“Some Pain In 2007″: NAR
The Pasadena Star reports from California. “Home sales in Los Angeles County dropped 21.6 percent compared to last year and some communities are showing drops in median home prices, according to figures released Thursday.”
“The statewide median home price increased 1.4 percent in November, the smallest increase in nearly a decade, said Robert Kleinhenz, deputy chief economist for the California Association of Realtors. ‘The 1.4 percent increase in the statewide median masks the fact that you’ve got markets across the state moving in different directions,’ Kleinhenz said.”
“The San Gabriel Valley had similar highs and lows. Hacienda Heights’ median home price dropped 17.8 percent to $512,000. But Altadena’s median home price increased 15.2 percent to $702,500.”
“Sales have dropped substantially and defaults and foreclosures are up, said Michael Carney, a professor of finance and real estate at Cal Poly Pomona. More money might be flowing out of speculative housing and into stock markets, Carney said.”
“Some sellers who were waiting for a market peak are panicking and putting their homes on the market, he said. ‘How long this will go on is the issue. If there’s going to be a recovery, I think it will be well into 2008 before we see it,’ he said.”
The LA Times. “Optimism was voiced Thursday by economists for three of the biggest industry lobbying groups. They see home sales bottoming in the current quarter and picking up in 2007.”
“However, after three years of record sales, the slowdown will continue to be a drag on the nation’s economy until at least the middle of next year, they said. ‘A lot happened in that boom and we have some paying back to do yet,’ said David Seiders, chief economist for the National Assn. of Home Builders.”
The Sacramento Bee. “California home sellers face several more months of pain, leading housing economists said Thursday. But while they believe the current ‘correction’ will be shorter-lived than those that hammered home values during the early 1980s and 1990s, the three cautioned that residents of California, Florida and much of the Eastern Seaboard are likely to endure the most prolonged pain.”
“That’s because prices during the past five years reached levels in all those areas that became unaffordable to buyers and unsustainable for sales, they said.”
“‘I would just emphasize that all real estate is local and there will be markets in this country that will continue to experience some pain in 2007,’ said David Lereah, chief economist of the National Association of Realtors. ‘It may be a 2 percent drop, a 5 percent drop. Maybe it even gets to be an 8 percent drop in that area.’ Lereah said about 25 percent of the country falls into that category.”
“Local experts say that includes the Sacramento region, where year-over-year prices have fallen up to 14 percent in Placer County alone and 2006 sales of all homes and condos are running 14,000 behind the same time last year.”
“Sacramento-area sales prices are expected to keep falling, up to another 10 percent during 2007 before stabilizing, according to predictions last month by (broker) Mike Lyon. The chief culprit: excess inventory, with 12,652 homes on the market in El Dorado, Placer, Sacramento and Yolo counties, according to real estate researcher TrendGraphix.”
“A year ago, Lereah and Seiders were among housing economists nationally and in California who provided outlooks for a market that in hindsight proved to be overly sunny.”
“‘Affordability is the problem in housing right now,’ Lereah said.”
“Folsom-based home-builder consultant Greg Paquin has predicted sales of 9,500 to 10,000 new homes in 2007, lowest since the 1990s and well below 17,155 sales in 2004. Paquin also recently told the North State Building Industry Association he doesn’t expect significant price hikes for new Sacramento-area homes until 2009 or 2010.”
The Tracy Press. “Mortgage foreclosures have tripled in San Joaquin County during the past year, making this one of the leading areas in the nation where people default on home loans.”
“An Irvine-based company that tracks foreclosures in California shows that foreclosures in San Joaquin County have tripled from last year. The company reported 1,228 foreclosures in the second quarter of 2006, compared with 374 for the third quarter in 2005. In November alone, 594 loans were in default compared with 139 for the same month last year.”
“‘There are a certain amount of loans out there that are probably going to cause problems for the consumer if the consumer isn’t prepared to refinance right now,’ said Dale Gray, executive director for the Central Valley Association of Realtors.”
“He added that there were a lot of investors who took advantage of rising prices and could use risky loans if they could build equity quickly. Those opportunities disappeared last year when the market hit a slowdown.”
“‘If they missed that window and bought it for an investment, it could be those property owners who find they can’t hold that property,’ Gray said.”
