“Buyers Know They Have The Upper Hand” In California
The Press Democrat reports from California. “Bring in a buyer for an Oakmont home and get a $5,000 bonus. Buy a fixed-up two-bedroom Santa Rosa house and drive away in a new Honda Civic. Close a deal in a Christopherson Homes subdivision and win a trip to Hawaii.”
“Incentives to drive home sales have become more common across Sonoma County during the housing slump. Most are aimed at enticing agents, in a market where the supply has doubled over the past year. ‘You pull up a price range and you get more houses than you can look at. You somehow want to do something to get noticed,’ said Tom Kemper, property manager in Windsor. ‘Houses don’t sell themselves any more.’”
“A new Honda Civic for a $359,000 house, that was an offer posted in red letters on a large yellow banner at a busy Santa Rosa intersection. ‘With the market as it has been, I thought it might be valuable to get a hook,’ said David Peoples, the agent with that listing. ‘I’m thinking anyone can lower the price, but let’s do something that will draw attention, and it did.’”
“More than a month later, despite more calls and interest, the lure of a new, $20,000 car still had not yielded an offer to purchase the house. ‘It didn’t sell the house, but it did get a lot of attention. It achieved that goal,’ Peoples said.”
“Since then, Peoples dropped the car offer and the sellers lowered the price to $339,000.”
The Sacramento Bee. “Curt Westwood recently settled a yearlong legal dispute with Loomis officials. He’s begun construction on the first of 62 luxury homes that will be sprinkled amid 320 acres of terraced vineyards and oak trees.”
“Now that an agreement is in place, Westwood is busily paving roads, staking out vineyards and starting work on the first homes. They’ll be finished in about a year, ranging from 5,000 to 7,000 square feet and priced between $3 million and $4 million. Custom homes built by others could be ’several million more,’ he says.”
“That’s a lot of money for a home, especially now when, as Westwood says, the housing market ’stinks.’ But he’s convinced it will rebound by the time his project is completed.”
The Daily Press. “Victorville lender Max Anderson concurs that the market for adjustable-rate mortgages dropped when the current market slow-down started. Now, he said, demand for ARMs ‘is dead.’”
“Then, again, he, along with most other lenders, want to guide buyers away from adjustable rate products anyway, not because they are inherently flawed, but because ‘many home buyers simply don’t understand mortgage products well enough’ to use them beneficially.”
“(Of) consumers who purchased 1 percent option mortgages, said Anderson, many didn’t realize the outstanding interest wasn’t disappearing; it was being shifted to the ‘back side’ of the loan amount, adding to their overall total cost, and resulting in buyers being responsible for thousand of dollars in additional cost.”
“Even if a buyer’s credit precludes them from purchasing a 30-year product, most lenders can fit subprime borrowers into 5- or 2-year fixedterm mortgages. which revert to and adjustable rate unless a buyer re-finances at the end of the fixed-rate term, he said. ‘Today is the only day to buy,’ Anderson said.”
The Voice of San Diego. “The year’s beach season was in full swing before many in the county noticed a chill in a San Diego housing market that had been sizzling for years. ‘The beginning of the year was still kind of jubilant from last year,’ said economist Michael Colby. ‘No one really realized where we were until the middle of July.’”
“‘Before that, it was just experts saying, ‘This is not sustainable,’ he said. ‘Now, the data actually showed a change.’”
“San Diego proved an extreme version of what was happening in markets across the country, as inflated markets started to cool. Year-over-year price declines continued monthly from June, eventually reaching a low point of $482,000 in November. That was a $36,000 drop from the previous November, according to DataQuick.”
“Many analysts considered a decline in sales activity the most concrete marker of a slowdown. The number of homes sitting unsold on the market soared to more than 23,000 units this summer before declining to about 19,000 in December, 10 times as many homes as the market’s lowest supply in 2004.”
“And 25 percent fewer homes sold in the first eleven months this year than in the same period in 2005. Home builders drastically scaled back their plans, slashed their profit outlooks and laid-off employees.”
“According to the San Diego Association of Realtors. The association experienced a sales volume drop of 25 percent from January to November, a $5.7 billion difference from the same period in 2005.”
“The drop in demand, and profit share, among the county’s estimated 10,000 real estate agents will force many out of the profession, experts say. Job losses in the real-estate related sector, including agents, mortgage brokers and construction workers, will have lasting, significant effects on the local economy, they project.”
“Many in the real estate industry blamed the media for the negative mindset of their formerly enthusiastic clients. Agents, builders and brokers lambasted those reporters, blaming the media for perpetuating a perception of doom for the housing market. But the numbers didn’t lie.”
“In these circumstances, convincing buyers to get into the market just for the sake of doing so will be a tough sell, said Peter Dennehy, VP of the Sullivan Group. ‘The market as a whole has gotten the memo,’ Dennehy said. ‘It is very hard to convince someone that it’s a good time to buy right now. That ‘let’s just get something,’ ‘gotta get in on the market’ — I think that perception is gone.’”
“Dennehy does consider San Diego a ‘buyer’s market.’ ‘Buyers have a lot of choice; they know that they have the upper hand,’ he said.”
“The popularity of creative financing options worries analysts. Some buyers got into homes even though they could only afford the introductory payment on the loan. Those watching the market fear an avalanche of foreclosures from those who can’t afford their loans anymore.”
“Dennehy said he expects an up-tick in sales in February or March. Prices will continue to come down until sales and inventory catch up, he said. ‘On the whole, we’re looking at more ‘fingers-crossed’ thinking,’ he said. ‘Six months ago, it seemed a lot more desperate than it does today.’”
‘The bond gurus at Pimco in Newport Beach, who spent considerable time in ’06 tracking housing markets as they related to mortgage-bond investments. Us: Will loans be harder to get in 2007? Saumil: We believe the subprime mortgage market will re-price credit risk during 2007, thereby making it more expensive and onerous for first-time homebuyers to enter the market.’
‘Us: How will O.C. home prices fare? Better or worse than U.S.?
Saumil: O.C. home prices will likely underperform national home prices on a percentage change basis in 2007, due to prior inflation, affordability, and the local labor market’s dependence on real estate markets. O.C. prices, on same scale, likely down 5 percent or so. The risk to our price forecast is to the downside.’
‘Us: What might be the housing surprise we’ll be talking about a year from now? Saumil: The surprise will likely be that activity will not rebound meaningfully upon realization of lower mortgage rates. The realization that residential real estate has not historically provided meaningful real returns on investment will come back to the fore, and turnover along with new investments in the sector will underperform current expectations.’
Reprice credit risk. This means that investors of Mortgage securities will want more yield to compensate them for the risk of subprime loans. As their performance continues to worsen, this risk premium will increase. Perhaps rates on subprime loans should never have been so low.
Next the market needs to reprice equity risk by lowering the prices!
Coming soon to a neighborhood near you.
Well put!
‘The realization that residential real estate has not historically provided meaningful real returns on investment will come back to the fore, and turnover along with new investments in the sector will underperform current expectations.’
Translation for non-bond-market-gurus: Buy now and catch a falling knife.
True story-
I was at a dinner party this weekend and sat next to a doctor (30 years old). He just put a bid on a 1.8 million dollar “starter” home in Pacific Palisades Ca. He was upset because he just received a call from his agent and he had been outbid. Here’s the catch, the house has been on the market for 8 months and all of a sudden there are 2 buyers? I told him his agent was pulling a fast one. He assured me I was crazy, and that he was going to bid over asking. He couldn’t qualify for a traditional loan and he was going interest only, but that was okay because he would pay off the house right after he paid off his school loans.
I told him to wait, but he HAD to buy now because (you guessed it) real estate never goes down in California.
He didn’t understand his neg/am loan or how it worked but that’s not stopping him.
I guess you can be well eduacated and still be a F’d buyer.
