“Builders Are Desperately Unloading Their Inventory”
The San Francisco Chronicle reports from California. “When Dan Wan and his wife, Sara, bought their home two years ago, they managed to snag it in a tight market by contacting the sales office just after another buyer canceled a deal. But now they are looking for a larger home. After four months, they haven’t gotten any offers for their home, despite dropping their price to $350,000 from $370,000.”
“The Wans are in a bind. They are not only competing against at least three other homeowners who want to sell their properties in the same subdivision, they are also facing an aggressive marketing campaign by the builder of hundreds of houses just a few blocks away, where many are selling for less than $350,000.”
“The Sacramento residential market has been hit hard. Nowhere is that more evident than in the new-home market. Builders are desperately unloading their inventory, offering perks. By doing so, they’ve created a situation where it’s cheaper to buy a new house than an old one.”
“‘There’s no doubt that in this market new-home prices are better than resale prices,’ said Jon Nicholson, president of the Sacramento division of Standard Pacific Homes, which has seven developments in the region.”
“Standard Pacific has slashed prices by about 30 percent since the market peaked 18 months ago. For a $500,000 home, that works out to a price cut of $150,000, according to Nicholson.”
“In Sacramento County, the bloated housing market is in midst of a correction after years of overbuilding. At the end of October, there were 13,886 new and existing homes for sale in Sacramento and neighboring Placer, El Dorado and Yolo counties. That compares with just 8,974 in August 2005, when home prices reached a record level, according to the Trendgraphix. At the current pace, it would take nine months to sell all of the homes on the market.”
“Sellers, both individual homeowners in the resale market and builders pushing new homes, are finding the only way to make sales is to cut prices. And that is precisely what is happening.”
“‘When Sacramento got hot, the median price in Sacramento was about a third of what it was in the Bay Area,’ said Stephen Levy, director of the Center for the Continuing Study of the California Economy. ‘Now, it’s closer to 70 percent.’”
“Levy said he believes it may take three to five years for the Sacramento housing market to recover. That’s little comfort to people who can’t wait that long.”
“The Wans paid $298,000 for their house in 2004. Keith Anderson, the real estate agent who is selling their home, held a dozen open houses, one on each Saturday and Sunday afternoon for the first six weeks it was on the market. ‘We had a series of open houses where absolutely no one came through,’ Sara Wan said.”
The Press Enterprise. “Throughout Inland Southern California and the state, home builders this year have more to worry about than selling homes. They are struggling to make the sales stick, with cancellation rates in some areas double what they were 12 months ago.”
“Builders and industry consultants say sales cancellations have been spurred by falling prices in new subdivisions, causing many buyers to get cold feet.”
“Darren Warren, Pulte Homes’ VP of operations for its North Inland Empire Division, said when Pulte opened a new project last February in Victorville, it benefited from the last of the boom-market euphoria, which helped to spark orders at a brisk pace of 40 to 50 homes a month.”
“But by June, those sales were quickly evaporating, with some buyers forfeiting deposits of $5,000 to $10,000 on houses they once yearned for. Warren said that by the end of November, Pulte had recorded about 220 closed sales at the new Victorville community and 90 cancellations.”
“‘We sold those 90 homes twice and some of them three times,’ he said.”
“As the market softened, prices of homes in future phases were lower, not higher. Builders slashed prices and added an array of incentives, from free backyard landscaping to below-market financing, to clear a glut of completed, but unsold, homes.”
“Mike Dwight, of Ontario-based Frontier Homes, said cancellations are running at about 40 percent, up from about 20 percent a year ago. ‘People commit to a purchase and then say, ‘Gee, I don’t know. Everything we read says prices will go down even further,’ he said.”
“Also behind the rise in cancellations has been the reluctance of prospective move-up buyers to lower their sights when they sell their existing homes in a declining market, builders say.”
“Bob Yoder, president of the Inland Empire Division of Shea Homes, said because Shea builds homes primarily for a move-up market, it has seen a 40 percent cancellation rate since March. ‘We have to sell 10 homes to get six that stick,’ he said.”
Just to show that Florida isn’t the only state with RE fraud:
‘Testimony began this week in a trial in which operators of a North County real estate venture are accused of defrauding investors out of more than $1 million and promising homes that were never built.’
‘Industry critics say it’s too easy to become a real estate agent in California, but that will begin changing next year, when newly approved licensing regulations take effect. As housing sales have slowed in recent months, agents have faced growing competition. San Francisco broker Vince Malta, president of the California Association of Realtors, said his organization supports the tougher requirements measure to raise professional standards, not thin out an overcrowded field of agents. An estimated 85 percent of new licensees are coming into the field with conditional licenses, he said.’
‘We don’t want to limit the number of people coming into our business, but we look at it from a consumer-protection standpoint,’ he said. Malta holds that a single class doesn’t prepare agents ‘to handle the most important transaction people will have in their lifetimes.’
‘Ponder this: The number of Orange Countians missing mortgage payments is at a six-year high by the Big O’s count. Real estate’s fate is more than just a question about housing values, though home profits from a real estate boom certainly buffed up the local economic scene. Real estate of all sorts – from lending to supply stores – has been a key O.C. jobs creator.’
‘Profits at Pacific Mercantile’s mortgage business were being squeezed by heavy competition. And real estate’s slowdown was just in its early stages. Dellerba said the only option to improve profit was to take on more risks by providing cash for dicier mortgages. So he asked his board of directors: ‘How many of these loans do you want to do? And how many do you want to be stuck with?’ The reply? ‘None,’ Dellerba says.’
‘So in late 2005, Pacific Mercantile exited the mortgage game. In hindsight, it was perfect timing, as the loan business has since gotten far harsher. ‘It was a tough decision,’ Dellerba says. ‘Because we had made a lot of money in the mortgage business.’ That’s the quandary many folks face in this town: forgetting yesterday’s glory years.’
Today 12/17 I visited a few home builder sales offices in Philadelphia suburbs. Here is what they were offering - only for sales commited in Dec - 100K off in options or 75K reduction in price on 525K house. Another builder - offering 120K off on 800K+ house. These are all 3000+ sq feet luxury houses about 30 miles from Downtown. One builder said - “you can get a house for 800K that was sold for 1.2 mill last year - so you will have a 300k equity as soon as you buy it!”. I liked the idea!
Then those scary tactics - these incentives are only for this month and then the prices may go up. By the way, tax on a 800K house here is 14000/- per year.
You have no equity, sans your downpayment. Your sale is a comp against last year’s sale at 1.2 mil so last year’s buyer is now unsidedown by 400k!!!
you liked the idea. Are you serious. The truth is the others will actually have a depriciated asset of at least 400k. This is only for december and then the prices may go up. That is a joke. They may go up but more likely they will go down.
I did mean sarcastically that “I liked the idea”. I just wanted to show how RE agents try to con people. If it goes down by 100K in Dec, chances are that it will come down to the realistic price of $275 - $300K in the next few months.
Well spot, there is no false equity, instead the existing home owners are sitting on negative equity. There might a lot such properties around the nation.
If Big Bob Slob is going to buy a house, I’m first going to spend $100 to get my real estate licence. (My mother is a broker). Then I am going to save 3% on my house and have the entire MLS at my fingertips. It seems that now I must get my licence before Sept. 2007.
I’m selling a house in Bakersfield next week. I’m pricing it 6% ($20,000) under the rest of the listings in the tract. One of my neighbors complained that I would ruin ‘the comps’. I don’t want to follow the market down and if it doesn’t get an offer in 30 days I will lower it some more until I do. I should call Nina and Suzanne for help. What do you think? San Diego 14 KC 3.
I think if you are serious about selling it you will base your price on actual sales transactions for the last few months and not on current listings. Remember, current listings is nothing but a list of people who HAVEN”T sold their home.
I suggest loweing your asking price in two weeks if you do not get any offers. One month is too long a time. In this market, timing is essestial. I sold my house in March 06 in 24 hours becaus it was priced right.
Proper response to such a neighbor: “Well, if you think my house is worth more than I’m asking, buy me out and flip it.”
From the SCMP>>>>>>>>
Developers are expected to fight tooth and nail at a land auction tomorrow for a rare residential site at The Peak, and in the process may set a new record price per square foot for land.
Many real estate professionals expect the final price for the 79,148 square foot site to be more than HK$1 billion, equivalent to an accommodation value of HK$23,400 per square foot.
The site at 12 Mount Kellett Road, which has an allowable total gross floor area of 42,658 square feet and could accommodate six to eight townhouses, already holds the highest reserve price on a per-square-foot basis among the sites triggered for auction since the government introduced its application list system, according to Ricacorp Properties executive director Willy Liu Wai-keung.