I’ve been keeping tabs on the NOD’s in Los Angeles County for the past 2 years. San Jaoquin county tripling is nothing….Los Angeles County is now tracking 500+ NOD’s per week, up from 80-120 this time last year.
The market picking up in 2008? That’s being overly optimistic, when it took 5+ years to run up the prices to the level they’re at now. If anything, it’ll be either a slow crawl to the bottom or what I really think will happen, is a slow decline that’ll pick up speed in 2007 and 2008.
Soft landing happy talk against a backdrop of steadily eroding fundamentals will only serve to prolong the agony.
Bakersfield NOD’s has gone from 5-10 per week (2003-2005) to 95-100 per week in the last few months…
Where is the pain in the LA NOD’s high end, low-end?
“A year ago, Lereah and Seiders were among housing economists nationally and in California who provided outlooks for a market that in hindsight proved to be overly sunny.”
“‘Affordability is the problem in housing right now,’ Lereah said.”
Bingo!!!!!
And just how quickly will the “Affordability” issue be resolved?
In a couple of months?……..I don’t think so
Is MSM going to let DL get away with just a slap on the wrist ? “Proved overly sunny” ? Is that ALL ?
On the stock market side, there enough reporters making fun of stock analysts and criticizing them on how they are always “buy side analysts”, and how there are many more buy recommendations than sell. But nothing for DL and his gang ?
The guy made a wrong prediction ? Is that all ?
And this guy Carney.
Feb 10, 2005
“People who talk about a bubble are blowing smoke,” said real estate economist Michael Carney with California State Polytechnic University Pomona.
Carney said even if mortgage rates rise another percentage point or two, he thinks that the increase in California housing prices would only be slowed, but they wouldn’t fall.
“I don’t see anything to stop them,” Carney said.
Singing a different tune now, I see.
That is the most infuriating part of this.
RE economists were wrong and aren’t being held accountable.
Dean Baker had an excellent rap about economists and accountability.
They think accountability is great for the lazy janitor but are incensed at the idea that they should be subject to some performance qualifications to remain employed.
What are those professor clowns from Claremont College with their real estate perpetual motion machine up to these days?
I’m embarrassed to say I graduated from California State Polytechnic University when isolated minds from reality exist in our educational facilities.
‘It may be a 2 percent drop, a 5 percent drop. Maybe it even gets to be an 8 percent drop in that area.’ Lereah said…”
WTF, David? We are already way beyond that in the DC area. How about Florda? WTF?
Just re-read the quote. Maybe I am being too harsh. We’ve already lost a nominal 12% in our area, so maybe he’s comforting us in saying it’ll only be another two, five or eight percent. I feel better now. I rent.
Don’t you know? You are supposed to add figures together to get current decline. 2+5+8= 15%. More to come…
DC posts ” ‘It may be a 2 percent drop, a 5 percent drop. Maybe it even gets to be an 8 percent drop in that area.’ Lereah said…”
Hey! wait a minute I signed up for 15% in the bag, now I got pain?
Wait, it may be a …..
50% drop. Who knows what the bag has in store for 2008, but with potentially millions of foreclosures heading down the pike, and if I were a betting man, I’m not sure I would want to be holding my Lereah’s bag…
“California home sellers face several more months of pain, …”
monthsyearsThe LA Times. “Optimism was voiced Thursday by economists for three of the biggest industry lobbying groups. They see home sales bottoming in the current quarter and picking up in 2007.”
Uh Huh, bottoming in a black hole where, light, information, and even Reltor spin can not escape the truth of this house of cards collapsing into a singularity of bankruptcies and recession.
The only thing “picking up” will be the speed of new listings as panicked speculators and owners try to unload their “profit” before it’s too late. (Which it already is…)
The refuse to be ripped off buyers are the ones “unloading” their profit for them.
It seems like yesterday’s CAR report was the first inkling of the housing tsunami which has begun to inundate the LA coastal plain. As normally happens in tsunamis, the areas closest to the shore were the first to submerge (PV -20% yoy, etc).