Doctors and other medical professionals have always been notoriously bad business decision makers.
I will second that and Im and accountant.
They join cults like the Templar order and die of untimely death in hip vacation villas where the gurus calls them up for a “meeting” after they question his handling of some financial matters.
Oops I meant Order of the Solar Temple
http://query.nytimes.com/gst/fullpage.html?res=9407EEDB123DF935A35753C1A962958260&sec=health&spon=&pagewanted=print
“said the Order of the Solar Temple was founded at least a decade ago by Luc Jouret, a 46-year-old Belgian-born physician who often preached of a coming apocalypse.”
No, he’s just a doctor.
and soon to become a dentist
and a real estate invester
My wife, a semi-retired CPA/Lawyer, has dealt with a lot of doctors over the years. She said, “Most doctors have no idea how to handle their financial affairs. She told me several horror stories of doctors (some who formed investment groups) who had got themselves into real financial trouble because they hadn’t a clue about business or how to look for good investments, cash flow, negative returns, etc. The one saving grace doctors have under these circumstances is people are always going to get sick so that’s where their cash flow comes from. Not from brilliant investment moves. Also, these exotic 1% starter loans were mostly aimed at doctors (and lawyers) because of their future earning capacity.
just received a call from his agent and he had been outbid…
Your right … Its a faked multiple bid. I dare say I almost got nailed in the same manner.
So what triggered it for your Dr Pal ?… well his first mistake was to say he was a doctor to begin with.
Doctors, Lawyers, Accounting Partners, CEOs, or smuck with ton of stock options. They arent stupid…
They nailed plenty of people like that even Joe 6-Pack?
Thats why the market so poluted with phony offers and I stay away for the “the well needed Correction” to set things right.
In fact, one the stupid sell this house shows actually had an agent LYING to a bidder about other offers!! Caught on film! I can’t wait to some ambitious DA wants to earn some points by jailing these lying oily scum.
“He assured me I was crazy, and that he was going to bid over asking.”
I would be stunned hearing that in person!
So damned financially irresponsible for one and really sckewing the market price for another.
A realtor tried to play that “another offer” trick on me last year. I played nice and told her that wow, that other buyer must really want the house pretty badly to offer so much, and that if someone else really wanted it so badly, it would probably be best for me to just step aside and let the other buyer get the house… Needless to say, I got a counter-offer within 24 hours of my conveying that message. I guess that other buyer wasn’t so serious after all.
Hope he doesn’t over charge his patients to help make the payments.
NOW you know why healthcare is so EXPENSIVE… well, that and the $1,000,000,000.00 a year paychecks some of the insurance CEOS are bringing home.
*Cough*Dr. William McGuire-UnitedHealthcare*Coug
h*
That is why any “service job” is expensive to consumer.
If you stay away from services and stick to goods and discount services, you pretty much are beating inflation.
Maybe that is why I have not visited a doc in two years. Now if I could just find myself a high-deductible insurance policy to avoid buying all these prepaid medical services I am not utilizing…
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GS - maybe you can get on your mother in law’s policy? Doesn’t she already declare you as a dependant?
GS, BlueCross/BlueShield of AZ has a $10K deductible policy that doesn’t cost much. Does BCBS-CA still not offer such a thing?
Just signed up for BCBS-CA! Maybe I will start visiting the doc next year.
I had that pulled on me earlier this month…..
Made an offer and suddenly there was another on the table. My counter needed to be very close to the asking price with a 1% non-refundable deposit otherwise I would lose the house.
I told the agent to share my answer to his counter with the seller……he could go #$%^ himself.
My offer was a cash offer w/2wk close. I received a call the next week saying the other offer fell through and I could re-submit mine! After laughing so hard I cried, I pulled myself together and told the agent to share this…..if the asshole had accepted my offer he would have his money in another week. Now, he had NO offer, keeps his house, and it’s costing him more every day. Call me back once he drops his price by $30K and I’ll think about it…….
I do love Karma…..
He’s 30 — and a doctor. Two strikes against him when it comes to invesment decisions.
It’s a joke… In Quebec you have to be in the top 10,000th of the students to make it to med school after high school. And when it is al said and done with internships you are about 35… maybe 3 more years for a specialist.
Funny how in the states the same lawyers who push for malpractice lawsuits are also the ones preventing the raising of standarts for med school admissions and acceptance of foreign physicians…
This is untrue, you don’t know what you are talking about.
The entrance requirements are roughly similar for MDs in the US and Canada.
Quebec is slightly different only due to the French requirement.
A GP in canada can easily finish by age 30. How do I know? because I work with one every day.
College from age 18-22.
McGill for Med School 22-26
Residency 26-29.
HIC.
Pimco is probably the most savvy of all.
The 5% downside in OC they project is conservative, or as they say, “risk is on the downside” of that number. Greenspan speak.
More Greenspan speak: translation: the return of the residential house to a residential house. The house-is-a-piggy-bank era is gone. You buy a house to live in it. It’s basically a sound consumer item, not an investment item.
Residential real estate as an “investment class” is kaput.
My late uncle, who was a mega millionaire before there were hoards of them, was a bond seller for Chase Manhattan. He never owned a house. Always rented. He had many a fight with the family over his idea that homeownership was by and large a consumer item and a means of keeping the herd in the pen.
He said 5% was for 2007.
Thanks for the clarification.
Awesome site.
“The house-is-a-piggy-bank era is gone. You buy a house to live in it. It’s basically a sound consumer item, not an investment item.”
I PITI those who recently bought with exotic loans and are just waking up to the costs of ownership in a flat-to-falling price environment.
I tried to talk one out of it. I was politely thanked. Hire apprentices while they still know everything - isn’t that the saying?
“He never owned a house. Always rented. He had many a fight with the family over his idea that homeownership was by and large a consumer item and a means of keeping the herd in the pen.”
Interesting perspective. I suppose if one is responsible for keeping the barbarians from rioting they must cut ‘em a slice of the action too.
I think your uncle and I would’ve gotten along just fine.
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did your sweet old uncle leave you any of his mega millions?
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Edmund Phelps wins 2006 Nobel Economics Prize
Phelps said that he had no immediate plans for his prize money but would probably invest it. “It may amuse you to know that my wife and I don’t have a lot of hard assets,” he said. “We don’t own a house and we don’t own a car. We have a few clothes here and there. But don’t misunderstand me. We don’t live a very austere life.”
He’s a Columbia U professor with a rent-subsidized apartment. Doh!
It’s basically a sound consumer item, not an investment item.
Well no. In economic terms, an investment is any durable capital good that returns income. For owner-occupiers, that’s the rent you don’t have to pay.
In fact, residential real estate will become a true investment as prices decline, because of the improving yield (rent/price). Right now it’s a subpar or bubble investment - yielding less than risk-free fixed income.
Too many people use “investment” as a synonym for “speculative investment”, a capital good which is purchased primarily for capital gains. Which of course is what housing has been for the last 5 years. It wasn’t before that (except for previous bubbles), and it won’t be in the future (until the next bubble).
“Buy a fixed-up two-bedroom Santa Rosa house and drive away in a new Honda Civic. Close a deal in a Christopherson Homes subdivision and win a trip to Hawaii.”
Are the builders still tricking the buyers into paying for these goodies as part of the (inflated) purchase price? And are appraisers still ignoring the possibility that the amount financed “accidently” was overstated by the cost of a car or an exotic vacation?
And are appraisers still ignoring the possibility that the amount financed “accidently” was overstated by the cost of a car or an exotic vacation?
The pro’s adjust out the value of concessions. It’s why the purchase and sale contract is provided to the appraiser, prior to inspection.
The “rubber-stampers”, who are all that are left in the profession, simply ignore what’s in the contract, and punch the number needed by the LO to make the deal, to get repeat business.
The compensating value is derived from selecting bogus comp’s (or making them up) from nearby superior regarded neighborhood’s.
