjusts and you can’t eat or sleep, I’m sure you wish you rented and would gladly pay 5.8% more in rent.
yes, they are not making any more rents.
Wait a minute, I’ve become infected with talk like a Realtor disease.
but you can live in your car!
rents are up as a direct result of the bubble bursting. People see hot gas escaping from the bubble and decide to pay rent even if it goes up every year for the next five years.
it depends, I would like to know how they collect data. if they calculate it using owner’s equivalent rents, that is most likely just “wishing rents.” I’d like to know what rents are actually going for, not a statistic.
Exactly. If rents are up 5.8% but vacancies are up 20%, well… revenue is going down on an idividual basis folks.
I’m not even sure I believe rents are up - in fact, I’ve seen them going noticeably down in downtown L.A. lately - just because a lot of FBs are advertising insane rents on Craig’s List doesn’t mean anyone’s actually paying those prices…
Nope. Rents are up and vacancies are down, just like many of us expected. Let’s see how long it lasts, however…
The article to which you’re referring:
Average rents for all types of units increased 5.8 percent over the previous year to $1,237, the poll showed. Rent for one-and two-bedroom units, which dominate the market, increased by 6.2 percent to $1,229.
As prices rose, the region’s vacancy rate decreased from 3.4 percent in the spring to 3.1 percent, leaving about 13,509 units vacant.
Some renters are delaying home purchases in anticipation of declining home prices, said association Executive Director Robert Pinnegar.
http://www.signonsandiego.com/news/business/20061212-9999-1b12rent.html
The problem is that to assess rental rates, they look at apartment complexes. There is no way they can monitor ‘individuals’ renting their condos out on a 1 by 1 basis.
Yes, rents at complexes have gone up…but those of us in SoCal know that there are a TON of people trying to rent condos and homes…so in that sense rents are flat or down.
I have had one 3% ($50) rental increase in the past 3 years 9 months.
The cost to ‘own’ would be 2 times that with I/O, and closer to 3 times with a ‘real’ mortgage.
SoCalMtgGuy
http://www.housingbubblecasualty.com
“David Dunn felt as if Christmas were stolen from him when prices for neighboring homes in his new subdivision fell by about $140,000. Now, he says, his home is worth less than he owes, making it next to impossible to refinance before his $3,000-a-month payment doubles. Eleven neighbors who bought before the price cuts are in the same boat.”
“‘They put us in a bad financial situation by lowering the price,’ said Dunn. ‘Some of (the buyers) did 100 percent financing, so they’re completely over their head right now.’”
Looks like the builder acted like Scrooge and the Grinch combined. But the builder is in business to make money or at least not lose money. This will send sales lower as no one will want to have negative equity a few weeks after closing on a new home with falling prices.
Wow. That looks like a truck is going to hit them head on. The no way to refinance when the payment shock hits…. Sounds like they just sit there and pay zero till they get kicked out. Might as well save the 3000$ per month for (six months) then at least you have some cash to ride things out.
Of course the bank will be going after that like crazy.
This is exactly what happens when people only look at howmuchamonth and interest rates. We have all said before, but once again for the very slooooooowwwwwww…”You can refi interest rates, but you can’t refi a buying price. Overpay and you are stuck.
I would also like to add that with all the howmuchamonth Harrys and Helens are we surprised that none of thee fools understands the escrow papers they are signing. They only see one thing, $1500 a month. They don’t understand teaser rates and they definately can’t amortize a loan. I try to feel for them, but if you can’t at least look at those details, then you are not paying attention to detail and asking to get hosed.
Heck, most people don’t even understand that the ground under your sacred property is not yours. Read the covenants in the papers, most tract housing contracts clearly state that if oil or rich mineral deposists are found, they are not yours.
Oh, no - it is yours, your name is on the deed. It’s just that someone else has retained the right to remove your house, dig up the property, strip the earth of anything remotely valuable,and keep the proceeds. They give you back the plot of land when they’re done - so what’s the problem?
yeah… see that alot here in LA. “mineral rights excluded” I don’t think I’d buy a place w/out the mineral rights. Or buy a SFR in an area zoned for anything but SFR’s. Just ‘cuz there’s no 3 story apt building next door *now*… doesn’t mean there wan’t be one someday…
Usually title will say “no right of surface entry”, meaning they have to drill at an angle to get under your home from a neighboring property.
‘cuz there’s no 3 story apt building next door *now*… doesn’t mean there wan’t be one someday…
——————–
And this is exactly why people in established neighborhoods hate the new “infill” developments, including McMansions. In the SFV (LA), you see this a lot. Nice, simple little **single story** homes on “regular” lots (~7K SF) are bulldozed to make way for huge (3K SF) McMansions that tower over your house and yard. Sometimes they even try to fit two or three new “homes” on one lot.
Seriously, this should not be allowed. Established neighborhoods should be allowed to keep their character unless a majority of the current residents vote to change zoning or land use, IMHO.
Such tear-down McMansions really only hurt the McOwners. Prior to this bubble, a good rule of real estate was never build the biggest house on the block, you’ll never get your money back.
True about the “best house in worse neighborhood” scenario, but you must admit that many of the long-time owners enjoyed peaceful, private lives in their one-story, **single-family** homes.
Personally, I do not like multi-level homes. Not to live in, and certainly not to live next-door to, especially with small lots. It literally feels like you’re going to be swallowed up by the stucco. **NO privacy** Also, many of the infill McMansions I’ve seen end up with multiple families living in them. Multiple cars on the street, etc. Just not my idea of a desirable living situation.
0 down. Neg equity. What really can happen if he just walks? Can the bank actually go after the difference? I understand the taxes on the forgiveness of the loan but it seems harder to go through a bankruptcy than walk away from a mortgage.
‘They put us in a bad financial situation by lowering the price,’ said Dunn.
You put yourself in a bad financial situation by buying a house you could never afford in the first place, dummy.
Larry Kudlow says there has never been a recession when there is full employment.
Pretty easy to say when the government can change the definition of full employment at will.
Full employment with a $ 6000 monthly payment might be worse than being unemployed for 2 months.
6K a month would be like making 30 $200/month car payments.
Think about that for a moment and realize how screwed this guy is.
1 car payment for every day of the month.
$200 a day for the privilege of paying property taxes @ $30 a pay. Oh, boy!
Cocaine larry is way to bullish on everything. I hate listening to his cr@ppy show because he is a cheerleader for everything lately.
Yeah, he could sell ice to eskimos.
At he rate Greenland is melting, that would be a good business.
Trouble is, I don’t think there is much market for clubbed baby Seals these days.
The greatest story never told: This is going to be the finest recession in history. Everyone is going to love their seven dollar an hour jobs.
Employment always peaks before a recession. Its a lagging indicator. Employers prefer not to fire people until its clear they’re not needed. Retraining is costly and time consuming.
Bubbles accentuate this phenomenon. I ran a business in SF during the dotcom daze. In 1999 and early 2000, unemployment was around 3% in San Francisco and the office occupancy rate was 99.5% (not an exaggeration.) By early 2002, the unemployment rate was over 7% and the office occupancy rate was nearly 20%. Things can change pretty fast at inflection points.
Please don’t make me bring out my 35 Kudlow lies I have saved.
LOL
do it!
do it!
Ok - but only 1 (LOL):
June 20, 2005, 10:40 a.m.
The Housing Bears Are Wrong Again
This tax-advantaged sector is writing how-to guide on wealth creation.
Homebuilders led the stock parade this week with a fantastic 11 percent gain. This is a group that hedge funds and bubbleheads love to hate. All the bond bears have been dead wrong in predicting sky-high mortgage rates. So have all the bubbleheads who expect housing-price crashes in Las Vegas or Naples, Florida, to bring down the consumer, the rest of the economy, and the entire stock market.
None of this has happened. The Federal Reserve has effectively mopped up excess cash and calmed inflation expectations. That’s why bond rates are hovering around 4 percent, with most mortgage rates about a point higher.
Meanwhile, the homebuilders index has increased 76 percent over the past year, with particularly well-run companies like Toll Brothers up about twice as much. The bubbleheads missed all this because they haven’t done their homework. If they had put a little elbow grease into their analysis, they would have learned that new-housing starts for private homes and apartments haven’t changed much during the past three and a half decades.
crispy,
Could you please forward this to him? Pretty please?
That smug, arrogant supply-side idiot has me tearing my hair out whenever I watch him. I know he’s supposed to be smart, but I just don’t see it.
Yeah, a little sniff sniff tends to disorient people just a bit
Larry Kudlow should be on FOX not CNBC. End of Statement.