Just in case anyone is still insisting that this time will be different, it may be wise to suggest they carefully study the findings of this outstanding powerpoint presentation…
(Caution: .pdf file)
http://www.realestateclubla.com/pdf/Cagan_FireBurn_1104.pdf
P.S. Note in Cagan’s presentation that the time to pick up bargains (1996) was not until three years after foreclosures sunk the market to the bottom, and foreclosures did not sink the market (1993) until three years after the 1980s bubble burst (1990). But don’t worry — this time will be different, with a quick bottoming out in 2007 followed by a resumption of high price appreciation.
GS: you’ve showed us this before and I think it’s great, but is nearly 3 years old now. Has Cagan done anything more recent?
Nevermind, I answered my own question. All of Cagan’s research is published on the website:
http://www.firstamres.com/marketwatch?page=list&moduleid=6
“Affordability is the problem in housing right now,” Lereah said. “All the other fundamentals look pretty good.”
fundamentals: spending ≤ income
Affordability is the main issue now, in the past and in the future. It has always been the most important factor in housing. No other asset is as expensive and is financed to the degree of housing.
The people I talk to daily cannot afford to buy using normal financing. Lately, they do not want to use financing with unsustainable, artificially low payments on 100% of price because they see prices falling and think they may fall more.
When friends or co-workers ask for advice, I ask them if they are willing to make the sacrifice of years of no new clothes, no vacations, no dinners out, no furniture, no toys, driving a 10 year old car. I show them the payments and they are silent as they think about it……
(Bull plugs ears, tightly shuts eyes, and loudly recites):
“Soft landing, soft landing, soft landing…!!”
—————————————————————————–
Shelter in a storm
Housing market got buffeted in 2006, expected to stabilize in 2007
By Amy Hoak, MarketWatch
Last Update: 12:01 AM ET Dec 21, 2006
CHICAGO (MarketWatch) — For many residential real-estate markets in the U.S., this year started with an advantage to sellers and ended with buyers holding the upper hand. But, unlike some people had expected, the switch didn’t follow the deafening “pop” of a massive real estate bubble.
That spells good news for both buyers and sellers in 2007, as markets return to balance, prices moderate and, if interest rates remain subdued, sales begin to edge higher.
Many markets saw slower home-price increases and a build-up of inventory in 2006, much to the dismay of optimistic sellers. And while speculators — investors who many argue are partially responsible for the massive housing boom — tried to exit the market, buyers began waiting out the correction to get the best prices, causing a drop in home sales.
In many areas, however, the correction wasn’t as harsh as some had feared. In fact, the year as a whole might even have been described as “healthy” if the country’s perspective hadn’t been skewed by the boom of the past few years, said John McIlwain, senior fellow for housing at the Urban Land Institute. The market is still “well within long-term norms,” he said.
“I think the story of the year is the bubble that wasn’t,” McIlwain said. “Instead of a bubble busting, so far it has been a healthy correction.”
http://tinyurl.com/y8zjtp
Doubt Shrouds Soft Landing
MARKET SNAPSHOT
U.S. stocks lower amid growth concerns
Weaker-than-expected durable goods orders offset upbeat tech earnings
By Nick Godt, MarketWatch
Last Update: 3:32 PM ET Dec 22, 2006
NEW YORK (MarketWatch) - U.S. stocks dropped on Friday, putting the market on track for losses for the week, after a key economic report on orders of big-ticket items fueled concerns about growth, offsetting upbeat earnings from Blackberry maker Research in Motion Ltd. and software producer Red Hat Inc.
(Will Red Hat Inc save the rally?)
http://www.marketwatch.com
—————————————————————————–
Main Entry: shroud
Function: verb
transitive verb
3 : to dress for burial
Note that the Urban Land Institute is funded mainly by developers. It would not serve anyone at ULI to say anything negative about the developers, since they are paying the bills. I would read “healthy correction” as double-speak for “bubble bursting.”
“John McIlwain, senior fellow for housing at the Urban land institute”
Gee I wonder how many acres of Kool aid producing land he owns.
Cool.
Cow_tipping.
name on county in all of USA going up since 1/106 other than a drilling site
“However, after three years of record sales, the slowdown will continue to be a drag on the nation’s economy until at least the middle of next year, they said. ‘A lot happened in that boom and we have some paying back to do yet,’ said David Seiders, chief economist for the National Assn. of Home Builders.”