Idiot underwriters in CA , TX, or NY don’t have a clue because they have no familiarity with local markets. If there is a need for a review, it will mostly likely be done by a newbie hack, because nobody with experience will take the assignment because the fee is so crappy.
A dumber Chinaman ends up with the bogus MSB.
Have they invented no doc appraisals yet?
yes, its called zestimate.
Good one!
As a matter of fact, Stucco there is.
It’s called an Automated Data Report.
Lenders plug in zip codes and use a combination of sales and assessment data to come up with an estimated value.
LOOK MA, NO INSPECTION…LMFAO.
Big time use for high equity re-fi’s
Then it became WTF, if it saves time and cuts costs so what.
Notoriously unreliable.
Just another thing lenders devised to cut out the legit appraisal function.
I use AVM’S all the time. Cracks me up that my investors will take this in lieu of appraisal but if i cant get one on a specific property and have to get the appraisal, they want to chew it up. They will bust my chops over some wood rot or paint chips or having a hot tub in the ggarage but, they will take a peice of paper with a number on it and not question it a bit.
IMO, you and hd74man just nailed the very item that will eventually cause a credit meltdown. The rubber stamped and automated appraisals, combined with all the inflated loans based upon cars, vacations, and other crap, will come back to haunt us. Too much debt floating around, based upon values that are only imaginary.
“They will bust my chops over some wood rot or paint chips or having a hot tub in the ggarage but, they will take a peice of paper with a number on it and not question it a bit.”
Your investers sound penny wise, pound foolish.
What is up with that “dumber” chinaman comment, arse? What the hell is wrong with you?
What is up with that “dumber” chinaman comment, arse? What the hell is wrong with you?
Must go with that old Chinese saying ” the moon is rounder in the USA”
But I’ll bet you tell dumb blond jokes.
Actually, I tell dumb ruth doyle jokes.
I AM a dumb blonde. So there. They don’t call it ‘MBS’ for nothing
MacAttack, your ability to poke fun at yourself elevates you far above the level of mere “dumb blonde.” At LEAST to the level of marginally intelligent…
It was in reference to China buying the MBS paper from Wall Street RENewbie. I’m going to go out on a limb and say nothing racially detrimental was meant by it.
Thank you Mr. IncomeStream…
As you note, there was no racial intent with the comment.
I used the term simply as banter which I assumed to be readily accepted by the the tone and temperment of the regular contemporaries who inhabit the blog.
I never ceased to amazed at how thin the skin of the polically correct are.
Always a self-righteous, laborious, tantrum at the most intellectual trivialism.
It’s always so easy to label someone with the dreaded PC moniker whenever one wants to say whatever he feels like, thinking it’s a God-given right to say whatever one pleases. Newsflash, free speech is not truly free. There are always going to be consequences for what you say. What you consider simply “banter” is oftentimes an affront to others.
As noted by another poster, the term “chinaman” is indeed a slur. Nothing along the severity nor with the history of other racially motivated slurs, but detrimental nonetheless. If you did not recognize this, now you know. You learn something new everyday.
Isn’t intellectual trivialism grand? I stand firmly behind my self-righteous laborious tantrums. This is what America’s all about. I believe myself to be a patriot along the lines of a Patrick Henry or a Thomas Jefferson. I’ll make my stand now, Mr. hd74man, I will fight on for my Allah given right to continue making inane commentary on blogs! I believe Jesus would back me up on this. Or at least Santa Claus. I’m glad I could amaze you! Cheers!
It is a right to say whatever you want, even OFFENSIVE things…unless you are advocating hurting or killing someone…but YES, we have a right to offend. You have a right to have thick skin and not be bothered by it, too.
If it offends you that is your problem. The idea of free speech is that you tolerate opinions that are not your own..in other words you deal with it like a grown up. Temper tantrums are for control types…which is exactly what the Democratic party advocates.
Long live free speech saying anything you like without fear of “offending” the PC crats!
“You have a right to have thick skin and not be bothered by it, too.” Great. Thanks for the profound advice.
“Temper tantrums are for control types…which is exactly what the Democratic party advocates.” I think you are responding exactly as I had planned. Moohahahahha!! Do you see how I’ve completely manipulated you into making asinine comments? You are under my Democratic spell, my dutiful slave…
That reference may indeed have been to what you mentioned, but I would challenge any notion that the term “dumber chinaman” has no racist implications whatsoever. If our resident wordsmith hd74man had used the term “intellectually challenged honkasoid,” would that have been any less offensive?
Not the pc police bud… Just trying to offer a little clarity. Interpret it as you wish.
Nobody cares….
Then why comment?
“Apparently someone has an enormous amount of first hand knowledge about Chinese penises, so to speak.”
Chinese sex partner basher.
Can’t help sharing this racial-stereotype story. About five years ago I wrote a paper that was a little far out (but ended up in Proc Natl Acad Sci). The second author was an African American from Purdue, the third author was a Chinaman from Caltech. The Chinese guy wanted me to include a paragraph relating one of our findings to the Search for Extraterrestrial Intelligence. The Purdue guy had a fit, said it was just too nutty. Finally I said to the Purdue guy: “Joe, does this have something to do with your being black?” He said “Thank you for understanding!” - the point was, since he is a black scientist, he worries all the time about looking dumb. Whereas the Chinese guy who came up with the idea is never worried: anything he thinks of will appear to be brilliant, because he is a Chinese scientist from Caltech.
“Chinaman” is a derogatory term historically used to denigrate Chinese-American laborers during a period of racism and inhumane treatment. Some people mistakenly use the word “Chinaman” because they believe it is analogous to the word Frenchman, Irishman, etc. However, people from France are French men/women. People from China are Chinese men/women.”
http://tinyurl.com/lsnf4
The term in the Chinese language for a Chinese person is “zhong guo ren”. Which literally means - “China man”, or “China person” if you want to be PC.
I am a Scotsman, calling me such is no insult.
az_l, too funny. I would venture an MD degree from a state university has far more status and income than a random Caltech scientist, Chinese or otherwise.
My ancestors are from England. I’m labeled as Caucasian. I prefer honkasoid.
Rob
I’m sure the people using the term “chinaman” did not intend any offense. But you should know that it is a rascist epithet on par with chink or slope. Now you know.
imploder always has me lol
keep it up and renewbie lighten up
RE: sigalarm inane scotsman comments. See, scostman is not offensive to you, because you’re already a kilt-sniffing drunk.
“Idiot underwriters” ????
Good underwriter’s know how to read an appraisal even if they don’t know the area.
Great Underwriter’s will use “Dissco” to check appraisals.
(Valverify)
“The popularity of creative financing options worries analysts. Some buyers got into homes even though they could only afford the introductory payment on the loan. Those watching the market fear an avalanche of foreclosures from those who can’t afford their loans anymore.”
The popularity of creative financing should worry these analysts. Anyone who bothers to run some numbers can quickly determine that suicide loans instantly stretch the household purchase budget by maybe 50% or so, at the price of a considerably higher risk of future foreclosure.
And the risk of future foreclosure for suicide loan purchases goes much higher when prices are falling. I wonder if the lenders are pointing out these risks to prospective buyers these days, now that the federal regulators have circulated guidance?
“I wonder if the lenders are pointing out these risks to prospective buyers these days, now that the federal regulators have circulated guidance?”
that’s a good one.
I don’t really agree that buyers have the upper hand yet. Buyers need to stay on the sidelines another year or two before the market will truly turn in our favor.
There are still sellers in the Bay Area who believe they can take their house along with its inflated asking price off the market and relist it next spring at the same or higher price. If buyers stay out of the market and let the inventory rise significantly the pressure will really be on to drop prices.
The market has receded but is not yet depressed. Don’t buy unless you can drive the price down 10 to 15% below asking.