Last month private developer Manhattan Garments (International) controlled by Liberal Party chairman James Tien Pei-chun triggered the site for auction after the government agreed to its bid of HK$768 million or HK$18,000 psf. In the application list system, a developer must submit a price that is at least 80 percent of the government’s reserve price for a site to be triggered for sale.
Midland Surveyors director Alvin Lam Tze-pun has estimated a final price per square foot of HK$24,000.
He said the lump sum of about HK$1 billion is not too expensive but what is attractive to developers was the rarity of the site. “The site is extremely good and I expect a lot of developers, big and small, to take part [in the auction],” Lam said.
Some small developers active at The Peak in building properties for leasing out may take part, he added.
“If many people bid, there is a chance it could be higher than what we estimated. There is a chance it could go over HK$30,000 psf,” Lam said.
Henderson Land Development chairman Lee Shau-kee said last month the site would be a “strategic stronghold” to be fought over by developers.
“It would not be surprising if it went for double,” he said.
Developers such as Cheung Kong (Holdings) (0001), New World Development (0017), Sun Hung Kai Properties (0016) and Sino Land (0083) have expressed interest in the site.
A report by property consultant CB Richard Ellis noted that supply in the traditional luxury areas of Hong Kong Island has dropped from 1,814 units in 2004 to 653 in 2005 and only 44 in the first nine months of 2006.
A Jones Lang LaSalle consultant said supply on Hong Kong Island “will remain extremely tight” with only 255 units expected in 2007 and 2008, of which only 14 are at The Peak. Sino Land won a site at Kowloon Tong last month with a bid of HK$1.94 billion or 76 percent above the reserve price.>>>>>>>>>>
So $US 3000+ & up for raw land….guess what finished cost is!!! Remember…this is a land lease 99 year term.
Developers are expected to fight tooth and nail at a land auction tomorrow for a rare residential site at The Peak
So would this be “buying at the Peak”?
Hong Kong RE is in recovery mode and the inrush of Chinese money..I don’t expect any drop until 2009. BTW prices per square foot in Chinese cities are at California prices already.
I fully expect a lot of that Chinese money to be “invested” in California RE in the coming 3 years.
The deperation is everywhere these days.
I would call it inertia of saturation…
For exemple the middle class is pretty is pretty much over. You can work your a$$ off and pay faithfully the mortgage 20 years, and a small illness or a few weeks of hard time can bring it all crashing down.
Kudos to the 160k/yr manager who gets a 300k mortgage on a 120k house… it proves the “middle class” in America was really just what is living in slums in other countries but got to live with a car and a house while this country was not “saturated” and full of natural riches to be exploited from unwilling natives or a defenseless environment. Now that America has a population density to match the rest of the planet, the natural pyramid of wealth will revert to the top 1% controlling 50%+ or more… And the bottom 50% controlling maybe 1% of the riches.
It was just a mirage in the end. Once the excess of houses gets sold and the builders go bankrupt… what will be left is a construction base catering to the wealthy and the rest will rent out or pass houses from one generation to the other like what is mostly done with (farm) houses in Europe.
Although realtors will be the last ones to say that “here it’s different!!!”
Agree. The middle class is effectively extinct. In a few years a ruling elite of 1% will control 60-70% of the wealth and property, aided and abetted by another 20% comprised of managerial, technical, supervisory, and, increasingly, “security” personnel. The rest will be serfs, kept docile through a combination of bread & circuses and Orwellian herd control measures.
kept docile and allowed to load up on cheap stuff from China.
I went down to ikea today over near chandler and was amazed at all the cheap sh@t they have there. Looks like the place is loaded with chinese imports made from slave labor.
We live 2 miles from that Ikea, Arizonadude. My sister loves to buy stuff there. Then not less than a year throws it out. Funny thing is that she professes to be an environmentalist and agrees with Al Snore.
Ikea selling cheap sh@t. that is nothing new. It always has. Now if Thomasville goes that direction…
ikea has another name
i-screw-ya
there stuff is crap
I believe it was the ever-prescient Douglas Coupland who coined the phrase “sem-disposable Swedish furniture” when he couldn’t use Ikea by name.
It won’t be cheap for long as the USD crashes and the Chinese middle class rises and demands more than an adobe hut
Fortunately for the herd, the Chinese currency (renminbi) is practically pegged to the dollar! (it’s actually a basket of currencies, but pretty close to a peg).
In Santa Clara County, some mangerial and technical jobs are high paying, but these tech companies are not long term in their lifespan. Many large $1b do to go under via mergers and competition. You be surprised how easily they hire cheap support staff paying 40-60K but will move $120-160K jobs as easily due to high cost and long term nature of tech business.
“You be surprised how easily they hire cheap support staff paying 40-60K…”
Wouldn’t surprise me one bit.
The reality shows on TV and the Office of Homeland Security makes me realize what a visionary Orwell was…
uh no, Huxley Brave New World is much closer to reality
uh no, Huxley Brave New World is much closer to reality
For those that haven’t read 1984, it is online free at:
http://www.online-literature.com/orwell/1984/
It is so sad, but you are right. 30 years from now we will be looking at the 60 and 70’s as the golden age of the middle class. When I am in a really dark mood I think that one of those Orwellian herd control measures will be legalized drugs, a little like the “soma” in Huxley’s brave new world.
As far as legalized drugs, I completely agree with you, cass. It’s already happening. Judges can legislate medication.
Read some Neil Postman. Soma is already here in the form of the electronic devices to which we’re constantly attached. PalmPilot, GameBoy, or I-Pod, anyone?
The may of the wealthy will be pulled down by the coming depression. Many of their assets are based on direct and indirect loans to the middle and underclass. These will be defaulted on burning the stock market and upper class.
History indicates that during times of debt destruction the nation moves to the left. Look for higher top end tax rates, protectionism, border (labor supply) control and greater union power. All these steps will be designed to curtail the deflation and protect the middle and lower class.
Well I think you are just a bit overly dramatic on your assessment of the couple facing foreclosure in Long Island. Yes they will lose their home but more likely, they will be able to sell it and get a bundle of cash if they have been sitting on their house for the last 20 years. However if they recently refi then tough luck. Also, in a foreclosure, any money the property fetch paid the liens. If there is any remaining proceeds, then the homeowner gets that, not the bank.
> The Virgas were unable to make their $2,300 mortgage payments.
The payment that they are making seems high. 20 years ago, a 300K+ house would have been quite a nice place. They’ve almost undoubtedly tapped the house ATM multiple times.
Am I the only person who doesn’t think it HAS to go that way? Nothing personal, but every time I read a post about where American is headed, it conjures in my mind a gleeful vampire face dripping saliva from fangs over the fate of the country. What’s even worse are the “Cheerio, you’re right, old chap” posts that follow.
If people think they deserve that fate, then so be it. I disagree. I think the principles this country has stood for in the past are something worth fighting for and re-asserting.
Palmetto, you often have good comments, and I would agree that it does not have to go that way, but it seems inevitable, at least short term. We seem to have lost our sensibility when it comes to $, and all these fools that grossly overpaid for a stucco box are part of the problem. They need to understand what is important in life, and that sure isn’t a McMansion. This bubble implosion just may turn them around, after which we can try to re-assert the founding principles.
Thanks, CA Guy. Sometimes I just don’t get the “we deserve this” aspect of it all. There’s an awful lot of posters on this blog who aren’t of the McMansion variety and “we” don’t deserve the same fate as the delusional idiots. Aw hell, it just seems to me like the country has gone mad since 9/11 and has done everything just the opposite of what should have been done. Americans are not all bad and there are so many good ones on this site and I want to see all of them survive and prosper, because they deserve it.
“deserve”
Clint eastwoods “Unforgiven”
Little Bill: “I don’t deserve to die like this.”
William Monney: ” Deserve’s got nothing to do with it.”
Then a shotgun blast to the face of Little Bill.
One of my favorite movies.
No, not all deserve the same fate as the delusional idiots - but they will more than likely get it. Another reason to despise them.
Those who deserve to survive what’s coming have more of a chance - for they have prepared.
The bills are coming due for the ’something for nothing crowd.’ ‘You can’t fool an honest man’ - remember that when the blood is running in the streets.
The U.S. goes through rough stretches every few years and is by no measure perfect. But betting against it in the long term is a very, very bad idea.
I guess the alternative is to legislate away individual prosperity and become Scandinavia, where everyone is middle-class.
“I guess the alternative is to legislate away individual prosperity and become Scandinavia, where everyone is middle-class.”
Rant on.