Yogi Berra said, “It ain’t over till it’s over.”
“The future ain’t what it used to be.”
Yogi Berra
“Nobody goes there anymore, the lines too long” - Yogism
Seems like some folks over at the San Diego Investors blog are gettin’ a mite nervous.
http://tinyurl.com/y5w7zp
and
http://tinyurl.com/vndto
LMAO.
They have changed their tune BIG time!
These fatheads realize that these ARms and IOs are timebombs. So glad they see it now! Where were you 3-5 years ago when DiTech and Ameriquest and other scum lenders started this nonsense. Yeah, gonna hurt to take a 7% haircut plus inflation. Ouch! Housing is not quite the investment you thought it was once you realized that the cost have far outstripped most people’s ability to pay for it within the traditional fundy’s.
“I gave up on DQ type statistics.”
My zip code (Capitola, 95010) shows 33.6% down according to DQ for October.
But the sales volume is so small. They sold SFRs in 2005 and a few condos this year. Well, I hope that is the reason
I don’t want to think that I really lost 33.6% in the last 12 months.
Zillow is a little better - it says I lost 5% in the last 30 days alone. About -10% over 12 months.
That’s believable.”
I am not familiar with DataQuick, but I am with Zillow…
IMO..junk data…
You gotta just love this guy…I don’t the numbers, so I’ll look for a source that agrees with my opinion. Talk about hearing what you want to hear…
ror.com will give you reasonably good data for the Santa Cruz area.
By all means, DON’T PANIC!!!
I can’t wait until the “national housing bubble” blows up on these fools who are relying on “market timing.” It will be fun to watch 80% of them (Taco Bell Jeff types) lose everything. You cannot start a “real estate empire” at the top of a bubble, and bounce around the country buying SFR’s at inflated prices which barely cash flow or don’t at all. A couple of pricey repairs, and some deadbeat renters, and it’s curtains for these idiots. Screw em all. Maybe, should I want a change of scenery, I’ll buy some of their garbage for .40 cents on the dollar and show them what “market timing” and “positive cash flow” is all about.
LOL. I’ll be right there with you brother Bear. When the whole house of cards comes crashing down there are going to be some sweet deals from some very chastised FBs and lenders. You’re awfully benevolent to offer 40 cents on the dollar - I was thinking more along the lines of .30, plus making them stand on front of the house for a week, pre-sale, with a sandwich board saying: PITY ME, A BROKE FB!
Sammy and Bear. Do you really think it’s going to go that low? Would that mean you could buy houses at 97 prices?
Try ‘77 prices. Seriously.
You make me dream. If that happens I could buy something with 60% down or more.
I believe 40-50% off peak pricing is not only possible, but probable in many bubble areas. Considering that 300% appreciation over 6 years was not unheard of in certain instances, a 50% haircut from the peak still leaves 50% appreciation over those six years. A scenario like this would not even overshoot the mean like many have suggested will happen. We are just warming up.
John Templeton says 90% off of RE.
John Templeton is an old and wise man.
A billboard on the WB I-10 in Fontana, near the Ontario end, says:
“Buy 4 investment properties a year NO MONEY DOWN, we’ll show you how.” [Yeah, me and my hero Casey Serin.] I took note of this after counting housing billboards all the way from Palm Springs. About 10 as you come into Palm Springs, mostly “communities” from the $300’s, a few from the $200’s, and of course Del Webb with no price, the female in the swimming pool is the message. Then I was surprised to see 4 more in Banning [!?!?], at least 8 in Beaumont. A reprieve in Redlands which maybe has a billboard ban? Billboards start up again in Colton, but not housing ads, until Fontana where there are another 4 or so. The last one being the Real Estate Empire ad with which I began this comment. I had fun keeping track of things: this was my first drive to LA since I started reading this blog 6 or 8 months ago. Bubble consciousness provides some fun for the trip.
I’ll be heading out for another SDCIA meeting this evening. And no doubt it will be like the last few I have attended (How to buy foreclosures (and they are coming), what to look for in RE investments, and Robert Campbell on how ridiculous the market is, etc) and be very, very bearish on the housing market.
Again, if you are in or near San Diego the meetings are nothing like the go-go bulls on the discussion board. (Although I do notice a lot more bears are feeling free to speak out now.) The meetings are excellent and provide real information on what is going on in the San Diego market. Robert Campbell in particular was very helpful and having real numbers (median was 4.2 times annual income in 2000 now 9.7 times. Yeah, that’s substanable. sarcasm off.) to quote makes the bubble argument much stronger.
Tonight’s topic is “Seven Things you Absolutely Need to Know to Protect and Build Your Wealth in 2007.” I will post highlights tomorrow or Friday. Many of you would like this group because many of the long term RE investors who are out of the market right now are pretty hip on gold.
Wow. Wish I lived in SD. I’ll be watching the california thread tomorrrow and Firday for your update, Mr. Bear!
I hate to disappoint but I am unable to attend the meeting after all. End of year issues came up for a client. I will go to the January meeting and report on it.
And that’s Ms. Bear to you.
LOL, egg on my face, sorry.
Did they eventually get TxChick fully banned?
Man, she was a one woman wrecking crew on a couple of those threads.
SD RE Bear,
I’ve heard that those meetings are actually quite good. I’ve been keeping an eye on the SDCIA board, and there are some very intelligent, experienced people there. “Jeff” is not indicative of the population there, IMHO. Even a few people from here who post regularly over there.
Would you mind letting us know about the next meeting? It would be fun to attend, and perhaps we could meet more of our HBB “friends”.
The meetings are really good and the people who run them are definitely housing bears.
The dicussion forums are a mixed bag. There are still a lot of newbies who think they are “professional investors” and maintain all these reasons why it is different this time and how the market will never go down in San Diego and other areas. Those individuals tend to refer to us as the “doom and gloomers” and that is one of the nicer descriptions.
And like most bulls they feel that loudly proclaiming their beliefs will make them true.
Since I do not have a crystal ball and cannot see the future I simply give my reasons for a possible coming decline and try to stay out of the flame wars. I don’t understand people getting so upset because someone disagrees with them. But I think some of the people on the discussions are in way over their heads and denial is more comforting than the cold hard truth.
I don’t know if TxChick was banned. Honestly, I can barely keep up with this blog anymore and since I feel it is the best source for my beliefs I devote my “research” time to it and am rarely on the SDCIA board. I would think it would be fairly easy to come in under a different name even if banned. But since the last thread I read started out mocking us but quickly turned into a bear’s forum, I am not sure she has so much need to be devil’s advocate there. TxChick?
The meetings are the second Wednesday of every month and the next one will January 10th. I highly recommend it and would love to have a San Diego reunion of sorts there. It’s $15 and well worth the price. ($10 if you are a member which is $40 or $45 to join.) I’ll post closer to the next meeting and we can see what we can arrange.
This decline is not news. If you read the board we have been talking about it for the last 9-12 months. Many have already adjusted their investment strategies. In fact a majority of those investors will do well because they know how to deal with a market cycle.
Like I posted on another thread, this is going to put a crimp into Gary (15% It’s in the Bag) Watts “inverted year” phenomenon. Flat YOY price appreciation doesn’t seem like such a big deal except for here in the OC where RE always goes up!
Ah, but if you read the the SD link, you’ll see that they compare Nov ‘06 to Oct ‘06 quite favorably (sales are up and price declines have leveled off or risen a bit). The inverted year prediction is true!!! LOL!!!
Obviously, there’s a correction going on, but it’s not going to collapse,’ said Delores Conway, at USC. ‘Even with prices flattening, it doesn’t mean that we’re in a serious housing downturn.’”
————————————————————————–
Naaaah! What serious housing downturn? Here at USC we’ve been talking to the folks over at UCLA who claim that everything’s gonna be OK in the Spring! Nothing to worry about.
You read something like that and automatically assume Delores is leveraged to the gills in real estate.
Either that, or the USC Lusk Real Estate Center is in bed with the entire real estate sector:
http://www.usc.edu/schools/sppd/lusk/luskcenter/boards.html
holy SHIT
I work at USC and I can tell you, yes, the Lusk Center is OWNED by the real estate-industrial complex. They will tell you what the CAR and NAR want you to hear. Sadly, we have no Chris Thornbergs in Trojan land.
That does it, I’m pulling for Michigan now.
Um, Go Nebraska?
“Either that, or the USC Lusk Real Estate Center is in bed with the entire real estate sector:”
It would not surprize me if lusk school did not have it’s arse bent down completely for the REIC. There is a gigantic amt of RE construction activity within a 3-5 mile radius of the USC campus, from the megaconstuction of dwtn LA condos to the construction of affordable gov’t subsidized low-income housing units along figuroa ave south of USC. The entirezone around USC is a hotbed for urban redevelopment/urban revitalization.