“There are still sellers in the Bay Area who believe they can take their house along with its inflated asking price off the market and relist it next spring at the same or higher price.”
I would say most Bay Area sellers believe this.
Most shacks that ought not to cost more than $100-150K, still sell for 5-6 times that in the Bay Area. It will take years of gradual depreciation for the prices to rationalize. As people migrate to other parts of the country (due to housing costs) and startups outsource development to India and China (reducing the number of high paying jobs), this will play out predictably.
I have been saying the very same thing…if a company can get the same job done at half the price in different place what is the motivation to keep the job here….nothing.
California is doing the same thing to itself that the United Steelworkers did to Ohio and Pennsylvania. They drove the cost of production up so high companies could not compete globally and went out of business or moved to cheaper locations. The cost of living in California is driving companies and people away. California has put too much of a premium on the cost of business to do business here in the longterm and remain competitive.
6 of the 50 Silicon Valley homes I’ve been tracking have gone “inactive” in the last week. I don’t know if that means they sold or were taken off the market. If I had to guess, I’d say half and half; some were among the more appealing, and others had been sitting there for months.
“The market has receded but is not yet depressed. Don’t buy unless you can drive the price down 10 to 15% below asking.”
More like 20% - 30%, maybe more…
I would say in the biggest bubble areas, it needs to be closer to 40%, and somehow I think one way or another it will get there. High new build inventory, lots of foreclosures, much much tighter credit, and inflation will all combine to effect significant reductions. I think it will inevitably be the tighter credit that makes the biggest impact. It’s what fed the beast, and it is what will destroy it.
Ric,
How can you rule out helicopter-drop-induced inflation-fed soft landing? (Double entendre’ intended…)
GS, is Bernanke the monster in your bedroom closet?
ROTFLMAO!
GS-
Because I think the inflation necessary to restart the housing bubble will need to show up in wage inflation as well as asset inflation to do any good. The psychology has turned IMO, and I don’t think there’s any turning it back now.
There were plenty of people at HP Intel and Sun that believed they had a job, then 6 months later they got their pink slips.
Trying to predict the economy 6 months out in the Tech land- Silicon Valley is a no winner. You will loose more times than enough.
Of all places to overpay for a home, SF bay area is the least one that makes sense given the unpredictibility of the economy. Way too much risk!
Does anyone else think these discussions of the bear market are surreal? Do people have any idea of the bloodbath that is coming?
The analysists et al are talking about the bear market as if it is a sprained ankle; the market has stumbled, it’ll limp along for a few quarters, maybe even a few years, until it regains its footing. In the meantime there will be some pain and swelling, etc.
IMO it’s not like that at all. Instead of suffering a sprained ankle, millions of people are about to get both legs traumatically amputated by a runaway train.
Millions upon millions upon millions of people have bought houses they simply cannot afford over the last 3-4 years.
Most everyone whose loans adjusts in the years to come will be wiped out. People are already overextended at their current paymente; they don’t have the cushion to withstand a 1/3 hike in thier monthly mortgage payment.
In SoCal’s Inland Empire, entire TOWNS filled with FTB FB’s will go into foreclosure. Ditto basically every home in SoCal ghetto areas that has changed hands within the last 4-5 years.
Plenty of McMansion “trade-up” owners will go under, too. They bought their McMansion with equity from the sale of a previous residence, and both spouses are gainfully employed. But what happens when one of the spouses loses his or her job? Most middle-aged people have very little savings and spend every cent they do make.
This thing isn’t just going to depress sales prices and take down an unlucky few who became unemployed, etc., during a lull in the market; it’s going to take down millions!
I am not an economic doom-and-gloomer. I personally think the housing crash will cause a fairly painful recession but I do not think it is the end of the world. The economy was doing okay in 2001 before the madness started, erasing the RE gains of the last 5-10 years will hurt but it won’t kill us.
However, the tone of the media does not seem nearly bearish enough to me. Do they have any idea what is coming?
“Does anyone else think these discussions of the bear market are surreal?”
Who is discussing the bear market? I thought the discussion was about a soft landing next year.
As long as these stupid and crazy japaneese will keep their interest rates at ZERO, it will be just a nice pastime. Money really grows in trees.
stupid and crazy japanese? Is that who we’re blaming now? Um, I think it’s called American greed, stupidity, and ignorance, tool-bag. What is up with all the bitter, xenophobic losers on this site? I thought this was meant for semi-erudite discourse, not thinly veiled racist barbs to hide one’s lack of achievement in life.
Again… See above. Research the conditions of the market in Japan past and present and then you’ll understand the comment.
Incomestream, clearly you don’t get the point of my observations. It’s not about the study or the reference to the study, there’s an underlying tone of bigotry and anger that comes from several of the posters here. Imagine this, you’re on a foreign based blog where they characterize Americans as “stupid and crazy” or “dumb whiteys.” Wouldn’t this be considered an offensive characterization? I am not arguing the validity of any study on Asian economic moves. I do not claim to have any solid knowledge on that topic. What I take umbrage with is the underlying tone of these bloggers’ comments.
Now someone make a slightly more rough comment about the Indian labor arbitrage. Then we can have another round of PC counter PC… it will make a great SNL skit…
“American greed, stupidity, and ignorance” Stupid huh? Its pretty smart and its called the carry trade and it’s making alot of money for a small number of people. Borrow at 0% from Bank of Japan and lend at 5% to the USA Government by buying treasuries. Do it with billions of yen converted to dollars. Want to make more? Loan to home buyers.
Unfortunately, this is far more hilarious than any recent SNL skits…
Mr. Cactus, I don’t even understand the point of your comment. Please explain. What is it that you’re arguing against, or for, for that matter? That the housing bubble situation has NOT been a greed and ignorance motivated debacle?
My arguement was you don’t like Chinese or Japanese called stupid but then called Americans stupid. I’m saying Americans were smart to borrow cheap and buy assets that would benefit by lots of cheap money. It wasn’t until a year ago that things got real stupid as they always do at the end of these manias. Another interesting thing is alot of this money came from overseas. The FED can print as much money as it wants but then investors should demand higher interest rates as they percieve too much money = inflation so give me a higher interest rate to protect me. However Japan loans money at 0% percent interest and china uses its trade surplus to buy US treasuries which keeps interest rates low. They can do this because they have lots of dollars and don’t seem to want to buy as much as they sell. I could go on but I expect you know this already? Anyway I expect this cheap money to continue and now go into the stock market again.
The carry trade is one of the primary reasons why interest rates are so low in the US and the US dollar hasn’t fallen as much as it should. People borrow money from overseas (primarily Japan with 0% interest rates), exchange it for US dollars (bringing up the value of the dollar), and buy tons of treasuries and MBSes (lowering the interest rates of treasuries and MBSes — simple supply and demand). They then sit back and collect the cash. Low interest rates allowed the housing bubble to last as long as it has (even after the Fed increased rates). Lenders have been desperate to put cash to work.
The reason why I believe this crash is going to be worse than any in recent history is because when the value of the US dollar drops enough relative to the yen, the carry trade will “unwind”. Then everyone involved in the carry trade will be fighting to hit the exits before everyone else. US dollar will plummet and interest rates will skyrocket.
I just hope the economic calamity won’t be as bad as the 1930s.
P.S. half way down the article look at the chart showing Japanese money supply and purported consequences.
http://www.safehaven.com/article-5330.htm
“The FED can print as much money as it wants but then investors should demand higher interest rates as they percieve too much money = inflation so give me a higher interest rate to protect me.”