I’ll take that over an ever shrinking middle class with an absurdly rich 2% of the country. Aided by corrupt politicians with only the elites interests in mind, the rich, fat-bastard CEO’s are raping their employees, stockholders, and the country in general. Over the past 10 years, they have effectively driven down wages, all the while raising theirs by nearly 10 fold, going from around 50X the average salary of their workers, to nearly 500X. Greed has become the order of the day in this country, and as long as it is allowed to continue unchallenged, the average families and individuals quality of life will progressively deteriorate. The number of mega-mansions built within the last 10 years is the greatest in history. I posted a link to one in Zephyr Cove, NV in the past week, which is asking $100 million. I am all for individual success, but when it comes at the expense of millions of others, I draw the line. I have never been a big fan of taxation, but am starting to subscribe to a “soak the rich” mentality due to the growing divide between the haves and have nots. Rant off.
Bantering Bear, you bring up some VERY interesting points that I was discussing with a family member the other day. They made the point that so many members of the middle class go along with this “gift the rich” mentality because they secretly hope or think that one day they will be rich and they want all those goodies there for them when “their time has come”. AS IF!
“They made the point that so many members of the middle class go along with this “gift the rich” mentality because they secretly hope or think that one day they will be rich”
And now you know who the true culprits are. The ‘rich’ are skinning the ‘middle class’ alive and the middle class allows it - encourages it - because they think one day they will be rich and get their turn with the knife.
Makes it difficult to keep from laughing as they retake their rightful places among the peasant class.
It’s called Fascism… the merging of corporations and the state as defined by Mussolini himself, the mentor of Adoph Hitler, first chancelor of the Third Reich.
But remember, ‘he made the trains run on time’.
the scary part of the rich getting richer is when the tipping point is reached that we are helpless to reverse it. it will take generations and concerted effort from the inside (their group) to do that. much like feudalism in europe.
the key test of economic justice is: if you couldn’t choose your parents, which society would you choose to be born into?
Anybody with the resources to post on this blog did relatively well in the birth lottery, even for America. Would you care to re-roll the dice here in the US? I think I would pick Scandinavia, hands-down. We might have bigger outcomes on the outlying 2-5% success stories, but about 40% of this country is born into debt, and it’s only getting worse.
Funny you should mention that, Troy. If I could live anywhere else, I would pick Scandinavia, too. I think it was Money Magazine that did some sort of poll of the “happiness” level of various countries and four out of the top five were Scandinavian countries. Strong national identity had a lot to do with it, as well as general economic prosperity.
It was my understanding that Scandinavian countries have weak national identity; their flags are rarely seen and have been banned in some schools that have lots of immigrants. The only notable exception I am aware of is Denmark, which tells Danes that if they want to marry a foreigner, THEY will be the ones leaving.
Note the difference between happiness levels in diverse (e.g., Israel, U.S.) and non-diverse (e.g., Scandinavia) countries. Enough said.
Switzerland for me, thanks.
I lived in Sweden for 2 years (Stockholm’s burbs) from 2001-2003 and if that’s as good as it gets unders socialism, please hand me my revolver.
mugsy, do tell. What was living in Sweden like? Must be pretty miserable, given your statement.
So now america sucks because we have rich people and a falling housing market. One thing about the USA you need to know is that there isnt one person here who will stop you from moving to scandinavia or any other country so if you want to move there go ahead.
be careful here. lots of us in this blogs *hates* socialism (not communism that is often equated with it).
I’m not saying the US is bad . . . just that if you’re an average J6P I think life is much better in “socialist” countries like Canada.
Reforming our healthcare system, improving mass transit infrastructure, implementing rational land-value taxation (taxing land and not capital improvements thereto) would go a long way towards improving the QoL here in the states.
I’m looking at the 20-50 year horizon here. The situation for the US doesn’t look that hot, really, unless we do more than stay the course of present policy, or lack thereof.
Looking at things from the peoples republic of Finland
I must say that quite a few finns are very jealous for the US system. If I were unemployed, handicapped or something, I might actually prefer the nordic welfare system. As a taxpayer with no hope of getting anywhere even by working two jobs (progressive taxation eats up the extra salary) my options are to either suck it up, leave the country, or become an alcoholic and let the taxpayers pay for my drinking and rent.
Thanks for the input, Finnishguy. I guess the grass is always greener on the other side, so to speak. So Finland does not have a monied class?
If you’ve never spent much time in Scandinavia or the upper midwest you might want to before deciding it’s paradise. One of the reasons the socialist model works so well there is that there is a concept that most Americans don’t function well with. Those cultures find it anathema to elevate one’s self above others. It’s pretty much the opposite of the American individualism/can do spirit and it’s a rare person who functions well in both societies happilly.
I do not agree with the statement that most Swedish are middle class.
They might be middle class for Swedish or European standards but not for American ones.
A family of 4 living in a 700sqft condo with one car (if any), which is only used during the weekends because of high gas price, hardly categorizes as “middle class” in the US.
Palmetto, all the Nordic countries have a very small monied class. Mostly inherited money or a result of good luck such as having stock options during the IT bubble. Being able to become very wealthy by getting a good education and just by working is nearly impossible thanks to the system.
NAM, the real middle class in the Nordic countries is a little better off than what you describe. Think 1400-2500sqft SFH outside the cities or maybe 700-1500sqft condos in the cities. City-folks often settle with one car, as there is well working cheap public transportation in every city. But you are pointing at the right direction, everything is more modest than in the US. The cars (SFH people typically have two) are worse in quality and the McMansions are nearly non-existent and strictly for the really rich people.
Finnishguy…the 1500sqft condos might be in Finnland but I do not think a middle class family can afford that kind of condos in Stockholm or Oslo or Denmark. That size is for rich folks (or subsidized rent) even in the suburbs. I know for a fact that any SHF outside the city I lived in The Netherlands (a province city in the South) were at least 1mill Euros (not for middle class pockets but for the CEOs and CFOs). Within the city everything was either condos (more affordable for middle class but not more of 900 sqft) or what they called rowhouses (townhouses) which you could afford with two incomes.
My husband and I are middle class in the US but for European standards we are almost rich and because we have not bought a house yet (so we can save lots of cash) I know we have the highest savings than any of my friends in Europe (even with the currency exchange difference). Most of the middle class in Europe has no hope to improve their standard of living at all and some have became poorer because of the “hidden” Euro-inflation.
Sadly you don’t understand the wealth that is made today by the upper class is at the expense of the middle and skyrocketing serfs of the lower class. It is not anymore about the conquest of “virgin” (alas inhabited by the natives for 10,000 years) lands and every settler making his own house and farm and building value by the sweat of his hands.
The bastards CEO like Ken Lay who makes millions do so at the expense of the salaried employees who are stuck in 9-5 jobs because of artificial debt like mortgages and long commutes that steal at their free time (where they could be creating their own companies…).
The whole system has degenerated into a well oiled machine tailor biased for the top 1% of america. Those a$$holes will never get to send their progeny to Iraq and who knows what Cheney and his cabale dreamed next.
The american Nomenklatura has been born… and like what afghanistan did to the Soviet Union in 1980-1989 I do not expect the average american to sit idle watching young people getting slaughtered in a war made for the upper class without the whole country collapsing (California sessecion’ ????) in an expanded LA type riot…
Then again I digress…
How about we sell California off to the Asians for a few trillion? The Mexicans will take over in 10 years anyways, so we might as well get rid of some of our debt. We can auction off counties to the Japanese, Chinese, Koreans and Indians.
“the mexican will take over”
is that what you are scared of in california? keep in mind that they will probably take over in the sense that the names and color of skin and taste will be mexican but the way they will think is no different from how we americans think today. again, the rich will have the same clout and influence as the caucasians today, and the same ambition and greed.
It didn’t make sense to bet against the Roman empire, or the British, for a long time. Make no mistake, we are running a global empire. Empires always fall, and Americans are especially bad at running one; hence the short lifespan. Empires are not defeated from without, until the very end; what destroys them is internal rot. When the citizens of empire realize what the situation is, and the inevitable end, they scramble to get as much as they can for themselves, regardless of consequences. Screwing each other over is the order of the day. I for one, would say we have reached that point.
how long do you think the roman empire lasted? they are still here today although in a much benign version (catholic church).
Yes, but the Romans
a) fully admitted that they were running an empire, and generally expended the energy to do it properly
and b) pretty much invented the right way to run the world, which is why it lasted, and the rest of the wanna-bes have been pale imitations ever since.
Would I want the Romans for my masters? Not really. But if you’re going to subjugate and colonize peoples for the long-term, they were the only ones to do it right.