“David Dunn felt as if Christmas were stolen from him when prices for neighboring homes in his new subdivision fell by about $140,000. Now, he says, his home is worth less than he owes, making it next to impossible to refinance before his $3,000-a-month payment doubles. Eleven neighbors who bought before the price cuts are in the same boat.”
“‘They put us in a bad financial situation by lowering the price,’ said Dunn. ‘Some of (the buyers) did 100 percent financing, so they’re completely over their head right now.’”
DOH!
I wonder how that first neighborhood block party is going to go over?
“Which model did you get”?
“Uh …. The one that’s 140k less than yours with a pool….”
lol. I can see it now…the “underwater” neighbors and the “financially secure” ones will have separate block parties…
They’ll need barbed wire and attack dogs to separate them from the smug renters who are going to move in with ultra-lowball offers, circa 2008/2009, after Humpty Dumpty has had his great fall.
These guys piss me off. When it looked like they were getting a free lunch, they grabbed with both hands and some nodded to their wife to grab another one.
Now, as usual as history has shown time and time and time again, they are discovering their IS NO free lunch and the weeping and blaming everyone else for their own greed and stupid actions begins. Like I said in a previous post - we are going to see a lot of very busy lawyers getting very rich as this mess unwinds over the next few years.
Silly side question for Pen (or somebody). Why is the word that was spelt “Duh” in the 1950’s now spelt “Doh” ? I’m just assuming it the same word, rhyming with French “jeu”. N’est-ce pas? A lot of you posters have written “Doh” where I would write “Duh”, so there is some systematic change in perception, I guess, given that this word probably is not in Webster’s. (?)
I think “Doh” is from the Simpsons. Anyone know for sure? I can hear Homer saying it in my head.
You are right, it is from Homer SImpson. Doh! was recently added to the Merriam-Webster dictionary. Means something quite different from duh.
I seem to remember the “proper” spelling is:
D’oh!
Kind of like a jolt from the blue, where the
poor victim goes “Oh!”, but his fat tongue sitting
lazily almost out of his mouth gets caught up
first: D’
then: oh!
I’m sure there’s proper linguist term for that stuff.
Anyway, it’s far different from “Duh”, which can mean:
(1) a lazy/stupid response - if done in monotone
(2) a lazy/stupid implication about someone else - if done in wavering tone
There’s probably a paper about this out there by the American Society of Linguists.
I don’t understand how the guy quoted thought he was going to make the payment in the first place. What difference does the house value make???
Exactly! If the guy can’t make the payment, it won’t matter in several months.
Easy: If the house has appreciated in value, then he just refinances into another exotic loan with a teaser introductory rate, and starts the clock over again. Rinse and repeat until he either sells (which he can do at a profit if appreciation continues) or dies.
The wrinkle in this logic is that trees don’t grow to the sky — and when appreciation finally stops (because we’ve already used up two decades’ worth of average appreciation in the past six years), he’s hosed. He can’t refinance if his debt is more than the house is worth.
Exactly.
I’m just spitballing here, but I’d wager the seminars Dunn attended didn’t work their way around to that particular fact, Thomas.
hmm, I would think the bank might want to work something out with Mr Dunn rather than eat the house outright. If all lenders start foreclosing it’s going to be one helluva chain-reaction market meltdown. Game Theory 101 — Prisoner’s Dilemma — with the banks I guess.
Work something out??? He’s not short a few hundred monthly, he’s short a few thou! He can only afford HALF what he’s in. The only workout he’ll be getting is from carrying out whatever possessions he’ll still have when he’s foreclosed upon.
Almost everywhere sales volumes are down 20-40%.
Yet all we see are, at most, the odd 10% reduction in the local median prices.
But on the other hand, the anecdotes seem to all be far worse than mere 10% declines.
How is it possible to reconcile: a) severe declines in sales volume b) virtually no change in “median pricing” c) Anecodotes of individuals getting NO interest and/or slashing their prices far beyond 10%?
Bad data, dude. Gov’t numbers and/or associations whose members depend on good housing numbers for a livelihood are not credible. (Do you think people who can get good paying private sector jobs really want to work for the low paying, slow moving, non-motivated government?)
I got bad news for you.
Working for a big private company is just as bad as working for the government. Worse, actually, because you have no job security!
Job security, LOL! You obviously weren’t around for the early 90’s. Plus, try suing your employer in court for wrongful termination when its the State of California. Trust me, voters are not going to show up to protect state workers at the same time the voters are being laid off and having their pension plans terminated.
Over and over and over again we have to say this:
The people buying today are getting more than 10% “more” house. The shitboxes aren’t selling anymore, and the high-end stuff is 20% off.
So when you have a $1M house, a $900K house and an $800K house you have a $900K median.
Then the $1M house house sells for $900K, and the $900K house sells for $800K and the $800K house doesn’t sell. And if I had enough numbers it would be around $850K median.
So with my example you have sales down 33% and the median down 5.5%. But prices are actually down by almost 9% with a house-to-house comparison.
The median measures how much is spent more than how much is received.
Agree with you absolutely. Even just by consulting my own psychology. As I look at $400K houses whose prices are not being reduced, and $600K houses whose prices have been reduced to $500K, I am much more attracted to the latter.
Me too, I have started looking at open houses in pricier neighborhoods.
Well DUH!!! The FIRST problem is people in their late 20s - early 30s BUYING EIGHT HUNDRED THOUSAND DOLLAR HOMES!
Actually, closer to 900K than 800. Unbelieveable, isn’t it.
Like I mentioned a day or so back, once you get past your household’s lifetime capacity to repay a debt, what difference does another extra $100K make?
Mac, I know he is still 20% short, but think about what ou said. He has taken on almost 1Mil in debt. Think about that. Now multiply that by hundreds of thousand across the country. Too much late night ESPN and computer poker for these clowns. They all think they can run with the big dogs and then…a job loss, divorce, sickness, or worse, the teaser rate ends. Tsk tsk tsk. Even if I made 250K a year, which is still way more than my current salary, I would never take on that kind of debt. This guy is a fool who wanted to play with the big dogs, but in the end is going to get trampled by them. Too bad! I have no pity. Maybe Mr. T can Pity the fool, but not me.
Mac Attack: Did not see your post when I wrote the lengthy query above about why people on this blog so often write “Doh” where I (and you) would write “Duh”. Thanks for validating my version.
D’oh conveys baffled bewilderment on the part of the idiot FB. He’s the one who says it. Duh is irritated exasperation at his imbecilic folly. We get to say that.
HTH.
think about this. the $ value of mortgages is 5X higher this cycle at the top than at the last top.
http://www.prudentbear.com/Bear%20Case%20Library/chart_library_images/chart_library/mtgborrow.html
John, Nice post. A quick question do you think the graph is adjusted for $/house or as it appears total dollar value? Thanks
I think it’s just pure $ amount. I’d like to see it as a % of GDP.
David Dunn is going to have to change his name..
my suggest..
Al Done
G1 or “David Dunn” could become “Well Done”. Like how do you like your steak?
What about “Well Dunn” as in roasted…
Ben Dunn Unto.
I hate to go off topic but I have been kinda busy the last two weeks.
I had to do a job in Chelsea MA (2 Fam) and let me tell you out of the 30 multi family transactions from June-Nov there were 15 forclosers!! needless to say its very very hard to value something with that type of market.
What’s a 2fam going for in Chelsea these days?
A good standard 2 Fam is now $399,000 and going south
with a converted single into a two is $350,000 and going south faster
HonestA-
My hat’s off to you, muckin’ around in Chelsea doin’ multi-units.
My guess is you’ll be doin’ a whole lot more, as the bazillion of inner city sub-prime borrowers all go in the tank.
Your data stats are not surprising. My guess is foreclosures will become the measure of market value.
Deja vu ‘90/’91.
I know that most real estate brokers put out forecasts using the most optimistic support they can find whether they believe it or not. That way they can always justify their prediction based on other “credible” people’s expectations. If the forecast is wrong, blame the other guy. Bothers me to no end.
don’t let it “Bother you to no end”..
an end is fast approaching….
““‘Usually builders keep their prices up. They try to keep their buyers happy,’ said Christie Vu, who paid almost $870,000 for the home she and her husband, Philip Luu, share with their two young sons. ‘In this case, it’s just the opposite.’”