What makes you think the Fed does not intervene in the long-term bond market to deliberately suppress the inflation risk premium on the long bond? I would, if I wanted to convince the semi-tutored masses of economists out there that inflation was under control. And Bernanke’s speeches clearly state that the Fed would consider trading whatever asset classes suit its purposes…
Dude… I understand your points. But in the case above with hd74man more so I as one of the ones who spend way too much time on this blog can say your rant was off base. As someone who has traveled in many countries if I ran across a foreign blog and all they had to say about Americans what you posted above, I’d say I found a pretty friendly blog considering America’s foreign policy. One of the problems in this country is people spend too way much time whining and focusing on this fruitless pc agenda trying not too offend anyone instead of asking the hard question and solving difficult and uncomfortable problems. If the current state of what we see in housing is any indication a whole lot of feelings need to be hurt and a whole lot of folks need to be offended no exclusions. Fortunately in the coming years the BK courts will do a lot of that for us if we are really really lucky. But it won’t be enough to eradicate the real stench that has encumbered this country by being pc and avoiding real issues.
‘Imagine this, you’re on a foreign based blog where they characterize Americans as “stupid and crazy” or “dumb whiteys.” ‘
“People, I just want to say, you know, can we all get along?”
– Rodney King –
http://en.wikipedia.org/wiki/Rodney_King
“Imagine this, you’re on a foreign based blog where they characterize Americans as “stupid and crazy” or “dumb whiteys.” Wouldn’t this be considered an offensive characterization? ”
Hell, no. In many cases I would consider it an accurate observation. In fact, you’d probably be amazed at how many whiteys we gleefully drill.
You don’t get it. For most of the posters on this board, it’s IDIOCY that’s abhorred — nothing else. (Well, sociopathic greed comes in a real close second.)
Yeah, less time on the Chinaman and Japs, let’s talk about the fat American cows and pigs who can’t decide which is a better idea: bankrupt our families with HELOCs for plasma TVs and hummers, or bankrupt our country with a fruitless invasion on borrowed money. Go American borrowers! We’re doing a Heckuva job!
LOL.
There were some comments earlier about oil prices.
While folks were laughing about $10 more in the tank per week, some commuters who commute long distances were spending more on gas than on food. Gas was up to about $3.50 a gallon in California.
Moreover, heating and cooling (a/c) prices are going to be the real killer. Would hate to heat / cool a McMansion. And no room on the tiny plots to grow tomatoes. Seriously, crude oil was $25 per barrell 18 months ago. With the volitle situation with all OPEC members, incl. Argentina, and with the caving of the USD on the trade weighted index, heating could go sky high, for natural gas too. Also, nations are beginning to divest themselves of the US dollar and buy with Euros. This alone will depress the purchasing power of the dollar. Expect higher prices, long term, with volitility/supression of price short term.
When Bush was elected, unleaded was 99 cents.
When George H. Bush was elected, gas was cheaper than under Bill Clinton’s second term. So what does your line have to do with Rep vs Dem?
Iraq produces a lot less oil today than before Dubya’s war. You don’t think that has anything to do with higher prices?
So, are you saying it’s those nasty smelly arabs that are at fault?
I hope ‘Deodorant for Oil’ passes the senate…
lol-now your just baiting the re newbie
this thread is comical
“Gas was up to about $3.50 a gallon in California.”
Amid the supposedly joyous holiday hoopla the mindless Joe6pc is going thru, at least as portrayed by the fairy-gold spinning MSM, is that creeping dark force hovering over the US economy, a creeping upward surge in Gas prices. The cheapest I’ve noticed out in North OC/garbage grove/westmonster area is 2.47 for regular unleaded. In Ventura County last check 2 weeks ago showed $2.65 cheapest. Most gas stations in LA metro area are probably charging average $2.55-$2.60 just for regular. My info comes from Gaspricewatch.com. I am sure that there are many LA local stations charging above $3.00 for extra unleaded or super.
The situation regarding Iran bears watching as it relates to possible gas price spike surges this winter or spring 07, just what joe6consumer needed as he labors under a mountain of post holiday debt.
Dude, this is a goldilocks economy. The fed knows just how to play this economy and has everything just how they want it. Stop being so darn paranoid, everything is going to be just fine.
Tell me, what color is the sky in your world?
sky.Well,…it was kind of rose colored, but now it appears to be falling.
Was just on the phone with a friend who has a software development job at the Fed in Boston. I am always kidding her about her having insider knowledge of Fed’s next move. (She doesn’t, of course.) This time she tells me the Fed’s internal news postings are now including a whole lot of items worthy of Housing Bubble Blog.
Heck, I bet some of the items ARE Housing Bubble Blogs!
The economy was doing okay in 2001 before the madness started, erasing the RE gains of the last 5-10 years will hurt but it won’t kill us.
You were absolutely correct… right up until this statement. We’d have had a severe recession if the Fed hadn’t intervened, but now we’re guaranteed a depression. No, it’s not the end of the world, but it’s not going to be pretty either.
I totally agree. I compare the lack of a severe recession in ‘01 to having a half-way healed cut and ripping the BandAid off! It will be twice as bad if not worse than before! Our economy is the same. We should have had a severe recession to clean up the excesses from the internet boom/bust, but we didn’t due to 9/11 and Greenpants. This recession HAS to be bad to clean up all the excess!! It’s just a fact of market cycles! We do not have a Goldilocks economy!!!
Oh, I agree. All I am trying to say is that there is a whole economic world outside of housing. There is electronics, agriculture, transportation, services, the list goes on and on. They all do buisiness with housing-related industries, but they don’t depend on it for their existence, either.
All commerce will not cease simply because housing prices in some areas take a massive cut. Yes, people may not buy new SUV’s and flat screen TV’s using house-ATM funds any more. This will hurt.
And yes, much of the capital — financial and human — allocated to the housing sector will have to be re-allocated. But this will happen. Unemployed realtors, construction workers, and drywall factory managers will find work again. It’ll take time, and it’ll suck to be one of them, but we won’t end up burning railroad ties for warmth and eating one another’s flesh. That is all I mean.
There will indeed be the long-delayed recession, but it’ll pass and we’ll emerge from it stronger than before.
But housing? Pfft. It’s DONE. A lot of these valuations will never be seen again. IMO many of today’s $800k McMansions won’t see $800k again for decades.
Housing is headed for a crash of historic proportions. The heights prices have climbed to, the amount of leverage people have taken on in order to afford one of these places — look out below.
Our apartment rents for a tad under $1000 per month. Household income here this year…$290,000 (combined). Our jobs are not dependent on RE. We are software types. We will only laugh at the RE crash.
Bill, I am being serious when I write this to you. Will you adopt me?
Yes but aren’t there five in your household:)
According to “The End of Work” 70% of all jobs in America consist of repetitive tasks. Those jobs are being automated a a rapid clip. RE has saved the day to some degree by creating these high paying temp jobs but this has only masked that fact that real jobs are vanishing. It started with ATMs, now it’s moving into checkout lines, etc.
This is great for progress, bad for the wealth divide.
Posted this on money and metals, but fits here.
How much bad debt loss do you we have coming down the pipe?
Who will eat all this bad debt expense?
How will all this coming abolishment of money (US$ and debt) play out with the overall US money supply?
Where I am coming from is that (from memory) we have like 2 trillion in debt resetting next year and they exstimate that 1/4 or those loans will default. If the lenders can recoup 1/2 of that there will be $250 billion in US$ and debt that will disappear.
In the last 6 years the total value of RE in US went from like $5trillion to $12trillion (from memory). I have no trouble seeing half of that $7trillion gain dissapear. In total this would leat to around $4trillion in bad debt and $3trillion in capital loses.
The more I think about this loss (mostly foreign?) the more optimistic I become about the US ability to avoid major financial meltdown (depression and high inflation). The other markets in the world may now be able to take up US consumption slack, but can they do so effectively in the face of losses (is $3trillion a lot?) in this magnitude?
I am beginning to believe that this credit/dollar abolishment (if enought default) might strengthen the American balance sheet enough to (screw our creditors) mitigate some of the recessionary and inflationary pressures facing the US. My thinking basically sees maximum US bennefit (long run) coming from maximum (theft) foreclosures.