A guy named Richard Andrew Grove over at 8thestate.com has come to the same conclusion I did, but he says it much better, regarding the current state of our country (and this does have an impact on real estate prices, trust me):
“In layman’s terms: A Drug Syndicate has infiltrated the highest levels of our Constitutional Republic… The only way to dissolve their power is to educate yourself and others as to the hypocrisy that is killing our fellow Citizens… both foreign and domestic. Without the Black Markets created when you make certain plants illegal, there would be no War on Drugs, no War on Terror, and without the Drug Syndicate (i.e. the Pirates, who used to fly the jolly roger flag now sport the crest of skull and bones) deriving their power via laundered Drug Money; there might even cease to be ANY type of War. Who’s going to fight to defend the Drug Syndicate after they discover for themselves how it basically ties our investments, retirements, and pensions into the schemes killing our children, inner-cities, and rural towns?
Without the Drug Trade, Insurance Companies and Enterprise Software Companies would no longer be able to manipulate, threaten, and continue to control, the financial integrity of our lifetime investments and savings. That’s what’s at risk- all of your life’s work, savings, and investments. There are trillions of dollars being stolen in broad daylight, from both Pension and Retirement Funds, as well as tax dollars, via Pentagon fraudulent accounting schemes. Almost all of these schemes are software dependent, and yet software is continually used as the virtual scapegoat by the Drug Syndicate.”
Yes, and for those whining about the impossibility of fighting the money power, I would assert that, when hit by a 7.62, a trillionaires head will burst just as readily as that of the meanest of peons.
The founding fathers gave freedom to men in America, Alexei Kalashnikhov (A.K 47) made them all equal in the Whole World.
From Soljenystyn:
“Don’t fear them, don’t ask anything of them, don’t believe them”
http://energybulletin.net/23259.html
I disagree with his “disengage” formula. Better to do well and hide a lot of gold and silver for the bad times. But most don’t have that option. Time is up.
Now you’ve done it….the feds are gonna have a file on all of us now.
Crap. I thought this was the URL for a blog about housing prices, not the Randy Weaver memorial blog…
To think of all the things this country has been through–civil war, world war, depression, etc, and some people want to spin a manic run up in housing prices that any iodiot can see is perfectly correctable by market forces and within the norms of basic economics, into signs of the “end times” is just silly and stupid…have you ever heard of the the Iron Law of Oligarchy?
Homes being overvalued is a reason to stock up on 7.62mm to put into Goldman Sachs executives? Please.
But hey it’s not too late to cruise 89 miles south from Key West and talk to someone who once had similar ideas…Fidel Castro hated capitalist oligarchs so much that he overthrew the Bautista government and, lo and behold, 40 years later became a…wait for it…CAPITALIST MONARCH!….skimming the profits off of Venezuelan oil and Candian tourists.
http://energybulletin.net/23259.html
Concise, brilliant and witty… check the part on housing.
America is pretty much now 180 times more populous than it was back in 1776, and by definition more similar to Yugoslavia than China. The housing bubble bursting this time might be a perfect storm factor, with the economic collapse triggered by a devaluation of the $ US and the Iraki fiasco which bleeds the country like a bamboo torture.
“For example the middle class is pretty is pretty much over.”
That is problem number one facing builders. Problem number two is that the number of McMansions recently built or currently under construction is humongous compared with the shrinking pool of McMillionaires.
I don’t know that the middle class is pretty much over. What’s over is the middle class delusion that they can afford fake upper class stuff on a middle class income.
Agreed. The middle class will not be extinct. It won’t be what it was either. The reality check won’t be comfortable, IMO. I for one am not looking forward to it, but I cheer for the bubble to burst because I think we need to take our medicine if we are to heal.
“The middle class will not be extinct.”
Let’s at least agree that the growing wave of foreclosures already underway will widen the gap between rich and poor…
Don’t know about that, but it will help us finally identify exactly who is rich and poor. Which will be an improvement.
I think, if we were able to struggle back from the Depression and build a middle class, perhaps that could happen again. Maybe this could be a weekend topic, I’ll suggest it next time around. The Depression was a lesson that brought about savings, but since there are so few who remember that lesson, it looks like it has to be taught again. Problem is, some say that WW2 ended the depression and brought about prosperity, a canard I strongly disagree with. But if that’s the case, then that won’t work this time around, seeing as how this “war” has happened prior to the recession/depression that appears to be around the corner.
-
the middle class today in this country lives like the rich of the not too long ago yesterday. vacation homes, lawn services, nannys, maids, multiple cars, home theaters, etc. also, the poor in this country is NOT really poor but historical and world standards. of course, liberals love to spew this class warfare crap.
“the middle class today in this country lives like the rich of the not too long ago yesterday.”
Only because they are willing to live beyond their means on borrowed time and money. And you can take your politics and stuff’em.
Sadly, Mr Gekko, you are trying to “cover” for the rich. I am sure they appreciate your helping them out. Unfortunately, your million dollar NW only gets you in the top 10% and in NY that makes you middle class…
Gekko, hand me my bags…
-
the poor are poor because they continue to do things that make them poor and the rich are rich because they continue to do things that make them rich.
And peel me a grape.
“the poor are poor because they continue to do things that make them poor and the rich are rich because they continue to do things that make them rich.”
You’re full of BS. You’re telling me that inheriting tens of millions of dollars is “doing something that makes you rich.” You need to open your eyes and mind a little. A large percentage of wealth in this country is passed along from one generation to the next.
I got to agree with Gekko on this one. UN just released a report and individuals with a net worth of over $2200 are in the top 50% of worldwide weath. Just $2200 puts you above the world median (althougth many Americans don’t even have that thanks to credit cards). Additionally, a net worth of over $125 puts you in the top 10% of worldwide wealth. And believe or not a net worth of just over $500K put you in the top 1% of worldwide net worth.
Our (the US) poor truly are not poor compared to worldwide standards. That is why so many come to this country just to find any job and are happy being ‘US poor’. My father & mother are a case in point.
-
Most wealth of millionaires comes from job earnings (32%). Just 16% is inherited.
http://money.cnn.com/popups/2006/moneymag/ontrack_millionaire/3.html
“Problem is, some say that WW2 ended the depression and brought about prosperity, a canard I strongly disagree with. But if that’s the case, then that won’t work this time around, seeing as how this “war” has happened prior to the recession/depression that appears to be around the corner.”
WWII wipes out Europe, Japan and millions of lives. This “war” doesn’t compare.
And it will work this time around.
It isn’t just debt that needs to be ‘wiped off the books,’ but the debtors as well.
There’s a reason the US has been set up as a nation of war mongering, torturing, overweight, lazy, debt-ridden arrogant twits. When we get wiped out - the rest of the world won’t shed a tear.
The two stupidest groups on earth…
Log cabin republicans and poor republicans. Both get screwed in the end.
“Most wealth of millionaires comes from job earnings (32%). Just 16% is inherited.”
There were no facts to support this statement. I believe it is wrong and misleading. I am going to locate some better information.
BTW. If I inherit 5 million dollars, and then I start up a company and become a billionaire, I am all of a sudden in the “self made” group. What a bunch of horsesh!t.
“the poor are poor because they continue to do things that make them poor, and the rich are rich because the do things which make them rich”
Gimme a break. I know more unethical, bloodsucking slimeballs who work in various aspects of finance than i care to. Most middle class Americans are honest, hard working and but far too trusting IMO.
Gekko, get a clue. In regard to:
“Most wealth of millionaires comes from job earnings (32%). Just 16% is inherited.”
I have a few points. First, what about the other 48% of millionaire wealth that isn’t accounted for in your post? I guess thats the amount of wealth many millionaires get from ripping off other people, vice working or inheriting. Also, I don’t think anyone here as any problem with a “basic” millionaire, i.e. a hard working (honest) lawyer, doctor, heck even a plumber, who has saved, lives within his means and amasses a net worth of a million +. When you quote that a millionaires wealth comes from earnings, what does that mean…overpaid CEO compensation (while the company does poorly and the CEO screws the working class by offshoring jobs to ensure he hits his bonus), Boards-of-Directors who vote each other on and also take care of their buddy the CEO, Defense Contractors raking in the big $$$ with the war because they have former ties with the administration (both Dems and Repubs), etc. I could go on and on, but it is a rigged system and blatantly NOT FAIR, HONEST, or MORAL.
Palmetto — very well put.
That was re “What’s over is the middle class delusion that they can afford fake upper class stuff on a middle class income.”
Thanks, Chip. Maybe Ben will have a good Florida thread tomorrow. Great story on the front page of the Tampa Tribune today about some poor schmoe couple from Tennessee who bought 12 section 8 houses in Tampa, the purchases having been arranged by an ex-con relative. It really is a classic bubble story, the stories just get more and more over-the-top. If Shakespeare were ever to write a white-trash tragedy, this would be it.