It’s incredible…where do these people get their money to buy these homes? Got o Arcadia, Alhambra, etc…and you see an incredibly large Asian population there. My wife and I work very hard…we make decent money….we could afford an $870K home but would not be comfortable doing it. What are we doing wrong that they are doing right to afford these things? Where do they get their money from?
Well there are basically four classes of Asians three buying houses.
Ones with family money saved since WWII they tend to pay cash are a hugh downpayment.
The next are basically like many debt ridden Americans its a sham their in debt up too their eyeballs they might have a small amount of family money but not enough. Often these are ones that have been “cut off” because of previous losses and I’m not talking about second generation types. Asia probably has more then its fair share of huksters.
The lnext class is second generation generally they are just Asian americans not really different from the rest of us. More they just americans that happen to have asian ancestry.
Finally of course their are the poor asians but their not buying houses.
Thus the only real difference is some asians ( not the majority ) have access to asian family savings for making large purchases.
I’m american but my wife is Taiwanese (Chinese descent) and I lived in Asia for many years.
She should teach you to spell.
Sorry I have dyslexia accidentally sent that.
Although you should see the responses I get sometimes.
You have no idea what I went through before spell checkers become common.
Were you some of the folks who wrote “I am NOT Japanese” on your windows during WWII? Cuz my family had jack squat after the war.
Easy, they have more than 2 income-earners contributing to a house. It’s very typical in Asian societies for the grown kids, parents, and even grandparents to live in the same house, all earning a wage. Not too difficult to accumulate 12K-15K per month, especially if mother and grandpa earn 5-6K “under the table”. So you have a $5-6K mortgage, 3 beemers to share among the entire family, and still live in reasonable comfort.
It’s called: teaser rates, ARMs, IOs, refinancing forever, no documentation, negative amortization, 2-4 families living in a home, 80/20, 125 LTV, pick a payment, zero down, 40 year mortgage, 50 year mortgage, sub prime lending, interest-only, more than 100 different types of mortgages available. We have tried just about everything, but the Japanese 100-year mortgage.
Think about it. If you can think of the loan, it’s been tried. There is no way to make it work anymore. The numbers don’t pan out when you are talking about an 870K mortgage on a house like that. Something on the beach with 3 floors, several bedrooms and you can put down 50%, yes. Not that kind of tract housing in the middle of the OC. In short, that is how these people are doing it. I know odds are that this couple did not put 175K down with a 30-year note at 6% fixed for the life of the loan. If they did, they might be somewhat upset about the 140K loss, but not as much as I sense from this article, since they might stay until the house is paid off or they can seel at the top of the next bubble.
They probably scrimp on other things - vacation, dining out. Also, may be two families in one house.
When they go under ask yourself that question again, when wrong equals right.
First, they cannot “afford” these homes. Which leads to the second point, they get their money from lenders who no longer care about lending standards (although that may, finally, be starting to change).
Look at the guy in the story who has an option ARM with a $3K/month payment (obviously, he’s picking the lowest payment option). He is afraid that his payment is going to go up to $6K/month, and he can’t afford that. So, the reality is, he can’t afford his home, but he will live it in until the bank forecloses (and he won’t be able to re-finance it, which was almost certainly his plan, since the comps won’t support the new loan). Consider that 1/3 of all loans in California in 2006 were option ARM loans (and that there are over 580,000 active option ARM loans in California), and you see that people cannot afford their homes.
Don’t trust the CAR with their new affordability statistics (which are still bad, at about 24% for OC). The NAHB/Wells Fargo affordability statistics (which have not changed their methodology) show affordability in OC at around 2-3%.
So, you aren’t doing anything wrong. You are renting a place to live at a fraction of the cost to purchase. You are avoiding over-extending yourself financially. It will take some time, but you will be rewarded for your patience (assuming that you want to buy a house at a reasonable price).
Nailed it. Well said.
They work in force. A typical household may have two working parents, a working grandparent, 1-2 working grown children, and voila, you have 12-15K in income. Factor in that probably a couple of them are bringing in income “under the table”, and they can fairly easily afford a 5-6K mortgage and 3 BMWs to share. This is very typical Asian culture.
I’ll tell you how they afford these things - bank of mom & dad. No joke. Local paper had an article recently about how aging parents are lending/giving their adult children money to buy real estate because they can’t get into the market otherwise.
Yes, but where are Mom and Dad getting that $ from? Can you say “Generational HELOC” ?
Okay, story about 3 Asian (term is too broad, IMHO) families I know:
1. Vietnamese gardener. Wife takes care of the books & he (sometimes son, also) “mow, blow & go”. He’s the least expensive gardener I know (was $17.50 per visit for standard San Diego lot in 2004). They saved, saved & saved…bought “cheap” real estate…saved some more…bought more “cheap” real estate and paid cash for their final house (about $500K).
2. Japanese family. Husband is a manager at a grocery store (large chain). Wife is a **very inexpensive** maid & helps a friend with an at-home daycare. Sending/sent their only child to UCSD (goal is med school). They saved, saved & saved…bought “cheap” RE…saved some more, and own thier final house outright.
3. Chinese family (wife is Chinese, husband is white American). High-paying jobs in bio-tech. Made out like bandits with options & purchased their home cash.
Summary, of the three Asian familes whose financial circumstances I know fairly well, each has purchased their homes **CASH**. It was all earned and saved, to the best of my knowledge.
Oh, none of them have a fancy car or shop at Nordstroms, BTW.
FWIW…
I can only recount my own anecdotal observations (my family emigrated to the States from South Korea when I was a baby). My parents started with nothing- he came over with my uncle and started off waiting tables at a restaurant. She was a stay at home Mom along with my grandmother, who also emigrated. A few years later, after saving scrupulously, e.g., five of us crammed into a 2BR/1BA apartment in the ghetto, they bought a small dry cleaning business. After working 12-hour days, 6 days a week, the business prospered and they managed to save enough to buy a modest split ranch house in the burbs. Still, they saved relentlessly and over the next decade managed to buy two rental houses, building lots in Florida, commercial land, gold, stocks, bonds, etc., while putting one kid through law school, and another one through a local university, all the while working 12-hours a day, 7 days a week. They put down 50% on their current house and paid the rest off within ten years.
They cashed in their chips and retired comfortably in their mid 50’s. Even in their best year in business, I don’t think they cleared $100K between the two of them.
I don’t have to work nearly as hard as they did. Even though I have been making well into the six figures since my twenties, I have learned from my parents about fiscal responsbility and about saving money. In fact, these days they are calling me a cheapskate! Along the way I made some money in real estate and saved relentlessly and took risks that have been rewarded for the most part. I currently reside in Manhattan, drive a BMW and have a house in the Hamptons. And I did it all on my own as a single person, now in my mid thirties, without any handouts whatsoever from my parents. I suppose most people look at my situation and suspect that I must have inherited money or that I have a trust fund or rich parents. And, of course, there’s that Asian stereotype that we all have money sources in Asia, that we are all tied to the Asian mafia, ten of us live in the same house, etc. I think it’s all rather amusing… and if that’s what makes people feel better about themselves, fine. Please just don’t automatically assume that we are all of the same ilk.
The LA Times reports that even as housing prices have begun to fall in nicer areas, the ‘hood is showing 20% YOY appreciation:
http://www.latimes.com/business/la-fi-homes13dec13,0,3388249.story?coll=la-home-headlines
What, aside from either (a) massive mortgage fraud, or (b) ghastly predatory lending of unsophisticated buyers — saddling them with option ARMs with 1.25% introductory rates and 9%+ actual APR’s — could possibly account for this?
Lincoln Heights up 18.3%. Well of course!! What a beautiful area to walk your dog down the street, have a smog sandwich and get shot in the face. Me thinks the ground is coughing up a little radon gas in the hood.
“The LA Times reports that even as housing prices have begun to fall in nicer areas, the ‘hood is showing 20% YOY appreciation: ”
I did a through examination of Dataquick LA zip prices for october on a previous long post. Did note yoy % increases of 20-30% in some notorious LA crapzones and still believe that there is massive overappraisal/mortage kickback schemes in selected areas of inner LA. Will wait for dataquick to come out with november zip prices and do further evaluation. Will also repost the data findings from october this evening.
Note: i have extensive knowledge of LA inner city zip areas, the demographics, economic profiles and amt of physical infrastructures deterioration for large portions of LA innor cities so i can pretty much determine whether such and such zip area is way overpriced. Look at gardena 90248 or lennox 90304 which are extreme LA crapzones and showed 4 homes selling for around $600,000 each(oct data). Could be drug dealer purchases or extreme appraisal/mortgage kickback fraud but no way it should be priced at OC/Ventura median selling prices in a normal market.