It is like the stories of those destroying their credit for purchase kickbacks of $200k. From a logical standpoint it makes perfect sense to me that someone with no money would destroy their credit for this kind of cash. I know that when I was in my 20’s I would have destroyed my credit for $50k, that would have been enough to put me in business and free me from needing banks anymore. If I was in my 20’s-30’s without kids or assets I would be buying every home I could for a kickback of $100k. Hell $300K is enough for a single (VERY FRUGAL) person to not work again. You could have no car, not eat out much, no cable, cheaper food, etc… If one could do without the badges of consumer foolishness I see no problem (moral or otherwise) screwing these lenders for this kind of juice. How many across America are doing just this (knowing it or not)?
Since the US Savings rate is nill all this debt has to be flowing into foreign coffers, the more we burn them the better for us?
depression? nah. deep recession, yes. it is so easy for them to manipulate the numbers to avoid 7 quarters of decreasing gdp.
Joe -
I have my days when I read this stuff and see it just the way you do. I imagine this correction will affect most of us, one way or another.
It makes me sad when I think about it. The extreme stress, lost dreams, broken marriages, suicides: it is all coming to a neighborhood near you.
I wouldn’t get too carried away. I saw a number the other day, where exactly excapes me at the moment, that nationwide something like 20% of the last year’s worth of loans were “suicide loans”, and that 20% of those are expected to go bad. That would work out to be 4% of all loans going bad. That seems like a lot, but IMHO hardly enough to “melt down” the entire nation wide housing market. However, as its been said before, “There is no nationwide housing market, only local markets’. So we have these pockets of new homes/condos where speculation and over-building was rampant, and now perhaps upwards of 70~95% of ALL these local transactions are going to go belly up in the months and years ahead. It is going to be very ugly if you find yourself in one of these neighborhoods- massive RE price declines, un-kept properties, unemployment and major economic dislocations, crime and social unrest, etc. As you point out, in the IE, there are entire towns where this is the case. It may get so scary in these places that no one will go there at any price for many years.
Depending on just how close the rest of us are to one of these places and how much spill over effect there was into existing homes we might get a little bruised, but I think these places will basically be fine because there are large enough percentages of older, more conservative loans and owners who don’t really have to sell that there will be a stabilizing effect. Don’t get me wrong, these places will catch a very serious cold but it won’t be fatal.
While we are looking for comfort in numbers, how about the 500K+ suicide loans in California alone. Of mortgages originated last year, over 50% were interest only, and 25% were negative amortization. Not to mention all the HELOCs where people have withdrawn all their equity.
I don’t have data to prove it, but there are probably more than a million homeowners who either can’t make their future payment obligations after a reset or who will go underwater with even a slight price decline. Add a million homes to the supply over the next few years and see what that does to the housing market.
Yeah, I am trying not a doomsayer where the overall economy is concerned, but as for the housing market? It’s hard to be grim enough.
Millions of foreclosures are coming. Millions. We are looking at 50, 60, 70% resale price declines in many of the bubble areas, including LA IMO.
This isn’t going to be a 10-20% dip which casues a little temporary pain and a slow in sales. This is going to be WWIII.
I see it like you do. Right now in Orange County, the breakeven point between rent and ownership is a sales price about 55% below current levels. The price point where an investor can make a return on investment from rental cashflow is about 65% below current price levels. Those are the price levels where a bottom forms. Even if rents rise over the next few years, price declines of 50% are realistic.
I agree IR,I have been renting in CDM for 5+ years( was previously homeowner in NPB). Renting a great place; 3 bd,3 bath for 3K/mos. Rent increase $500 total over 5 years. Prices recently at $1.5M - 2000 prices were $650K. Renting at least 60% below PITI in CDM. Insane.
There’s approximately 35 million people in CA. So 500K suicide loans represents less than 2% of CA residents.
Uhhh.. I see a little flaw in your logic. I doubt it’s safe to assume that even 1/5 of Californians would ever hold a mortgage… so divide that 35M by 7 to be safe. 10% suicide loans and that’s understating the number by 200%. I’ll be shocked if 30% of CA mortgages are not int-only, ARM or option ARM all backed up by HELOCs. Most (50%+) are ARMs for sure. An interest spike or even the natural catchup period (after the loan honeymoon period is over) considering only slightly negative appreciation, will be enough to devastate the market. This sense of entitlement (10%+ appreciation/yr) built the bubble. Inverse is true and catastrophic to be sure.
Reckoning heaven in ‘07.
Let’s see, 35MM people, call it 2.5 people per household=14MM households. In CA, there is roughly a 50% home ownership rate. So, 7MM homeowners. if 500k is the number, then as a guesstimate, 500k “suicide loans” is 7% of all home”owners”.
I don’t know about you, but I think 7% is a pretty big number.
IrivineRenter posts ” I don’t have data to prove it, but there are probably more than a million homeowners who either can’t make their future payment obligations after a reset or who will go underwater with even a slight price decline.”
IR…. that sadly at 5 people per house mean 5 million people. This will be a social mess a real milestone for many…. “before we bought, then after”….
My husband and I were looking for a house In May 2004 in the South Bay beaches area of LA. A Manhattan Beach mortgage broker told us then that 70% of her loans were “non-conventional” or whatever you call loans other than a 30 yr fixed. That’s when we scratched our heads and said, “screw it, we’re renting.”
OK I guess, if you want to call the entire state of Florida a pocket. Maybe CO, NV, CA, and a few other states, but you are right, that will probably have a negligible effect on the national economy. We could always cut those states out of our nation and sell them to the Chinese or something. We have to keep the party going you know.
The loans were rubber stamped by Franklin Raines, CEO of Fannie Mae. That means all taxpayers are liable. Add that to the budget deficit and then think this RE problem is just a small pocket here and there.
I believe this is actually a common misconception, AFAIK the federal government does not actually guarantee the Fannie Mae paper.
Then how can the MBSes have a AAA credit rating?
You are absolutely right, and if anyone thinks Congress is going to guarantee this junk ex post facto, they are kidding themselves. The hedge funds and the Chinese are going to get stiffed.
Sell CO to Switzerland. Sell AZ and NV to the oil-rich Middle Eastern Arabs. Sell FL to Brazil. If necessary, sell NY & MA to Europe, probably to France. Sell Hawaii to NZ. Hmm, now that leaves California. Can’t sell it, just let it annex itself back to Mexico who owned it first anyway.
Spain owned it. Mexico tried to hang on to it as the Spanish Empire faded.
I agree. Plus the FED is keeping the money supply on the high side and letting inflation stay high just to be sure this housing bubble pop doesn’t spread. A soft landing is priced into the stock market these days. I think higher inflation is what we will get. The 1980’s and 90’s are over.
4% loan gone bad does not sound terrible, but what about the “still-feeling-finers”? It’s projected that many of them will tighten their belts in the new year too because of the drying-up ATM. It’s not the 4% but the dissappearance of cash-out loan that will hit the economy hard.
The big exporters to the US will suffer too as spending is cut.
“I personally think the housing crash will cause a fairly painful recession but I do not think it is the end of the world. The economy was doing okay in 2001 before the madness started, erasing the RE gains of the last 5-10 years will hurt but it won’t kill us.”
Think of it this way. I tell you you’ve won 1 million dollars. You immediately go out and spend 1 million on trips and bling. Then I tell you, oops, sorry, you didn’t really win 1 million.
You’re not back where you began, you’re 1 million in the hole that now you have to pay back. That’s what’s going to be so devastating.
That is a pretty good way of looking at it. If you dont mind, I am going to use it in future conversations with some HELOC FB’ers that I know.
the msm is just business as usual after yesterday’s new homr report they acted like we have a booming market again
i come here for the real stats and nationwide status of the market
‘Six months ago, it seemed a lot more desperate than it does today.’