We aren’t too far away, according to the Fed, the richest 1% hold one third of the total wealth in the economy.
http://www.chicagofed.org/economic_research_and_data/wp_abstract.cfm?pubsID=732
-
OMG! The government better confiscate all that money from those evil rich people and redistribute it out equally among everyone! The free market shouldn’t allocate capital! We should let the government do it! they know best! and it’s worked so well for all the once great and now third world countries in the past!
Gekko, how come you always defend the rich? Ask yourself - did the rich ever think twice before sending your job overseas?
-
i defend capitalism and the free markets. i defend everyone’s opportunity to get rich in this country and once they get rich, the right to keep what they’ve earned. i don’t spite people who are richer than me - i applaud them.
Whether or not I spite people richer than me has to do with how they came by their money.
unless they stole it from you personally why do you care. If you happened to make lots of money which sounds highly unlikely by your own account, but lets just say it did happen. Then you had kids and gave them the money would you spite your kids. Would you want others to.
I am not against inheritance and I don’t know where you got that idea. However, I do think economic systems should be equally fair to all involved so people can rise or fall according to their ability to produce, not according to their ability to game the system.
Just confiscate everything above $10 million. How can you possibly improve your standart of living beyond that point? How many more yachts and private jets can make you happy when you have $100 million.
Well, you can blow it on real estate, than have people with nothing better to do than post on blogs all day* laugh at you.
*note self-deprecation
Marc,
You are talking very foolishly. See Bastiat’s “The Seen & The Unseen.” The “everything above ten million” is what improves the standard of living of those who want jobs, consumer products, healthcare, investment opportunities, and leisure recreation. I could go on, but I’m basically with Gekko. Give me a free market and opportunity, and I’ll be content with my lot.
It should be noted that those who have opportunity are those who push the world average into the upper crust. After all, America is about the only nation with fat poor people.
Paul
Would somebody be so kind as to quantify rich?
You are rich if you do not need to work to support yourself and your family (this includes providing for retirement, tuitions etc). You may have a job but you have it primarily to keep busy or be around people like yourself or because you enjoy the challenge of working.
Rich is not the same as upper-class. Powerball winners are the former but not the latter.
The best book about class in the US is Paul Fussell’s book. Written more than 20 years ago and still relevant.
I like that definition. Although like me, some could answer yes or no depending on the city…
OK, how about: You are rich if you can live on your own terms without needing a source of income.
A single ascetic person can be rich on $1-2 million. (Advanced topic: Was the Unabomber rich?) A family of four who wants to live comfortably in southern California is not rich on triple that, even though they’d be rich in western Nebraska.
That covers things pretty well. BTW, I’ve got to get the Fussel book:
Money comes into play, sure, but the more important distinguisher is style. For example, Fussell argues that in the upper class, one might say: “Grandfather died.” Middle class? “Grandma passed away.” Prole? “Uncle was taken to Jesus.”
Paul,
The uber rich (those with net worth in the tens of millions range) will have a disproportionate amount of ressources which they will squander in a shameless way.
For exemple does Paris Hilton need her 25 sports cars, or Trump his 20 personal helicopters?
When each one travels we are talking about gallons per mile here, and the money they spend on jewelry or five hundred same suits from Armani could be more creatively used somewhere else.
On an even larger scale, America consummes 25% of the world’s oil for what? To go from A to B in a one ton cage. Of the energy in gas, only .5% is actually used to transport the mass of the passenger.
Etc, etc…
There has to be a balance made to prevent uncontrolled capitalism to reach a monopoly stage where all perversions of freedom are possible.
Damn, I was trying to remember Fussell’s name, thanks for bringing it up. I read “Class” years ago and found it interesting and also quite witty. A very intelligent look at the class system as it exists in the US. Also liked his analysis of how developers/builders name streets and housing developments with a faux British flavor, not to mention the term “townhomes” in favor of “townhouses”. Great work. Each time I’ve had a copy of the book I’ve given it away to a friend for their edification. This time I’ll keep my own copy.
The flip side of greed is envy. Some of you posters sound like friends of mine. Anyone who makes more money than they do or has more than them is “Rich”. It is called class envy and our elected representatives have used it for the last hundred years to help themselves stay in power. I’m curious, what individual or entity would you choose to have the power to decide when someone has enough money, cars or helicopters?
I think that the ultra rich ( 10’s of millions or more) use their incomes just to keep score. They have more than they or their children could ever consume (see above Hilton reference) and yet they keep on trying to keep having more and more.
They like to keep score against their ultra rich peers. Just as Joe 6 pack and jane soccer mom keep score with their friends by buying an SUV or a Plasma TV, or taking a trip.
I think part of the human condition is that people join a class or a group, and then continually attempt to re-establish or reaffirm their position in the group. It’s a way to seal the bond over and over and over again. A way to belong in the clan.
This is why the ultra rich like the Hilton Family and Trump and others never stop and enjoy life secure in their inexhaustible supply of personal wealth.
Most people here are not anti-capitalist. When the super-rich control large amounts of wealth, there is consolidation of wealth, not allocation. As for history, the logical extension of the policy you defend is…Mexico; a small group of super-elites and a vast underclass. This situation leads to political instability and quite possibly revolution.
The end result of unbrindled capitalism is monopoly where the capitalist can charge whatever he wants through lack of competition.
America and its trillion $$$ a year governement apparatus is already a de-facto one party oligarchy on par with the soviet union of old in the 1960s…
http://energybulletin.net/23259.html
gekko, do you honestly believe that this class of people are free of corruption? combine that with oversize wealth and power, what do you think is most likely to happen?
It will be interesting to observe how the foreclosure trend affects financial institutions. Are there any sites that track metrics of the MBS/CDS market?
[no offers] “despite dropping the asking price to $350K from $370K”
Duh, if they want offers, they better try $250K, so as to undercut Standard Pacific’s 30% discounts.
“The Wans are in a bind….”
No Dan & Sara, you’re not in a bind, you’re stuck! You don’t get to move to that bigger house. Paid my dues for 11 years in the penalty box, now it’s your turn.
There are 6 year olds with cancer at Ronald McDonald houses and we are supposed to have sympathy for the Wans? People are amazing. I feel bad for the 6 year olds not those that act like 6 year olds.
No kidding! Are these people just plain stupid? What kind of rationale person would think they could sell a used house for the same or more than a brand new one? These are cookie cutter tract homes, for crying out loud! These fools need to rethink their priorities. I am sure their present house is significantly larger than the average family home of 20 years ago, so why do they have to move to a bigger place after just two years? Could they be playing the tax free gains game? So many homes being sold right at the two year mark. That code needs to be changed since it only adds to market distortion. Yet another story of a stupid American couple wrapped up in image, bigger is better. I feel no sympathy and hope they spend years upside down. Greedy.
Exactly. They are still hoping to make a quick, tax-free 50K out of thin air after two years.
And they actually think we should feel sorry for them because they couldn’t do it. The sense of entitlement these people have is very annoying.
No need to change the tax code. Mr. Market seems to be dealing with the Wans pretty effectively. Remember, they can’t deduct their losses. Just watch this play out, and enjoy your popcorn
Life, liberty and the pursuit of happiness. Now wanting these thigns is called greed and you despise them for wanting space for their kids.
You say they’re stupid, have bad priorities, and ought to suffer for years.
They didn’t buy a bigger home before trying to sell their current one - smart. They don’t have an ARM resetting. They don’t have a killer commute or heavy debt from consumer spending problems.
Their crime: the family got bigger and then need space - another bed room. Seems like they were responsible and still are responsible.
They should have thought about their future plans at least a little bit considering they were plunking down $298,000! They’ve only been there 2 years and now they have decided they need more room. Usually the rule of thumb was you needed to live somewhere 5 years to BREAK EVEN. They wanted 75K more than they paid in 2 years, now 50K more. I don’t feel sorry for them at all.
So tell them to sell their small place and rent a larger one. Which they can do for half the price of buying an equivalent.
Over the last two months I’ve done an extensive comparison of builder vs resale market prices across Sacramento. I think it’s fair to say that the majority of resale houses in Sacto are still overpriced:
http://sacrealstats.blogspot.com/search/label/priced%20to%20sit
Great site. I know here in arizona the new builders are just killing the resale market. Roseville is nice but was infested with bay area flippers. It has a long way to go down.
Looks like the existing homesellers are making the new homes look like bargins.