I used to drive up to USC from OC for school. I’d get off the 110 at the 105 and drive up Hoover Street, right smack in the middle of those ZIP codes that are going up at 20%.
Every building on Hoover that wasn’t boarded up was (a) a storefront church with a handlettered “Zion Holy Spirit New Life Temple” sign; (b) a hooker motel; (c) a liquor store, or (d) a straggly used auto-parts outfit. The Times is telling me houses in those areas go for $450,000. I make well over $100K, and servicing a sustainable loan on that amount would be pressing on uncomfortable, even with a moderate level of student debt.
I would wager that every single one of those bullet-riddled houses (”that’s not a house, it’s a gazebo!”) was bought with a suicide loan — and not one in 10 of the borrowers has the faintest idea what was in the fine print.
Some nice people have taken it upon themselves to administer one more screwing to the underclass, doubled up with a nice screwing of Asian insurance companies. I swear, sometimes people make me start thinking forty days and nights of rain is called for. Or the fire next time.
Speaking of which, when the fertilizer definitively hits the propeller in those areas (i.e. loan re-set time), look for the number of burned houses to surpass 1992’s.
This is a repost from OCT Data Quick LA rediculous price runups in LA slumzone zips, only provided 4 examples to shorten this post:
IS THERE POSSIBLE APPRAISAL/MORTGAGE KICKBACK FRAUD GOING ON IN LA INNOR CITY AREAS?
Just checking on the Oct dataquick figures for price runups in some of LA’s most slummy,
rundown zips. Attempted to find a pattern of possible abnormal unusual pricing which
runs counter to the normal october pattern of most LA zips showing essentially flat,
slightly rising or declining yoy’s. There may be a possibility of massive overappraisals and
mortgage fraud/ kickback schemes in these areas: there is no way that homes should be
priced/sold at the values indicated in these nasty decayed rundown areas:
City, zip, SFH’s sold, Median sold price YOY % , short description of area
Gardena 90248 2 $595 32.2% : E of 110 fwy in grimy industrial district, heavily immigrant
Inglewood 90304 2 $560 45.5% : lennox, unincorporated, heavily immigrant, hi-crime area.
LA 90037 26 $490 24.8% west of 110, s of usc, n of slauson. Another decayed Ccentral slumzone
LA/Lincoln Heights 90031 13 $499 43.2% : Includes
China town, Solano cyn. Ulgy rotton grimy industrai area NEast oF LA dwtn, heaviy immigrant
“would wager that every single one of those bullet-riddled houses (”that’s not a house, it’s a gazebo!”) was bought with a suicide loan — and not one in 10 of the borrowers has the faintest idea what was in the fine print.”
Who is the screwer and who gets screwed? I would bet that most of these purchases were made by recent Hispanic immigrants, with maybe several low-income earners signing the loan doc’s. I will bet that if the s*t hits the fan and they default on pmts they will simply walk away with very little consequences, and the lenders get screwed. Ever try to obtain a default judgement against immigrants who can shift their addresses or simply flee back across the border. Not to mention that many of them are using fake id’s/’borrowed’ ss numbers/phony names/fake addresses in the first place. How will the IRS mail out the 1099’s if they cannot locate the addresses of the original borrowers? The Banks and secondary MBS holders will end up swallowing the losses on many inner LA city POS bullet-ridden claphouses.
My MIL was getting calls a couple of months ago from an agency in Texas. Some Mexican family purchased a house and used her SSN on the docs. When they walked away from the house, the agency tried to collect from my MIL. She got it worked out, but it took a lot of effort on her part. This definitely happens.
Hey Gekko, Paul in Jax, HFA (and any other Wall Street koolaid drinkers)…
Phase Three: The Speculative Blowoff
I particularly like this section:
With the S&P 500 currently trading at nearly 18 times fresh record earnings, on record profit margins, it seems clear that the current bull market is well into its third phase. To anyone who examines more than one or two decades of market history, even a multiple of 18 is very rich by historical measures, and can’t be reconciled simply by reference to interest rates or inflation.
On closer inspection, of course, valuations are even more hostile. Over the past three years, profit margins have widened to record levels, which has detached P/E ratios from other fundamental measures – such as price/revenue, price/dividend, and price/book ratios. The S&P 500 is currently about double its historical norms on those metrics. That isn’t a forecast that stocks have to eliminate that valuation gap, but it certainly does suggest that stocks are priced to deliver unsatisfactory long-term returns from these prices.
It bears repeating that if profit margins were at normal levels – even on the basis of profit margins that prevailed during the 1990’s (indeed, anytime prior to the past 3 years) – the price/earnings ratio of the S&P 500 would currently be nearly 25. Unless investors want to speculate on the notion of a “permanently high plateau” in profit margins, the stock market is strenuously overvalued at present. Neither current earnings nor “forward” earnings should be considered – in themselves – as anything close to robust or reliable metrics of value here.
John P. Hussman
Thank you very much, tj, appearing to validate my decision to keep no more than 1% of my total assets in US common stock. The 1% is what I think of as play money.
‘Unless investors want to speculate on the notion of a “permanently high plateau” in profit margins, the stock market is strenuously overvalued at present.’
What makes you think a huge liquidity blast from the stock market’s Price Czar won’t keep the stock market permanently overvalued?
Let’s not forget Ventura. Some how they moved into the lead in So Cal. Down 8%. YIKES. That spells doom for Bakersfield - they were gobbling up our homes with their “hard earned equity” in 2003-2005.
We’re #1! We’re #1! It’s about g*****n time!
“The median price in Ventura County also depreciated, falling 8.2% year over year to $562,000 as sales slid 30.8%.”
Ouch!
But I thought things were “different” in Ventura?
Growth restrictions… and all that associated bs?
Robert Coté would be the guy to answer that question. I personally think the “growth restrictions” are a load of horse shit. They’ve built like crazy in Thousand Oaks, Moorpark, Camarillo & Newbury Park (Conejo Valley area) in the last few years. The traffic is getting ridiculous. A few years back, I would have been content with living here the rest of my life, but I’ve since changed my mind. That small town feeling ain’t what it used to be here. With that in mind, 8.2% is a great start but it only wets my appetite.
And to think…I once thought Ventura was near that coveted (only for the elites, who don’t care about housing costs) California coast. Must’ve been wrong…
actually there is believe it or not an impoverished, down on their luck population of assorted low-wage workers, farm immmigrants, blue collars, underemployed or unemployed boomers residing in impoverished zones such as El Rio,parts of goleta,dwtn oxnard,ect. El Rio which is next to the Riverpark looks like a real trailer-trash dump zone. There are tons of illegal immigrant laborers in SB, who must reside somewhere is some dismal locales between SB dwtn and goleta somewhere off hollister ave. The SB ‘gold coast’ is deceving:the only locals residing there and in old Ventura dwtn are equities-rich senior citzens and aging boomers laching onto their parents housing wealth. Take a walk down Main st in the attractive historical old twn of ventura and you see at least a dozen thrift shops with such names as the retarded childrens or abused senior citizens thrift stores. There is also a white trash/middle/working class punk element in old Ventura. Sure , the coast here all way to SB is pristine and unspoiled by development, but that dosen’t lead to a booming economy which can maintain $600,000 Ventura or million dollar SB median home prices.
And Bakersfield is such an attractive place to live (lol). I’m totally stunned that such a wonderful area isn’t attracting more buyers. Joking aside, if a builder was selling a McMansion for $100,000 in Bakersfield I wouldn’t buy it.
Of course, if you grew up in Bakersfield, planned to raise a family in Bakersfield and wanted to live there - then I suspect even you might buy. In some ways, real estate is local.
Uh, I think that…if given a one time get-out-of-town ticket…95% of the people in Bakersfield would leave. Oil, carrots and pesticide dust.
For that price I would. You could (as I have) rent a nice place for $1250 per month and have some nice cash flow. However, a McMansion today will cost you $600-$900k
My friend’s twin brother, Monty, was a worm farmer in Bakersf***. Sitting all day waist-deep in manure. I think crispy&cole can imagine how perfect that encapsulates the B-town existence.
“‘It’s not just the financial aspect. It’s the emotional,’ Dunn said. ‘We can’t eat, can’t sleep. I can’t concentrate on work. This is all I think about.’”
Ya know, I can imagine exactly what was going through your head when you bought this cash cow with your friggin’ IO Option Arm, and with the kind of mood I’m in today (kidney stone put me in the ER) all I can say is FU.