For some reason that “Liar” song by Black Flag/Henry Rollins just started playing in my head………
We don’t have a price drop yet, but Silicon Valley y-o-y RE is flirting with it on a monthly basis. The latest snapshot is at:
http://www.viewfromsiliconvalley.com/id287.html
We’re in Florida this week &, as former natives, will publish some observations. (Even if my in-laws might object to the suggestion they’ll never sell their house for what the neighbor got in October, 2005.)
I guess either wiki or today’s WSJ is wrong about price changes or wikipedia is wrong about Menlo Park being part of Silly Valley, then. Because today’s WSJ shows Menlo Park (94025 zip code) midian sale price down 20.8% YOY, while wikipedia shows Menlo Park to be part of Silly Valley. I guess Menlo Park is different than the rest of Silly Valley???
http://en.wikipedia.org/wiki/Silicon_Valley
midianmedianMelon Park you mean, where there are chicks with melons … mmmmmm eeeeee llllllllll ooooooooo nnnnnnnn sssssssssss ….
That’s why Its Silicone valley. Silicone is used to make the melons. They park them there, and that’s why its melon park. Got it. Good.
Cool.
Cow_tipping.
Menlo Park is in San Mateo county, not Santa Clara county.
You are doing a great job VFSV ! I read your site quite regularly.
The “asking price” side already has been showing a YOY decline for last few weeks.
http://www.housingtracker.net/old_housingtracker/location/California/SanJose/
Median down 2% and inventory up 25%. The sample is different than DQ, but still covers important cities and hence can be considered as a good leading indicator.
The Tracy Press. “Mortgage foreclosures have tripled in San Joaquin County during the past year, making this one of the leading areas in the nation where people default on home loans.”
Tracy was the “HOT” area. So many tech employees from Silicon Valley bought the “cheaper, newer and bigger” houses in Tracy, Livermore, Brentwood and Mountain House. The daily 3 hours of commute is already painful. Now the falling house prices.
Not everyone was a flipper. Some wanted to build equity quick so that they can use it to buy a real Silicon Valley home later. Some thought this is all they can afford and made the compromises. Everyone I know who bought in that area, was just an average Joe, not someone who wants to pimp houses to retire early. They bought because of fear of being priced out, not greed.
Feel sad for them. That area is so far away from the job centers that it is going to fall the hardest among the so called Bay Area. 700K for a 2K sqft house in Tracy is as nuts as 500K in King City. Of all the insanity that happened, paying outrageous prices for the “fringe” areas was the most insane thing in my book. If you are going to risk your ENTIRE financial future, at least do that in a prime area. Sigh.
Not quite as nuts…although the Altamonte pass is sucky, there are quite a few good jobs in the Tri-Valley area (Dublin, San Ramon, Pleasanton, Livermore, etc), so that commute might be manageable.
Now, if you’re commuting from Tracy to, say, Cisco City - that’s a really sucky commute.
Yea Here is a little heads up:- David Liareah will totally burn CA in an futile attempt to save South Florida … He owns like 5 condo’s in the south FL area. watch the cheif econimist for the NAR drown in his own Kool-aid.
I hate liars, and I hate liars who take their own advice even more … even they dont know which is the truth.
Cool.
Cow_tipping.
he said fl & CA was toast and will sck in 07
but the rest of usa is just a “sprinkling”
Not everyone was a flipper. Some wanted to build equity quick so that they can use it to buy a real Silicon Valley home later.
Uh……..isn’t that flipping?
Maybe. Definitely similar attitude. I used the word “flipper” as someone who is flipping investment property, not someone planning/hoping to be a “move up buyer”.
no it is daytrading
“But while they believe the current ‘correction’ will be shorter-lived than those that hammered home values during the early 1980s and 1990s, the three cautioned that residents of California, Florida and much of the Eastern Seaboard are likely to endure the most prolonged pain.”
WTF? You may as well say: “40% of the U.S. housing stock will endure prolonged pain”. Of course, if this be the fate for 40% of our housing stock, the other 60% is pretty much SOL, as well.
BTW, he missed Arizona and Nevada.