In Chico CA, you can rent a new home for less than it costs to rent a used one. Most used homes are for rent by deperate people who bought their house last year and can’t afford it.
In Sorrento Valley in San Diego there’s a few of those ugly tracts with $1 million McIdiocies on them. Saw a sign saying “For rent. $3200 per month”. Then it dropped to $2950… then it disappeared.
Who the hell would rent at such a price… I suspect it was kind of the far away distant sign of a pending foreclosure… until the lights fade away from the ship sinking on the horizon.
You can rent a new home for less then a resale property all over Sacramento, in fact I’m about to rent one and tell my current Davis CA slumlord to find a new chump. You can watch the new landlords underprice each other in real time.
So do you think the builders will still be a building in late 2008? That’s when I’m hoping to purchase and the new home prices are damn good compared to existing homes out here.
I’m hoping to have a house built in 2008 for about 70% of the new asking price in 2006. I believe it’s possible, given the combination of reduced costs for land, labor and materials, and the likely willingness of builders to get through their “winter” with minimal profit.
Check the LV home by Roccio Romero… you can have it built for 50k.
Prefab modern will be the slaughterer of inflated shoddy construction, as Ikea was the slaughterer of ugly pricey furnitures…
I just went on a tour of her homes a few weekends ago (in SE MO). The homes are fabulous. There are some photos on flickr (not mine yet) and her website has good photos. Dwell Magazine just had her homes on their cover a month ago.
But I think the price is much higher than you quote when you add in all of the interior stuff (e.g. walls, bathrooms, kitchen, floor, etc.)
Among all the prefab modern tenets, most California bred architects and entrepreneurs forget the CHEAPER component of cheaper/faster/better (through technology).
Roccio is from Chile and understands the needs of good construction without the stuck up requirements of spoiled american “modernists”, who won’t return your phone calls if you think of spending 1/2 million $$ for their “visionary” monstruosity.
For a while I was a fan of Michael Jantzen and his M-house… but he blew it for me by his demands. Obviously such people will cater only to some excentric millionaires.
As for the interior stuff… you can get Ikea and cheap chinese stuff. The cost of her M-house prototype in Chile was in the $ 18,000 range.
Maybe the builders can bitch about globalization… but I am all for it when it comes to housing!
There is a concept house that I really like. It is a kit house created from sustainable growth forests, looks somewhat like a log home. The homes are designed to reduce energy costs through a passive solar sunspace and an envelope that uses geothermal energy to heat and cool. Check them out Enertia.
Chip, I am not sure which bubble market you are in, but that 70% seems quite high considering the 2006 version will most likely be selling below that. And, if you are handy, you can really save money doing some of the finish work yourself.
This is the major reason why I won’t buy in a new development unless we are at firesale prices and blood in the streets…then, IF, the neighborbood looks like it has potential to remain in its class or improve, I’d consider it. Blood in the streets in these Sacramento homes would mean 30% of the homes are in foreclosure or just went through it and are for sale for something like $150K-$200K. Based on these graphs in the attached blog, these neighborhoods may well get there by 2008-09.
In my neighborhood, teardowns go for $375K-$475K, making the lots (1/4 acre - 2 miles from Mid-town Atlanta, 4 miles south of Buckhead) $400K to $500K when cleared. They CAN’T undercut the 1920s-30s built resale homes ! … OTOH, the prices can still decline over time…but not under such insane pressure from new development.
the real estate agent who is selling their home, held a dozen open houses, one on each Saturday and Sunday afternoon for the first six weeks it was on the market. ‘We had a series of open houses where absolutely no one came through,’ Sara Wan said.”
I would have came by, but I heard you did not have any peanut butter chocolate chip cookies. What the hell, you want top bubble dollar for your stucco crap box and you won’t even serve peanut butter chocolate chip cookies. You greedy bastards.
And where’s the Starbucks(tm) coffee? Nothing creates that comfortable, at-home feeling like a fresh cup of java.
Besides, it would give the agent some practice for future employment opportunities.
This whole Valley is f#cked. The wages were never there to support any of this building. Never.
I went to some open houses last week and no one showed up to any of the homes, a couple of them didn’t even have realtors - I guess they gave up too.
“This whole Valley is f#cked. The wages were never there to support any of this building. Never.”
Ditto for Reno, Sparks, Carson City, Gardnerville, Truckee, Sacramento, Auburn, Redding, Roseburg, Grants Pass, Ashland, Medford, Salem, Hillsboro, Vancouver, Centralia/Chehalis, Bellingham, …should I go on?
“I went to some open houses last week and no one showed up to any of the homes, a couple of them didn’t even have realtors - I guess they gave up too.”
No realtors? Like, nobody there at all? Cool. That’s the way I like to look at a house.
In fact, my wife and I have done this many times, even when the house wasn’t “open”. More often than not, an empty house for sale will have at least one door that somebody forgot to lock.
“The rest will be serfs, kept docile through a combination of bread & circuses and Orwellian herd control measures.”
This could be comming sooner than later if this story checks out. We will find out within the next few hrs I guess…….
Im watching gold and Forex now, and also find it very intersting that Precious metals were hammared just before close on friday. Obviuosly a blatent effort to bolster the dollar for a possible, black monday after a couple of goons mess up our relations with China even worse then they already are.
http://www.kitco.com/market/
Help welcome the “Amero” as our new gold trading medium..
http://www.halturnershow.com/ChinaToDumpUSDollars.html
The second story is nothing more than crazy propoganda from a white supremacist. He has zero credibility
I’m wondering what tomorrow will be like. Hoping it is all a tempest in a teapot, but let’s see what 5:00pm tomorrow looks like.
Don’t bother buying Gold, but Aluminium.
It looks like foil is getting more and more popular for headgear…
Loafer
BTW - I’m not trying to be insulting here, but could you guys note the second “i” in Aluminium and pronounce it - it drives us Brit’s mad.
I love the British pronuniciation “alumium”, although to my American ears, this pronunciation conjures up an image of a rare and possibly radioactive element.
meant “aluminium”
uh… we don’t have the second “i” in aluminum! (I forgot that y’all call it “AL-oo-MIN-ee-um”)
In British English you do have the second “i” but we actually don’t have the “i”. (in other words, it’s not that we’re ignoring the second “i” and simply leaving is silent, we don’t have it)
It’s kind of like:
color vs colour (do you actually say “cuh-loor”?)
center vs centre
capillary (our CAP-ih-LARRY vs your “cah-PILL-uh-ree”)
My favorite was when I was in London and a person said to me “Queue up for a trolley?” (I had no idea what they were talking about…. they meant I was supposed to stand in line for a shopping cart. we don’t use the word “queue” in general parlance, and for us a trolley is a cable car.)
I can relate –was an exchange student there one year.
How about Lorry vs. truck
Lift vs. elevator
Ground floor vs. 1st floor (which is their “2nd floor”)
And how about food names, where Britons & Americans often use the same exact word to refer to different things:
U.K. “crisps” = U.S. “chips”
chips = fries
biscuits = cookies
scones = biscuits
etc…
Actually, now I recall that a party I went to in Ontario stopped when I asked if anyone fancied a fag….I was referring to cigarettes, but I understand you might have a different meaning!
Loafer
“despite dropping their price to $350,000 from $370,000.”
whoptee doo.
they dropped price 5%
The Wans are feeling… wan.
350K for Sact home is way out… it wont sell until it it hits around 250K…
just look at historical prices up there. no way its worth that much… homes were selling under 175K in 1998…
I am convinced that new home inventory is going to kill the N. San Diego County market. I just took a Sunday drive through the new part of 4S Ranch (dubbed 4Closure Ranch on someone else’s blog) and around Black Mountain Ranch, two new McMansion tract developments in N. San Diego County. I literally feel a bit shaken by what I saw in terms of the number of homes in various stages of partial completion. Yesterday I estimated roughly 1000 new homes in this area which will soon add to the inventory glut (based only on looking around the Black Mountain Ranch development), but after driving around the new area of 4S Ranch, I am upping my estimate to 2000 homes, which would be roughly a 10% increase in the inventory shown on ziprealty.com. Given that this is only one of many areas of San Diego County seeing a new home construction boom (Carmel Mountain, Carlsbad, San Marcos and downtown high rise luxury condo land immediately come to mind and there are certainly other areas I am unaware of), the new home inventory overhang must be truly massive.