Mr Dunn ought to write down his feelings of anguish in a letter and mail it to the citizens of Iraq. Or Sudan, or Liberia, or Haiti or Afghanistan, or any one of dozens of hellholes on the planet that has real suffering. I’m sure they’ll have loads of sympathy for the greedy overextended American FB.
Think about this, 2 out of 3 people in the world is either jobless and/or starving everyday. Mr. Dunn let me introdude you to Mr. Dumm. You know, I hate to say this, but a damn big giant of an arse depression might be just what the doctor orders for this country. Hey, it is okay to be rich, but when that is what consumes (pun intended!) most Americans it is time to Man Up as well as Tighten the Belt. There is a reason the greatest generation is called that. They know what hardship is. A depression followed by a world war and rationing of domestic items. Rationing, what a concept. They also built this country as a manufacturing giant after the war.
What do we all do know? Well if you are Goldman Sachs a sh*t, you fleece people, or may be move papers and get a fat bloated commisssion. We are truly screwed and a big economic crater is what we need. I know my grandfather, if he were a live, or my father, if were alive, would say no, but it is high time this country feels some pain, esp. for the banksters and fraudsters.
I know this rant will not go over well, but I think Thomas said 40 days or fire. No, a major economic bust is what we need to clean up the slush and get people focused on what is important. It also needs to last since we can see how long the Tsunami and Katrina held our collective attention, oh, about 5 mins.
And don’t give me that crap about the most generous country. I hate hearing that. On a per capita basis we aren’t and even if we are it doesn’t negate the fact that they are a lot of crooks and just plain greedy SOBs in this country.
Don’t get me wrong, I don’t want to see pain, but I think a lot of people need to learn a lesson, a very hard lesson about what really matters in this life. BTW, I don’t care about the rest of the world on this one. So what if the Germans or the French or whoever does what or has the same type of people, I don’t live in those countries. I live here and have to deal with them here.
Rant over!
Hey, why shouldn’t I consume whatever I want? Its not like we’re at war or anything! Why should *I* have to sacrifice?
You are completely crushing my view of librarians with this excellent rant OCDan. I don’t think we ever would have heard this from Alice on ‘Ghostbusters’.
OCDan,
The big picture is this: The truly wealthy are “indemnified” by the comings and goings of the masses.
in·dem·ni·fy (ĭn-děm’nə-fī’) Pronunciation Key
tr.v. in·dem·ni·fied, in·dem·ni·fy·ing, in·dem·ni·fies
1. To protect against damage, loss, or injury; insure.
This is why a Dupont can roam around his “estate” in an army tank.
Clinton’s / Bush / Cheney … all Dupont wanna-be’s
Dupont used money…these guys use the Secret Service.
They’re “Untouchables”.
Don’t forgive to check the $1.00 box for the election of the President on your tax forms this year.
I feel your pain. I had lithotripsy on a 2.5cm stone last year.
Nothing saps the will to live or let live like kidney stones.
Screw ‘em all!
I dunno, I reckon gallstones give you a run for your money too.
That being said, having a kidney infection is possibly one of life’s most miserable experiences
I’m starting to see a pattern. Ordinary shmoes like our friend Dunn here are going to be bearing the lion’s share of the pain, while the people who gained the most from the bubble will come out relatively unscathed. We’ll continue to see a bloodbath in these scruffy exurbs while wealthy enclaves go sideways at worst.
Did everyone see the Goldman Sachs bonus numbers today? I’m told that the AVERAGE bonus for the 29,000 GS employees is well over $600k this Christmas. Of course that means many thousands of them are getting checks in the 7 figures, and hundreds into the 8 figures — that’s one merry x-mas I’d say.
And think about where they get all that money. Can anyone say commissions. Man I am pissed. That is some easy money.
That money is coming from fleecing the middle class retirement / pension funds as well as the individual investors. Ever heard of naked shorting?
Know what “new money” is? It’s old money that got away.
that’s a line from a movie I saw years ago, can’t remember the name of it anymore. Anyone know?
Of course they have to fleece the retirement/pension funds - the wealth has to be transfered back. Plain and simple, the American worker did too well during the postwar economy and now that wealth - earned by the “greatest generation” needs to be brought back home to where it “belongs” - with the modern day equivalents of the 1890s robber barons.
Easy money?!?
Wow. Try working at GS and then decide if it’s really “easy money!” Bear in mind that the average employee is getting nowhere near the average bonus: the bulk of that money is going to the real stars who made serious money for the firm.
The people getting the $600K bonus this year basically sold their lives to GS for the past year: call their phones at 10pm and they are still at their desks; make a dinner date with them and you get a 50% cancellation rate (work came up at the last minute.)
It’s not an easy life: most people burn out at it after a year or two, many others are just managed out. 99.9% of the population would fail if they took the job.
oh yes so much harder than supporting 2 kids as a single mother with no health care working 2 jobs.
cry me a freaking river.
“Wealthy enclaves go sideways at worst” - I think only the urban wealthy enclaves will be spared. Georgetown, yes. A favorite example of what happens to exurban wealthy enclaves is a house in Nahant (MA) that sold for $110,000 in 1928 (I think) and $11,000 in 1933.
Hey, my family is from Nahant. Aside from the fun of hearing it mentioned, do you know where the house was located?
That’s consistent with general economic trends in this country …
Think about it. The average CEO gets millions of dollars in severence pay if he does his job poorly enough to get fired. Meanwhile, the same companies are laying off productive workers to pay for the CEO’s firing bonus. The entire mechanism of free-market capitalism (competition in the marketplace resulting in better and more efficiently produced products) is slowly drifting into decay …
Annata –
The CEO compensation situation is so twisted I cannot fathom it…
“We’ll continue to see a bloodbath in these scruffy exurbs while wealthy enclaves go sideways at worst.”
Not here in LA.
http://www.latimes.com/business/la-fi-homes13dec13,0,3388249.story?coll=la-home-headlines
Best neighborhoods are biggest losers so far. Beverly Hills 90210 down 15.7% YOY according to DataShtick.
“One community revving at high speed is Lincoln Heights, where the median price rose 18.3% to $491,000 in November, DataQuick said….
Located just north of downtown L.A., Lincoln Heights has seen a surge in home buying after Puerta del Sol, a new condominium complex within walking distance of the Gold Line, opened for business a year ago.”
Lincoln hts is a degenerated slumzone poplulated with immigrants. There is a however the USC medical complexes and other assorted Government bldgs off De Soto/marengo drive, which apparantly created a surge in demand for those Puerta De Sol Condos. This is a case where a select number of newly-built housing units catering to a specialized localized jobs sector(Gov’t)creates a one-time YOY % boost in an areas median home prices,which actually masks the real state of an area(Lincoln hts), which is in reality a real depressed run-down section of LA. Don’t let this LA times article fool you:they are shilling for the REiC.
Do you think that this “affordable project’ did not get special Gov,t treatment? Read this:
“the company(AMCAL), which gets special government tax breaks for building below-market-rate housing, plans to begin construction on a community of 50 detached homes next spring.”
This is a case where The gov’t steps in and subsidizes low-cost affordable housing to benefit, guess who, Gov’t workers. I read that Santa Barbara is doing something like this to provide affordable housing for univercity personnel at UCSB.
“David Dunn felt as if Christmas were stolen from him when prices for neighboring homes in his new subdivision fell by about $140,000.
Clearly Mr. Dunn has no idea what Christmas is all about.
T’is better to give than recieve. What a scrooge, Dunn is!
“‘It’s not just the financial aspect. It’s the emotional,’ Dunn said. ‘We can’t eat, can’t sleep. I can’t concentrate on work. This is all I think about.’”
I just love being a smug, debt-free renter. Babies don’t sleep this good.
I am sure that all those FBs and GFs out there are sleeping like babies…
(waking up and crying every two hours)
Stop it! wettin’ my pants laughing ….
That is not funny if you have a baby in the house.
I would kill for a couple of nights in a row on uninterrupted sleep.
SSBG,
You guys have another one, or is your first still keeping you up?
BTW, just in case you’d be interested, I can recommend a book which will help get your baby to sleep through the night. Worked for us on all three — like clockwork — was recommended to us by friends and it spread like wildfire through our social network. Everyone who’s tried it swears by it.
Same one at 7.5 months.
We are using Ferber’s book. It works mostly but the baby seems to have a macro sleep cycle.
3-4 days sleeps 9-10 hours.
3-4 days sleeps 4-6 hours.
In case you check back, the book I’m referring to is “On Becoming Babywise” by Ezzo and ???? (forgot the other name). Haven’t read Ferber’s book, but am aware of the “Ferberizing” theory.