It will be shorter due to our several years of negative savings, the Heloc’s, the ARMs, the IO options, the flippers etc but it will be sharper and much more severe. The 90’s had none of that. There also was no internet and news travelled so much slower. Today a decline in one area will rapidly cascade into a decline clear across the country if they have some commonality.
Also The starving hordes of real estate clerks will very very rapidly cheer on the price decline since they will suddenly see that that will get the volumes up, and volumes are what feed them literally. They can eat burgers instead of steak, they wont die. I’d guess 1 year to bottom from now and sit there for 2-3 years and then go as fundamentals govern them in each region. Dont expect detroit to come back for a longtime, and silicone valley is the next dinosaur wiht IT jobs going to India and China. Somehting like that.
Cool.
Cow_tipping.
in 87 the tax law change was the end for the Regan flip- but then I could go 20% down and be cash possitive
If this debacle isn’t worse than the late 80’s I’ll give up.
In the Boston area back then there weren’t ANYWHERE near the number of properties on the market. No where NEAR the amount of NEW inventory (though the developers of condos got scorched).
I don’t recall much being said about foreclosures then (though they certainly increased) and getting a non-conventional loan was unheard of.
There was fraud but virtually all at the developer and S&L level. Nothing like the stuff we’re already seeing on the personal level and NOTHING on the scale of what’s been shown already. I think the unfolding will be faster simply because there are too many individuals so totally on the ropes this time. That will make inventory impossible to control.
You can see the inventory creeping up around here already. Even if unemployment rises a little, the impact (because so many are already on the margin) will be far worse than the 80s.
I don’t know about all this bearishness. I wish it were true. My own personal experience is, just this week my brother represented an estate that sold a condo near Beverly Hills for 150K over the ask price, with multiple offers. When will this downturn I keep reading about hit LA?!
” When will this downturn I keep reading about hit LA?!”
huh? do you bother reading the zip charts? certain zips in l.a. are negative from rancho palos verdes to manhattan beach…out to the valley and pasadena. we’re talking double digit y-o-y price declines. not isolated to one area or demographic as some of your previous posts have insinuated.
I admit I haven’t read any charts, I don’t have the time, I’m just going by what I see around me, and I still see houses moving at ridiculous prices, albeit at a slower pace. Seems like all the West LA posters agree on that one.
If you find some time you might read this:
Housing still up in some areas
Home values continue to increase in the county’s less-expensive neighborhoods, offsetting declines in higher-end ZIP Codes.
http://www.latimes.com/news/la-fi-homes13dec13,1,1554260.story
DataQuick for November La Zips
http://www.dqnews.com/ZIPLAT.shtm
Your precious Santa Monica has done gone negative. As has Brentwood… and others.
My Mother-in-Law is still grasping at the straw that the BA is different.
“…sold a condo near Beverly Hills for 150K over the ask price, with multiple offers.’
Do you really consider that to be reprensentative of LA?? It’s coming, just not when everyone wants it to.
I have to agree with JWM. Vermont is still bubblish, but I recognize that a) the rest of the country has already turned and b) at some point soon (but I don’t know when) Vermont will have the same problems. The important point is to recognize the storm on the horizon and prepare for it. It’s pretty cloudy over West LA, too.
I have no problem with hoping, wishing, thinking or predicting “it” is coming. What I don’t understand is talking like the bottom has already fallen out of this thing, when I’m surrounded by shacks listed for (and selling for) 1M+.
shacks in santa monica always have sold for insane prices.if you like 850 sq ft with 5 transients residing in your alley/back yard then i guess you are at home there,prices with crash there as well as everywhere else but still,if those shacks sell for 500k would you really want one?my sister lives there and there are gangs everywhere, homeless people ,crime,overcrowded,i can go on and on.is it really paradise there?
My advice to you?……get the heck out of West LA, Santa Monica, or where ever the heck your actually at in LA and you’ll see the whole mess is imploding. Who in there right might would want to spend their life in such a god-awful place (and I don’t care if you live in Bel-Air - mmmmm, the views….miles and miles of smog covered suburban/industrial sprawl) You’re livin’ in the wrong place, lainvestor. You may never see prices drop where your at, so go some place worthwhile that already is.