At this stage of the game, I believe the flipper premium and the move-up buyer premium are largely gone from prices, but the market still has to work through the denial premium (used home sellers setting a wishing price the market won’t bear), the fraud premium (sale prices inflated by appraisal fraud) and the subprime premium (due to buyers using suicide loans to buy homes they can’t afford). I believe the credit market is in the process of eliminating the subprime premium and regulators making CYA statements are gradually stamping out the appraisal fraud premium. Growing awareness of the sizable mountain of new home inventory will eventually bring an end to the denial premium as well, especially as rising foreclosures give way to REO auction sales, and used home sellers are forced to cut prices to a level competitive with the discounted prices of McMansions (would you like a new car with that supersized home?).
The move-up buyer premium, the denial premium ,the fraud premium and the subprime premium. Let’s give them 15% each, the median will bottom out at 40% of peak, which is about right to me.
I’ve always liked San Diego. If this keeps up, maybe I’ll be able to afford it.
My thought exactly. I think I’ll toodle down there next year sometime and have a look around. By ‘09 or so, it might be good to have some areas picked out for bottom fishing.
Forgot the panic premium (on the way down), but I will settle with 40%.
GS, I think your layered analogy is very appropriate for how this will play out in SD. I’m especially interested in San Elijo Hills community. I know someone who lives there and have been in that area several times in the past couple of months. They are only half way done with that area. All of the homes are Million plus. Who in the hell is going to buy them when the credit standards begin to tighten??
JWM –
Let’s just rough out an estimate of 2,000 homes at an average wishing price of $1,000,000 each (of course, this only covers the Black Mountain Ranch area; choose whatever multiple you want to factor in for Vista, San Marcos, Carlsbad, Carmel Mountain Ranch, downtown luxury condo zone, etc). That would represent a total wishing value of $2,000,000,000+ (!!!!) which will soon get written down due to all the vanishing premiums (move-up buyer premium, denial premium, fraud and subprime), not to mention the possibility of a panic discount which David mentioned…
stucco.
i always have to read your posts like twice to figure out what you mean.
im starting to like renting in la costa because im thinking my landlord is gonna take a nosedive.
how do you find out if someone has a lien on a propery you rent?
“i always have to read your posts like twice to figure out what you mean.”
If you figure it out on the second pass, then I will take it that I am at least shy of 100% obtuse.
San Elijo Hills…looks ok because it is all new, but nothing there is worth close to a million. Lots of cookie cutter tract homes on small lots & and it’s really in San Marcos. The thing that really makes me wonder is how bad the traffic must be in the morning (and evening) trying to get to the freeway. There are no good arteries out to I-5. It probably takes 45 min just to get to the interstate during rush hour…and then you are stuck in a parking lot if you need to drive to San Diego for work.
“president of the Inland Empire Division of Shea Homes, said because Shea builds homes primarily for a move-up market”
HAHAHAAH. LMAO move up market in Inland Empire.
What a rat hole. I have spent many months in SBD. That place is Bakersfield but Worse.
“Builders Are Deperately Unloading Their Inventory”
Desperately
Here in Santa Clara County builders are going full steam ahead and building more… near Lawrence and 101 where Avalon has apt complex, a hotel was torn down… im watching as they might be building a new condo complex. Everywhere i go i see new condo, townhomes being built.
Since the tech implosion of 2000, we still huge number of tech parks standing empty. Employers are not expanding locally. Still plenty of land to convert into residential. Local CEO;s are complaining the lack (in lower cost housing) but not in quantity. Tells me local employers will not hire more here, but the recent increase in construction will create a glut.
SVGUY: Alameda County here, but I know of what you speak. The square footage of vacant office in SV is staggering. I do not believe it will ever be used again. So yes, we still have tons of property that can be converted. These large homebuilders that are still going ahead are insane. Unless they bought the land several years ago, then I don’t see how they are going to come out ahead. I believe we will see total market stagnation next year. There really is no one left to buy unless prices plunge. The sad thing is that while people here go around cheering about their home value, what they fail to realize is that high housing will only contribute to the valley’s eventual demise. They say to never say never, but I do believe SV will never be anywhere near what it was 6 years ago. People here are deeply deluded.
Exactly, just like the Unions won in the Auto industry then we saw the decline of Detroit as a world automobile leader. There is blame on Unions and Management alike. The parrell in silicon valley is striking.
BTW As you said NO it will not come back. Y2K was the peak in many ways.
I’m not from CA, so could somebody explain this “Inland Empire” business to me? It sounds godawful, from what I’ve read on this blog from time to time. As a Floridian, I always object when some Californian bases their entire opinion of my state on the flat, congested reaches of South Florida. I’ve been to LA and Santa Monica (which I liked very much, except for the huge homeless population) and from Oceanside down to San Diego, which was also very nice. But one day we went inland from Oceanside and it just struck me as hot desert with house after house that looked exactly the same. The heat was all but unbearable inland, but on the coast, air conditioning was not necessary.
“But one day we went inland from Oceanside and it just struck me as hot desert with house after house that looked exactly the same. The heat was all but unbearable inland, but on the coast, air conditioning was not necessary.”
You only got a small taste. Imagine what you described only worse. Palm Springs is part of the IE. It is hotter there than it is in Vegas sometimes during the height of summer. Unless you live on top of Mt Jacinto or something, you better make sure that you never run out of freon for either your home or your car.
“Palm Springs is part of the IE. It is hotter there than it is in Vegas sometimes during the height of summer.”
Thank you, JWM. Now I “get” what IE is about, at least as much as someone can who has never really been there. I remember that my nostrils hurt from the heat, same as in a sauna and I guess that’s the difference between Florida heat, which is like a steam room (humid) and CA heat, which is sauna (dry).
Of course, to be fair, in CA, there is relief from the heat at the coast. In FLA, summer heat is just as bad on the coast as it is inland.
Your informants forgot to mention one thing: SMOG. It is bad in the coast, but as you go further inland it really begins to hurt in your throat. I am not kidding.
The smog is not a problem at the coast, except for the two weeks per year when the Santa Ana winds blow the crap out here from the IE.
California has a habitable region along the coast that varies in depth from one to five miles inland. California also has some terrific farmland in the first set of valleys inland from the coast. The rest of the state has very little to recommend it other than scenic beauty in the areas that have not been built up yet.
“California has a habitable region along the coast that varies in depth from one to five miles inland. California also has some terrific farmland in the first set of valleys inland from the coast. The rest of the state has very little to recommend it other than scenic beauty in the areas that have not been built up yet”
The best habitable coastal plain in Scal would have to be the Oxnard-ventura-Santa Barbara plain. Unfortunately Oxnard is already a minature LA, and ventura- Santa Barbara wish to preserve their coastal regions from overdevelopment. That means that the verdant oasis’s of Central valley and the IE are the hot growth regions of CA for rampant urban cheap cookie-cutter housing tracts. Ah, the smell of cow manure and the aroma of smog to wake up to!
Aside from small stretch of land in Monterey,Santa Cruz, Halfmoon Bay, Pacifica and San Francisco: all else ( which is vast) is all farm lands in no California. You can drive out of Santa Cruz to Monetery and drive past farmlands next to the coast for 34-40 miles. After that its well overr 100’s miles of farm lands.
Seen it all!
the benefit of living close to the coast instead of inland in florida is because the number and the size of critters, mosquitos and lizards increases exponentially as you get closer to the everglades.
I was in palm springs in september and it was hot as hell
thank god only for 1 day
“I’m not from CA, so could somebody explain this “Inland Empire” business to me? It sounds godawful, from what I’ve read on this blog from time to time.”
From Oceanside-San diego just follow the 15 fwy all way to Barstow on way to Vegas.. Or divert on 215 thru riverside till it reconnects to 15 at devore/el cajon pass in San bernardino. That would take you thru a typical IE section. Originally the term Inland Empire referred to the older settled regions of riverside & San bernardino counties which included incorporated cities of SanBern, Riverside, Colton, Redlands, Ontario,Fontana,and a few outlying exurbs. As the IE has grow rapidly over last 20-30 yrs the term has generally come to include the entire Riverside-San B county settled regions from the LA and orange county lines all way to the SAn Gabriel/San bern/San Jacninto mts. There is a question whether the Coachella valley/palm springs/victorville desert outliers should be included as part of the IE. I would put them in separate categories as coachella valley which includes palm springs, and Victor Valley which includes Victorvile, apple valley, adelanto,barstow,ect.
IE is the most laizze -faire region in SCal as far as RE development, both commercial and Residential. Anything goes in the IE, and you can see it in the nasty haphazrd ugly urban sprawl and slapdash laying of cheaply built tract housing and endless clutter of shopping malls.
Thanks for a great analysis. Sounds like some parts of Florida, but I guess that’s no surprise, seeing that CA and FLA have certain developers in common.