I like the “Babywise” book because it has some nice messages about the family unit, team approach, etc. I practically used it as a road map for the first. Had it down by the time the other two came along.
Good luck!!!
No kidding. I’ve had three kids two years apart, with the latest (and last, if I have anything to do with it) still in the baby phase, tho’ fortunately having settled down to sleeping through the night (once we can get the $#%# night owl — just like his dad — to actually go to sleep).
I’ve thought more than once that Herod the King got a bad rap for that little unpleasantness in Bethlehem. He just wanted some peace and quiet for a change. Can’t say I blame him…
Check out the YOY change in SFR prices for my zipcode:
Rancho Bernardo W 92127 20 25 $1,050,000 $770,000 -26.7%
With rents at 38% of ownership costs, you could fund a lot of 5.8% annual rent increases off $280,000 saved by not buying last year.
No kidding.
-26.7% or $280,000. Hmmm….
Let’s just think for a minute about the surfeit of “women buyers” the New York Times identified recently.
We all became acquainted with them - those who can “commit” and “make an investment”, who (some cajoling their partners) thought that whatever rent they might pay in the coming years would exceed their possible housing loss in a slowdown.
“Well - good luck with that.”
“Women Unafraid of Condo Commitment”
New York Times - December 10, 2006
http://www.nytimes.com/2006/12/10/realestate/10cov.html
Aargh, you guys have said it before: as an entire gender we women are woefully lacking in quantitative skills and a little too big on “commitment”. BTW did I ever mention that the large majority of my CLIENTS are also women? Persons who are quite willing to pay much more to buy than they would to rent. Instead of arguing with it, I decided 13 years ago to take advantage of it.
Thanks jack, good link. I can recall the Tribune here in Chicago running similarly themed stories about that great untapped reserve of single women buyers out there. They feature the same anecdotes about the intrepid young successful woman buying a condo in the city - or even the suburbs around here. What’s that supposed to do - challenge the man folk to go out an buy overpriced condos too? Have the RE boosters sunk to issuing challenges to our machismo?
It’s great that urban single women are buying condos - except for all the cat pee that’s gonna soak into their carpeting and stink up the joints.
More homeowners missing payments
Orange County homeowners are missing payments and losing their homes to the bank in ever increasing numbers.
http://tinyurl.com/yb2nyz
OCKurt it is going to get uglier as the months pass. OC is waaaaaay overpriced and overrated. i love RSM, but come on, 800K for 2500 sq. ft. on a 4K sq. ft. lot. You gotta be kiddin me! Then throw HOA, everyone has one in this county, and taxes. Ouch. The pain is a comin!
Hi OCKurt and OCDan, yeah, I am eagerly awaiting springtime when I expect to see Woodbury explode in a wave of foreclosures…Think about it - they started selling in what, late ‘04? Can we say, height of bubble? What percentage of FBs there would you estimate used toxic loans to get in? I am just salivating - it’s 8 minutes away from my job, down Irvine Blvd., and in 2008 I expect to buy a really nice house right within walking distance to Trader Joe’s. Mama’s so happy!
keep waiting….6 houses out of 8 on my Cul-de-sac off Barcelona are owned by Orientals.
My wife has the same Woodbury fantasy, and it is about 5 miles from my work near the Spectrum. Even if the prices don’t drop enough, I may rent there for a few years and wait for it to bottom out before I pounce.
“David Dunn felt as if Christmas were stolen from him when prices for neighboring homes in his new subdivision fell by about $140,000. Now, he says, his home is worth less than he owes, making it next to impossible to refinance before his $3,000-a-month payment doubles. Eleven neighbors who bought before the price cuts are in the same boat.”
“‘They put us in a bad financial situation by lowering the price,’ said Dunn. ‘Some of (the buyers) did 100 percent financing, so they’re completely over their head right now.’”
This is incredulous! Does anyone take responsibility for their own financial decisions?… or is it always someone else’s fault?
There seems to be a lot of happy faces when certian bloggers relish in other people’s misery. Remember, Dunn, though obviously lacking some common finanical sense - took his “Q” by the barage of inaccurate media proproganda that keeps churning from leaders throughout our economy that everything is safe and sound. From the supposed Financial experts who’s voice of reason are splattered over front pages of newspapers that are obvious “under the table money to calm the masses” - many bloggers glee is directed at the wrong people - many are gonna pay a serious price when this all unfolds - and those who initiated this illiusion in the first place are sitting with their vast wealth waiting to pray on the average american who simply wanted to have the american dream that has been drilled continously into our heads…..our distaste is truely marked at the wrong people…
I cannot see the look on my fellow bloggers’ faces as you clearly can, but I can tell you that the look on my face at the moment is one of shocked astonishment.
I think he meant those little yellow things the computer prints that look like smily faces. (Since you are clearly a sophisticated person, I have fun trying to tell you what I think other people mean. Like the so-called parabolic price movements.)
To the extent that “the barage of inaccurate media proproganda that keeps churning from leaders throughout our economy that everything is safe and sound” is probably sound. I certainly question the sanity of an individual who buys without seeing if he can afford the purchase. I do not feel smug.
Ah,…. I must of skipped over the picture of the Financial Experts holding a gun to Mr. Dunn’s head as he was buying a 800 fricken thousand dollar house!
I guess Mr. Dunn could have roommates like I did for 16 years or so after I bought my house. However, a jump from $3K to $6K would require about 5 roommates at $600 per month. How many bedrooms?
We have fired 1,000 times more missles at DL, Apple-Head Young, Michael Youngblood, Kudlow and all of the other REIC sympathizers/perpetratures; than all the Mr. Dunn’s combined.
Yes we are gleeful - partially out of relief that hey economic fundamentals do matter and there was not any “new paradigm” and that it was “not different this time”. We tried to warn people and now it is too late - the tsunami is coming and MANY STILL DON’T believe us. So we are heading for higher ground and all those who called us Chicken Little (see my blog, as a realtor actually called us that) will be their fate as we enjoy the show - Pass me some popcorn!
We have beat this topic to death before, on multiple occasions.
I would characterize it as vindication rather than glee, however, the piper has gotta get paid and better Dunn than me and my family doing the paying.
I do take pleasure in their misfortune and feel no guilt in doing so. Perhaps it’s a character flaw, but I couldn’t care less.
As my wife said when I told her about the article and this ridiculous lawsuit, “These people think they’re victims? *We* are the victims, renting and waiting years to buy because these people ran up the prices.”
Amen to your wife, Betamax!
“From the supposed Financial experts who’s voice of reason are splattered over front pages of newspapers that are obvious “under the table money to calm the masses”…
Diaper,
Just to pick one example from your post, newspapers do earn a good percentage of their advertising dollars from real estate, and so one could see a conflict of interest in their reporting on the downturn in the housing market. To me, they have been exceedingly slow in reporting on mortgage or appraisal fraud, or even following the growth in toxic mortgages aimed at the subprime market. But how do you get “obvious under the table money”?–clearly advertising dollars are on the table and plain as day to any sentient reader.
The issue here is a buyer named Dunn, who chose to purchase a 800k house, knowing in advance, that he could not afford the monthly payment. It’s as simple as that. He shoehorned himself into the deal with a teaser rate and figured he could refi into a lower rate when his house appreciated. Well, the market turned against him and his gamble, which is what his purchase was, went south. Now he’s whining because he lost his bet. In athletes, we call this being a sore loser-in adults, we call this greed and reckless irresponsibility.
The American Dream is one of freedom, individual responsibility, and personal values, not gambling on houses, spending heloc money on consumer crap and whining when your bets don’t pay off.
“Sales continued to tumble. In November, the number of homes sold was the fewest for any November since 1997, DataQuick said. ‘Obviously, there’s a correction going on, but it’s not going to collapse,’ said Delores Conway, at USC. ‘Even with prices flattening, it doesn’t mean that we’re in a serious housing downturn.’”
I agree with conway. So far, LA has merely reverted to the pre-bubble (1997) sales pace. The downturn will not get serious until prices revert to 1997 levels.
Yeah, declining sales volumes hurts realtwhores but does little to help those waiting to actually buy a house.
I’ve said it a dozen times and anyone who has traded even at an amateur level knows this…volume always precedes price…always. Patience will be rewarded.
“I would just like to know where this attitude came from. I know I could blame it on say, sin or vice or trying to keep up with the Jones’, whoever they are, or Madison Ave. However, I think there is more to that since this attitude of entitlement is so pervasive and embedded in our nation’s attitude and belief system right now. When, where, and how did it get this massive and out of control, I guess, is the question I am asking. ”
Watch Chompsky’s DVD’s. We as a nation have been perversely inundated with media driven consumerism gone berzerk. TV watching, crap buying robots is the result. Just look around. Crazy, isn’t it?