Maybe to the “fingers-crossed” crowd. This spring will be panic time, when the flood of inventory returns - to record levels - and the sellers all race for the exits at the same time as their ARMs reset. Waiting until spring will prove to be the absolute worst possible decision made by the FBs… advice issued by the NAR…
Dont you know that weathy boomer buyers are going to come out of the woodwork in the spring and buy not only the swelling inventory but buy every pre-construction deal they can get their hands on? They are just quiety renting right now, but this spring they will invade every sales office in the USA like zombies in the night of the living dead. What, you don’t think this is feasible? Damn pessimist!!
Don’t forget all the wealthy Asians who are going to sweep in to save the market!! They are still really buying in Arcadia and San Marino. They will never stop buying with all the money they have!
Oh, and the immigrant anchor babies too.
Actually it’s US they’re counting on.
“Those HBB posters will get tired of ranting and raving with each other and then they’ll have nothing left to do but buy a house!”
I gotta agree with you on that one.
NAR, CAR every dumbass in the REIC reads here to inform their marketing strategies.
The Asians pride themselves on being shrewd buyers.
LOL
Not so shrewd if they’re swooning in to buy at these inflated levels.
We’re still at the top.
as far as asians are concerned here in the nyc area
they are still buying and building, i sell brick and my top seller is the brick of choice for the asian community in the tri state area and they pay cash!!
“Dont you know that weathy boomer buyers are going to come out of the woodwork in the spring and buy not only the swelling inventory but buy every pre-construction deal they can get their hands on?”
Not me. I have $350k that’s not tied up, but it won’t go into real estate for the next several years. The money is happy where it’s at: Stocks, muni bonds, savings bonds, money market funds, CDs, and PMs. The other stuff that’s tied up is purely into stock mutual funds. RE is overpriced now and is going to still be overpriced in the spring of 2007 and the fall of 2008.
“Then, again, he, along with most other lenders, want to guide buyers away from adjustable rate products anyway…”
Yeah. Right. Their first priority is to sell the least profitable product.
Then, he goes on to say:
“Even if a buyer’s credit precludes them from purchasing a 30-year product, most lenders can fit subprime borrowers into 5- or 2-year fixed term mortgages. which revert to and adjustable rate unless a buyer re-finances at the end of the fixed-rate term.”
Huh? How the hell is this any different than your standard 5/1 or 2/28? What’s going on here? Still trying to sell ARMs, but doing what they can do not call them ARMs? “It’s basically a fixed rate mortgage … that adjustable stuff will never come into play ’cause you’ll have already refinanced”.
Curt Westwood recently settled a yearlong legal dispute with Loomis officials. He’s begun construction on the first of 62 luxury homes that will be sprinkled amid 320 acres of terraced vineyards and oak trees.”
“Now that an agreement is in place, Westwood is busily paving roads, staking out vineyards and starting work on the first homes. They’ll be finished in about a year, ranging from 5,000 to 7,000 square feet and priced between $3 million and $4 million. Custom homes built by others could be ’several million more,’ he says.”
“That’s a lot of money for a home, especially now when, as Westwood says, the housing market ’stinks.’ But he’s convinced it will rebound by the time his project is completed.”
That is a lot of money for a house in the Sac market. hat is lot of money for a house in the Bay Area already but Sac that is ridiculous. I don’t think he will be able to sell them all. Would expect the developer to file BK before they could sell all the homes.
That’s a lot of money for 100-degree summers and foggy 36-degree winters.
Mr. Anderson said:
“Today is the only day to buy,” Anderson said. “Interest rates are very good, and will probably remain that way for the next several months.
Before buying a house, Anderson said, consumers should try to pay off all collection accounts, including outstanding utility bills, avoid maxing-out their credit cards and protect themselves from too many credit inquiries, which will “kill you with 50 points or more, easy.”
Lowlights include:
Only day to buy (used car anyone?)
Pay off collection accounts, past due utility bills, avoid maxing CC (Un..Freakin….Believable)
I cannot believe this guy is actually trying to qualify people in this financial shape. I’ve heard about lenders, read about them, but never seen actual quotes. I….am….stunned.
you left out when Anderson said “Money is for pussies, you don’t need any money to buy.”
LOL! A REAL man finances 100%.
posted ” LOL! A REAL man finances 100%.”
Ja! Girlie men putz dem gelt down!
Yeah, and these very buyers are the ones you would have been competing with during the past few years to buy an overpriced home. Nothing like putting your 20% cash down, with a well thought out pmt. on a 30 or 15 year fixed mtg., next to a bunch of FBs who bought with 103% financing and will lose their place to foreclosure. Who knows what your neighborhood will end up like.
When I found out the details of the financing that has been going on is when I got totally angry and disgusted with this who RE scam.
WArenter …..So true . The sub-prime lenders made the market unstable in many areas . I think prudent people in general would of backed off from investing in a home had
they known that the lenders were making high risk loans ,( if people understood the concept that high foreclosure rates in a area could bring prices down .)
Before buying a house, Anderson said, consumers should try to pay off all collection accounts, including outstanding utility bills, avoid maxing-out their credit cards and protect themselves from too many credit inquiries, which will “kill you with 50 points or more, easy.”
Someone so poor that he has outstanding utility bills has no business buying a house anytime in the imminent future.
A sound argument can be made that it’s sheer madness to have less than six months’ living expenses in the bank (twelve months or more is preferable) at all times, and that includes AFTER making a downpayment and closing on a house.
“‘Before that, it was just experts saying, ‘This is not sustainable,’ he said. ‘Now, the data actually showed a change.’”
Which experts were saying SD’s steller price appreciation was not sustainable before the data recently proved it? Most experts I ever saw quoted in the press were talking about double-digit gains which were already “in the bag” and such.
I thought the same thing when I read that Stucco.
“More than a month later, despite more calls and interest, the lure of a new, $20,000 car still had not yielded an offer to purchase the house. ‘It didn’t sell the house, but it did get a lot of attention. It achieved that goal,’ Peoples said.”
Ok so now they’re no longer REaltwhores, they’ve evolved into attention whores?
It must be getting pretty bad out there, they’re forgetting their own raison d’etre.
David Peoples, snap out of it man! You’re supposed to sell the house, not just get the folks to gawk at a Honda Civic…
Yep - on the bright side, area real estate agents will continue to reference it as that “Honda Civic house” six months hence while it’s still on the market, as in “That Honda Civic house still hasn’t sold yet?” or “What have they lowered the ol’ casa de Civic to now?”
“Casa de Civic”
ROTFL
That one was too good! (Wipe eyes)
To think, we will not have enough inventory to make this interesting for a few months…
Neil
If only it was a riced out Civic they would have had a chance. RE agents are so out of touch
Hey RENewbie, the PC cop. Why didn’t you scold Mo Money for the “riced out” comment, you phony?
“The drop in demand, and profit share, among the county’s estimated 10,000 real estate agents will force many out of the profession, experts say. Job losses in the real-estate related sector, including agents, mortgage brokers and construction workers, will have lasting, significant effects on the local economy, they project.”
i am going to light a candle for the 10,000 displaced san diego real estate agents.
i personally know of 5 agents who own multiple properties. some rent out, some just hope the market goes back up. stucco, whats really going to happen in san diego? will things get ugly here? does it make me evil to wish encinitas could go back to the 300’s?
I can’t really get my brain around the soft landing scenario. Maybe the problem is that “they” spend too much time repeating the soft landing mantra, and not enough to articulate how it is remotely possible.
Personally I have witnessed the unbelievable sight of many thousands of new homes that were recently added or are currently getting added to the SD housing stock, and I am somewhat sickened by the prospect that many households who used exotic financing to buy these will be able to ultimately make good on their debt unless wage inflation soon approaches unforeseen heights.