I once went into the riverside county administrative bldg, a large modern brand-new bldg and the seat of all county gov’t affairs. Their bldg and planning dept was the largest busiest B&P dept in all of Scal. The main economic driving force behind the so-called IE ‘booming economy’ has been RE-related bldg and contruction, which has spawned a host of subsidiary feeder job sectors such as furniture suppiles, construction trades, pipe laying firms, lumber,ect. All this will decline(may be doing so now) as soon as RE prices and sales volume in IE go down, which they will. Don’t let the still yoy % increases fool you:they only reflect sales of brand-new 4/3 mcmansions. Total sales volume in IE has declined marketly while lots of new construction is still coming to market. 2007 will see the real pain in the IE housing market.
I’m in downtown Riverside right now, staying at the Marriott for a few days. While I agree the IE is not paradise there are parts that are truly wonderful. The Mission Inn is a fabulous beautiful landmark and the downtown is mostly nice. The local shopping center (I forget what it is called) is very nice. All out in the open because the weather here is mostly ummm.. warm. There are beautiful old Victorians and Craftsman houses in the older parts of Riverside. The native vegetation is surely some of most beautiful in the world, when you can find it not paved over with asphalt and houses.
Traffic is awful. And as for UC Riverside — it’s the only major university where “a freeway runs thru it”.
Big article in the local paper (Press Enterprise) here today (Sunday) about he crashing market in new homes.
The Gottschalk’s Dept. store was not crowded at all today 1 week before Christmas. Everything, and I mean everything, was on sale. Typical 50% off signs. Clothes did seem Walmart-priced but we were shopping for pleasure for just a few items not trying to get rock-bottom prices. But really, there were no crowds at the mall at all and the day was absolutely beautiful.
“I’m in downtown Riverside right now, staying at the Marriott for a few days. While I agree the IE is not paradise there are parts that are truly wonderful”
IE weather is actually decent from mid-november to march: rest of year it is hot,stifling and smoggy. Mission INN is truly one of the great Historical Blgs in Scal. Do not share your assessment of dwtn old riverside however: it is somewhat declining and aging, as are quite a few other Scal old town sections. If you want to revisit what the IE was before it became crapped out by overdevelopment, visit some historical musuems which feature maintained uncut citrus groves. Even 30 yrs ago San berbardino/riverside still had large expanses of beautiful citrus grove farms which clothed the hills and imparted a picturesqe pastoral beauty to the IE landscape. The 1st decade of the 21 century will be remembered as the period which saw the IE completely bulldozed and razed over into a gogantic asphalt parking lot.
Riverside is nice. It really reminds me of the blue-collar Chicago suburb I grew up in. Ozarkian is right about the native vegetation, too. Riverside is surprisingly green.
The rest of the IE really is a pit, though. San Bernardino is just as bad as places like Gary, IN, or Newark, NJ, plus 120 degree temperatures and smog. The Riverside exurbs are pretty awful too. Fontana, Victorville, etc. — they really don’t have too many redeeming features.
The people in the IE are a mixed bag. About 2/3 are nice, middle-class people, the kind of people anyone would want to have as neighbors. The remaining 1/3 are divided between marginal white trash types with a violent streak — the Hell’s Angeles got started in the IE, I think, transplanted ghetto thugs from South Central/East LA — many of the characters in 90’s movies like “Menace II Society” and “Boyz in the Hood” have since moved to the IE — and 1/3 “sullen white/Hispanic trash”; angry young men with goatees and pickup trucks with gigantic wheels who aren’t mean enough to become actual criminals but basically hang around looking sullen and angry all day. Picture “Jesse James” from “Monster Garage” without any of the mechanical skill or charisma. The IE used to be home to “desert rats,” too, but they are a dying breed.
The main problem with the IE is the commutes.
heh Heh! And many of those “sullen white/Hispanic trash” (angry young men with goatees and pickup trucks with gigantic wheels) moved to Phoenix. As an extra bonus, Phoenix gets the worst drivers in the United States - those who never use their turn signals (very rude, in my opinion, and very dangerous), those who cut off other drivers, and thousands of red light runners. It’s no wonder two of Phoenix’s intersections are among the top ten dangerous intersections in the U.S. I do think Phoenix has redeeming features that keep me liking this place as much as the South Bay in Los Angeles. Those features cancel out the rude drivers for me.
I live in the IE and it is not that bad. I live in Temecula, about 10 miles from the center of toen near Lake Skinner. I happily rent a 800k home for 1700 a month. On Five acres and very peaceful. I am waiting for the crash in the next two years to pick up someplace of my own. I left San Diego a few years back because of the crowds and price of homes. The IE is actually a fairly nice place to live. At least the southern portion near Temecula Murietta area.
See the trends in Silicon Valley RE stats, the latest of which are now posted at:
http://www.viewfromsiliconvalley.com/id286.html
To keep up with “What’s Really Happening” in SIlicon Valley, please visit:
http://www.viewfromsiliconvalley.com/
Thanks!
You need RSS feeds!
Yep, I realized fast that I was competing against the deeper pocketed developers with tons of spec homes & a very fat profit margin to dip into so they could move their inventory and turn off their carrying costs. New builds are forcing individual existing home owners to match/beat their price cuts and hence surrender all the equity they will need for their next home. The silver lining? Buy new and demand your lost “pseudo-equity” back!!
Check out the dog in the bottom right of the picture. I think he’s sending his own message about this listing,
http://www.mlsli.com/uniDetails.CFM?MLNum=1805780&typeprop=1&start=1&rpp=20
This tread really got off topic - Bring back Larry Nerdbaum. LOL
My bad, crispy. I was responding to a post of Marc’s about the RIP for the middle class and then it was “off to the races”.
I added to it also, LOL. Sometimes it’s hard to resist.
Apollo taking Realogy private for $6.6 billion: WSJ
Last Update: 9:42 PM ET Dec 17, 2006
SAN FRANCISCO (MarketWatch) — Buyout firm Apollo Management is set to take real-estate services firm Realogy Corp., the holding company for such operations as Coldwell Banker, Century 21 and the Corcoran Group, private for $6.6 billion, according to a media report Sunday. Is one of the most powerful players in the U.S. residential real-estate market, with a hand in one of four brokered U.S. home sales, The Wall Street Journal reported in its online edition, citing company officials. See Wall Street Journal story (subscription required).
Apollo is offering $30 per share, an 18% premium to Friday’s closing price of $25.50, The Journal said. Following a spinoff from the old Cendant conglomerate, the company’s shares began trading at just under $26, and later dropped below $20 in September, according to the report.
“The view of the board is that companies with declining earnings and no visible growth should be private,” The Journal quoted Realogy Chairman and Chief Executive Henry R. Silverman as saying. “(Buyout shop) have a much longer-term view. The people who own our stock have a five-second view. These are the kind of people whose performance is graded weekly, monthly, and annually. They don’t have that kind of patience.”
Realogy is in a bind given the faltering domestic real-estate market, and is forecasting sharp revenue declines for the foreseeable future, a bleak outlook that has weighed on its shares since they were first offered to the public in July, The Journal said. In the third quarter, after stripping out costs related to restructuring and the spinoff from Cendant, Realogy’s earnings before interest, taxes, depreciation, amortization and minority interests came to $277 million, down 32% from $406 million a year earlier, according to the report.
Apollo is betting some $2 billion of its own capital that real-estate sales will recover shortly and that Realogy will maintain its strong brand names, The Journal said. Apollo has the benefit of hyper-liquid financing markets, which are backing the rest of the purchase while allowing it to assume an additional $2.4 billion or so in existing Realogy debt, according to the report. J.P. Morgan Chase, Credit Suisse and Bear Stearns are financing Apollo’s debt.
Apollo and Realogy’s management have a deep history, forming a business called National Realty Trust nearly 10 years ago to consolidate operations serving the residential real-estate market, with Cendant buying out Apollo’s stake in 2002, The Journal said. Silverman said neither he nor other top managers participated in the negotiations, according to the report.
Warren said that by the end of November, Pulte had recorded about 220 closed sales at the new Victorville community and 90 cancellations.” “‘We sold those 90 homes twice and some of them three times,’ he said.”
I wonder which numbers are being reported for new home sales?
220
220 + 90 + 30(?) = 340.
of course he didn’t tell us how many of those 90 homes he sold 4 and 5 times.
The Wans home was at bubble proportions in 2004 when they bought it - NOW = they’re ASKING someone else to bend over ….. 5% a year from the ‘04 price would put them at 328,000 for a sales price …. they have the audacity to E$XPECT someone to bend over and take it for 350,000 let alone 370k - and they feel like their losing something??? LOL - Pleeeeaaaasssseeee!!!
They don’t deserve 328,000 ……
McCracker Box’s …..