DOC
The question to ask is who are the media.
I find this a persuasive argument as to the cause. http://www.mises.org/story/2411
Thanks tg…Great post…free education is a good thing! Now I’m back to those Berkeley Lectures
One more comment in the “I can’t believe they paid $870K for that sh!tbox” vein:
The property taxes on that house run $900 per month ($870,000 times .0125 over 12). In most of the rest of the country, including many large, agreeable, economically vibrant cities, you can rent that ENTIRE HOUSE for the same amount or less. That’s for JUST THE PROPERTY TAXES! And may even get a better house, with a bigger yard, nicer neighborhood etc.
Mr Dunn got caught in the greedy speculation trap and took on a expensive house he couldn’t afford and he will suffer as a result .
That being said ,Mr Dunn might have some points regarding the faulty appraisal and the Builders bad faith .
There is some evidence here that the appraisal was inflated and faulty because the builder slashed the prices 140K in a very short time from the Dunns sale ,( which suggests that the builders was in bed with the lender & appraiser) . Clearly the lender was scum if he gave a guy that big of a loan that he couldn’t afford long term .
There are thousands of borrowers that bought in to this faulty investment advice from the RE industry along with the bogus appraisals .
The Lender and appraiser failed the Dunns in this case as they did many ,but the Dunns will pay dearly for trusting a RE industry that was playing on clients greed with faulty investment advice ,inflated appraisals ,and faulty qualifying standards .
If Dunn were somehow able to prove that the builder planned to reduce prices at the same time it sold Dunn a house fo $800K, he might have a claim for fraudulent concealment. A generous judge (and I’m finding most of them are at the demurrer state) might accept a theory that the builder’s concealed intent to cut Dunn’s legs out from under him constituted a material fact that Dunn was entitled to have disclosed, and let the case go to a jury. In which case, get ready for your *oof* moment, Mr. Builder.
Plus the Mello-Roos taxes (I think another .2% or so for new construction) and HOA dues. Ouch.
First off, an appraiser who charges $400 for each appraisal which typically takes somewhere in the range of 6-12 hours to do between the inspection, researching the comps, driving around looking at the comps, writing the report, and producing four copies of the report is a pretty poor scapegoat. Besides - they are not hired by the buyers to ensure that the price they paid was right - they are hired by the bank to ensure the quality of the loan they are making. This is just another lender fee that is paid by the buyer and the courts have shown that the lender has the right to rely on the appraisal, but the buyers do not. It is not uncommon to go find comps outside of your development when there aren’t any sales in yours - such as with the first release of homes as seen here. So yes, there are unscrupulous appraisers, but it is not the norm - it is not in their best interest to make a few extra dollars to jeopardize their entire career with regulatory action by the state.
Secondly - are these buyers on crack? They are buying houses for over $700,000 and they are surprised that their monthly payments are going to be over $6,000. What the hell did they expect their payment was going to be?
Thirdly - sounds like they got burned by the developer off-loading inventory though - too bad for them. But really, the time for investing in houses has been over for a while - buy one to live in it if you can afford it - everyone else is just being foolish. Getting an adjustable loan in the last 24 months was stupid - everyone knew interest rates were going up.
Mr.Dunn was a greedy speculator ,but is it right that the builder was in bed with the lender and appraiser . The builder quickly slashed the price 140k a short time from the Dunns purchase ,which suggests that the appraisal was inflated . The lender no question put this guy on a loan he couldn’t afford .
The Dunns were stupid to trust the real estate industry/appraisers /lenders/and they will pay dearly for their mistake because they were blinded by their short term investment greed .
I posted this before and it didn’t take so we might see double .
So? Dude knew he couldn’t afford it, so he was “in on it” too.
We only feel bad for the home buyer because now he’s the main one losing. If prices appreciated, could the builder sue the homebuyer because he “colluded” with the appraiser, knowing the value would go up and rob the builder of his righteous profits? Didn’t think so.
To those poor folks who can’t afford their upcoming 6k house payment:
Are you the same people who looked down on me and my wife because we rent? Or, did you claim that we were throwing our money away? Or, did you talk about how much you were “making” on your house? I imagine it was fun. Well, now it’s my turn to have fun. I will allow myself a little grin. I won’t twist the knife by comparing my wealth to yours…now that yours has proven to be illusionary.
These folks won’t be able to rent either. Foreclosure, bad credit, no cash left, who gonna rent to them?
I share that sentiment. We have friends who have made derogatory comments about lowly “renters” as if we are interlopers in the world of “owners.” While they lay awake at night stressing over their dissapearing wealth illusion, I will giggle myself to sleep.
One thing that completely blows me away is comparing the foreclosure numbers to the units sold number reported by DQ. In Nov 06 in Riverside County, there were 700 to 800 foreclosed properties on the market (which, incidentally, is up about 500% from Nov 05). Note that the DQ sales stats for Nov 06 report only 3,794 sales. In other words, there are about 20% as many foreclosures as there were sales during the month of November. Compare that to Nov 05, with around 120 foreclosures and 5,542 sales, representing just 2% of all sales, and you can get a sense for the misery that’s in store for the IE.
I suspect that next in their little bag of tricks to keep pretending home prices are going up they will simply factor the interest rate of the mortgage i.e if it’s 6% then the house “value” goes up 6% a year. Kind of like here in Cali where taxation is based on purchase price vs. comps.
The logic behind this would be that if you paid off the house in 30 years and paid 200% of the price quoted when you brought it because of the mortgage interest, you would resell the house at that inflated price to make up for the total cost to you…
i am not a freq. poster but this Dunn story is garbage. Many excellent points listed above but I am really disappointed in the lack of understanding the meaning of “value” by the Dunn family. I don’t need to post my credentials for credibility but these families that do buy into these homes AND survive the ARM increase have put their long term future as well as their children’s future at substainal risk. The selfishness is so disappointing. The lack of understanding “Net Value” is dishearting. My many family x-mas visitors will be discussing these types of situations over the holidays. I can bet that few have saved more than 2 years worth of annual salary as their own loans require a large percentage of their Gross Income. My visitors will all be 40+ year olds. Shame on you Mr Dunn. I wonder what the car payments of the family are?
Question for the board: Won’t the bank just help them on a re-fi so they can keep making payments? In the long term, the note holder could make a fortune by extending the TOTAL payments. I do not expect Bofa and Wells to want to own a bunch of homes in “book-end” towns having local agents trying to peddel the properties for months w/o cash flow. Can someone offer some experienced knowledge. Thanks for keeping this blog so active and thank the lord that we have lithotripsy machines available — some of you understand. good evening.
wide-right
Bay Area, CA
To me, watching clowns like Miserable Dunn is vindication. I felt like I was looked down upon for a long time because I refused to drink the silly CA koolaid. These clowns deserve what is coming. Even a lick of reflection would tell you that you can’t afford an $870K house (plus taxes, HOA, etc) on an average $60K salary. So, tough $hit.
Not muh to say, but because I am here in the OC I’ll say this. We on this blog knew it would come to this. Many here predicted exactly the scenarios were are now seeing played out day to day. Mr. Dunn is but one of far too many who overlooked the risk because they wanted to get in on the game. It tugged at us here too, but for me the siren song was not without risk, a risk I was unwilling to take. Over the last 5 years I have many times felt that I had missed out on the profits of the game. But today is redemption for me because today I know I did not throw my money away on rent. I was not only paying a fair price for a roof over my head. I was avoiding risk. Mr. Dunn took the other path, the one most travelled here in the OC, and right now it does not look like it will work out too well for those on that path. Am I gleeful at his plight. Not really. There are enough angry people around here. I guess I only hope that somehow the folly of their choices will become clear to them, but I have to remain a pessimist on that one. The human race is just not wired that way in general. Dunn is a FB, plain and simple. We’ll be seeing many more tales of such woe. Man Up dude! You played and lost.
testing
‘They put us in a bad financial situation by lowering the price,’ said Dunn.
‘They put us in a bad financial situation by accepting the raised prices,’ said we.
To every season, turn, turn, turn. Sometimes that’s just the way the cookie bounces in spilt milk. (Or izit how the ball crumbles, I ferget?) Qué Será, la vie. Doh. Duh. Phhhht.
MR.Dunn has the poor me syndrome
i have no sympathy for these people like many posters above have clearly stated over 800k for a house? well you better be making major bank for that albatross
just another happy debt-free addicted to saving renter here