I have to disagree here SaMo, Pacific Palisades, Bel-Air those are nice area’s sold plenty of foreclosures there. You could do a lot worse. No I don’t live on that side of town too many industry folk.
lainvestorgirl ” I have no problem with hoping, wishing, thinking or predicting “it” is coming.”
You will not have long to wait, 07 will be a bloodbath. Wait untill all of the people, that either waited or pulled thier listings thru this winter, list this Spring/Summer. I beleive the 07′ Spring/Summer selling season will fail except for the price cutters.
But it will not be over by a long shot. The Toxic loans the busted out people will feed this thing for years.This only the very beginning of the beginning. 5 years from now they will still be shooting the wounded.
Stand by your intuitions on this one, IMHO. From what I have seen the past year dealing with media reports, personal contact and other anecdotal evidence, it is the tortoise attitude and calm-collected ones that will be able to handle any downturns in the next few years. Don’t buy when everyone is buying, and definitely don’t buy when you notice that buying is down but the media is trying to say that now is a good time to buy, rah, rah, rah.
This is the closest thing I can find in my area that shows any evidence of a downturn, in 2005 I think this would have sold more quickly and probably for like 900K, now it’s sitting without much activity:
http://www.realtor.com/FindHome/HomeListing.asp?snum=7&locallnk=yes&frm=byzip&mnbed=0&mnbath=0&mnprice=700000&mxprice=99999999&js=off&pgnum=1&fid=so&stype=&mnsqft=&mls=xmls&areaid=90291&poe=realtor&zp=90291&sbint=&vtsort=&sorttype=&typ=1&x=27&y=13&sid=07C7C4FE6982C&snumxlid=1070105858&lnksrc=00002
Yea, How many minutes will it take you to walk to the beach from there?. Rose has always been a hot street. I remember when 450k would have bought that all day long.
lainvestorgirl,
I am not seeing any price movement here in OC yet either, but I am certain it is coming. I guess the higher the run up, the stickier the prices are on the cornice. And I am completely bewildered when I see anyone looking at anything with a for sale sign on it these days. But then I remember that years ago when I went looking for a house that I had absolutely no clue about what we all discuss here on this blog. None, zero, zip, nada. I just contacted a real estate agent and off we went. I imagine that there are many many folks out there doing just that and they are just as clueless. But I do believe that those GFs are reducing in numbers each day as is evidenced by the inventory runups we are seeing. It’s only a matter of time when we will see the intersection of resets, stagnant prices/decline, inventory, and foreclosures that will bring this house of cards down. IMHO
Merry Christmas everyone. I have truly enjoyed reading all of your comments and points of view this year.
I have not seen much movement but I live here in Irvine(Woodbridge) and rent now after selling my home. I have noticed a Large House just off East Yale Loope here in Woodbridge that has been on the market since July and not moving after many open houses. Seems real estate doesnot go down in Irvine. It doesnt sell either! Just wait……
Good Grief. Stop complaining and read the data:
http://www.dqnews.com/ZIPLAT.shtm
Then get out there and snap up all those 8% off bargains.
Well, there you have it, all the cities I’ve been watching are positive, except for SM which is down not even 10%. Thanks for that.
I guess you aren’t watching PV (-20% or so)…the price drop tsunami is rolling inland from there.
” think this would have sold more quickly and probably for like 900K, now it’s sitting without much activity:”
That $850,000 house is about 2-3 blocks east of Lincoln, which has always been a seedy beragged main thoroughfare. Corner of rose and lincoln gets some whacked out retreads/street urchins/assorted poor folks going to the 99 Cents store and the cheap taquerias. IMHO that part of venice is too far north/northeast of the better sections of venice south of venice blvd and west of Abbot Kenny. The 1.5 mile walk to the beach would traverse some areas infested with lowlifes and gangs, particularly along california blvd south of rose ave. Venice is waaay overpriced: it may have been the hip chic place to buy when RE was shooting up 300% in the LA westside, but when the s** hits the fan and RE prices stagnate Venice will go down hard.
venice is a sewer.
Is there a single city in the entire USA that you guys haven’t trashed?
Venice isn’t perfect, but I’ve travelled to a lot of places around this country, and I haven’t found anywhere better.
That I could afford, anyway