If suicide loans go out of style and inflation does not go sky-high in the next few years, then I would think a 45% haircut off peak prices is a likely prospect.
inflation does not go sky-high in the next few years,
there is the flaw in your argument.
“inflation does not go sky-high in the next few years,”
I don’t know that it is a flaw — it is more of a caveat. I cannot predict the inflation rate, especially when I don’t understand which consumer goods (oil, houses, etc) to exclude from the correct inflation calculation. It also gets confusing when there are rumors circulating about helicopter drops of money, but the risk of currency flight suggests higher interest rates may be needed (which tends to be deflationary when housing prices are falling). I guess I wish I had received a crystal ball for Christmas which is just as accurate as yours obviously must be for you to confidently predict high inflation — especially of the wage type against a low interest rate and flat housing price backdrop, which is the magic combination to make houses affordable without falling prices or renewed investor madness.
caveatpremiseLet’s beat this dead horse again:
Inflation will not save nominal house prices:
1. Wages will not keep up.
2. Interest rates will go into orbit.
-> 3. Affordability even worse than today.
The Fed is not going to sink reserve status for US$ in a vain attempt to save some FB’s asses.
Additionally, high inflation would make the stock market and banks very unhappy. Politicians know which side of the bread gets the butter, and will do their utmost to avoid this situation.
How do you ensure that sky high inflation actually gets into wages? And not everything else but wages.
Several Billion Chinese and Indians say no wage inflation for Americans.
Lansner blog: O.C. real-estate jobs run flat in November
http://tinyurl.com/lzgbg
http://news.yahoo.com/s/ap/20061227/ap_on_re_us/laci_peterson
Bought for $390k last year, selling for $350k this year…
“Cozy with a colorful history!”
How useful to know that the way to keep an RE haircut at a mere 10% is to make sure the house you buy is one where a well-publicized murder was committed.
‘Six months ago, it seemed a lot more desperate than it does today.’”
Six months ago they were still telling us how great things were. He must be talking about ‘insider’ information within the industry while he and his NAR buddies were trying to scam a few more unsuspecting marks.
“Then, again, he, along with most other lenders, want to guide buyers away from adjustable rate products anyway, not because they are inherently flawed, but because ‘many home buyers simply don’t understand mortgage products well enough’ to use them beneficially.”
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What a nice guy….looking out for those poor borrowers, just like all the other lenders! Let’s get em set up with a nice Option loan instead, preferably with a whopping prepayment penalty and a negative amortization kicker. This way the borrower can use the loan “benefically”.
“Many in the real estate industry blamed the media for the negative mindset of their formerly enthusiastic clients. Agents, builders and brokers lambasted those reporters, blaming the media for perpetuating a perception of doom for the housing market. But the numbers didn’t lie.”
You’d never know there was a problem if you got all your news from CNBC and Larry “Crackpipe” Kudlow. Today I learned Housing stocks are a great buy for the coming RE boom in the 2nd half of 2007. CNBC should get a plaque of appreciation from the NAR for all the pimping they do for Real Estate.
Casey has some competiton:
http://foreclosureboy18.blogspot.com/index.html
Crispy!!!! I know you’re behind that site. Bad crispy bad. Why are you aggravating the sheeple.
LOL
Do you think it is true? Sounds made up. Time will tell. However, I think Crisp & Cole should have a website similar to Casey. Time will tell on that also.
LOL!
Remember it is now Crisp&______.
Mrincomestream-
How does the brokers licence requirement work? If the person with the license leaves do they have to find a new broker of record for the office? What are the requirements?
crispy&cole-
In short… yea, as far as the requirements in a combination of 8 college level courses from the following list — Real Estate Practice, Legal Aspects of Real Estate, Real Estate Finance,Real Estate Appraisal,Real Estate Economics or General Accounting Real Estate Principles, Business Law, Property Management, Escrows,Real Estate Office Administration, Mortgage Loan Brokering and Lending, Advanced Legal Aspects of Real Estate, Advanced Real Estate Finance, Advanced Real Estate Appraisal, Computer Applications in Real Estate, Common Interest Developments– and 2 years full time experience and no criminal convictions. If you have a degree and/or have passed the bar you can forgo the experience requirements if certain criteria is met.
Thanks!
no, casey has future cellmate!
Too bad its not a 6′6″ 300lb gang banger!
I think it is 100% Fake. LMAO. The comments are worth the wasted time.
It’s obviously fake you old devil, the similar names using the same letters a dead give away.
It is obviously fake - Crasey Nires - (Serin spelled backward)
You can turn the mystery property box price this way or that way in an attempt to find out what’s inside. You can shake it trying to figure out what’s inside. You can get it x-ray’d to see what’s inside. Save your time. There’s a much easier way to figure out the “eventual” value of any given property. Take the rental values in the area. Let’s say $2000 a month. Multiply by 150. Thus, 2×150. The value of that rental is $300,000. If the rental value is $3000, then it’s 3×150. That’s $450,000. And so on. You are never going to get it exact but that’s a pretty good guide.
In my area rentals are (top) $2,500. Renters are balking at higher prices because they don’t have the money. Price will always determine value in a stable market. This past 6 years has not been a stable market. It’s been a speculators market (builders and buyers and sellers) driven by momentum. If you trade the stock market you will know that momentum eventually dies and in the property market that has now happened. Now it will sloooowly pull back to some kind of sanity. Might take a few years to fully unwind.
So, the value of these properties mentioned above comes out around $350,000/$375,000. They have already dropped from around $650,000/$700,000 to one which just sold for $585,000. That means about another $200,000 to go. The exotic loans will do damage as they reset. A possible recession will do more damage. Even a shallow recession will bring problems. A tightening of loan requirements will add to that damage. Foreclosures and bankruptcy will be icing on the boom now bust cake. The bigger the boom - the bigger the bust. It just takes time. A rough guesstimate is that by 2008 to 2010 or there abouts, that $350,00/$375,000 will be reached. Easy, huh?
Btw, someone posted the Larry Kudlow mantra about this “Goldilocks Economy”. Wrong. There is a documentary being released in early spring about how Americans are now so deeply in debt that they are putting their baby food on credit cards. Not because it’s easier but because they don’t have cash to buy it. The dovcumentray reveals how over the last 20 years, the US banking system has manipulated the fees on credit cards, late payments, missed payments, ATM fees, other additional charges, etc, to the point where it’s the most profitable section of the banking industry. The documentary also details the changes from 1979 to now and shows just how close to the edge of bankruptcy millions of americans now are as they work and live in this wonderful “Goldilocks Economy.” It ain’t pretty and it’s very scary. And for those who watch that blithering right wing, coke sniffing idiot on CNBC don’t forget what happened to Goldilocks.
tell us how you really feel about Larry Kudlow.
A new Honda Civic for a $359,000 house
How about whatever car you want and you pay for it your self and a $339,000 House? And how about make that house about 3500sf with a big back yard for that kind of money.
Is it just me? no many on this blog have expressed this is no holds barred bs and think about the car in terms of a 30 year loan. How would you like to be paying for a car you cannot even remember 30 years from now, and with tens of thousands of dollars of property tax and interest added, never mind income tax for the “free car”. Anyone who falls for a con like this probably lacks the intelligence to buy a house!
“intelligence to buy a house” = oxymoron ?
There is no income tax on the car because it’s not income, any more than the Star Wars figurine you get with a McHappy meal. You’re just buying a house and a car for $359K.
>> Plenty of McMansion “trade-up” owners will go under, too. They bought their McMansion with equity from the sale of a previous residence, and both spouses are gainfully employed. But what happens when one of the spouses loses his or her job? Most middle-aged people have very little savings and spend every cent they do make.
Somehow my post got cut off. What I said was that while many middle aged McMansion owners indeed have few non-retirement savings, they probably have considerably more in 401K’s and IRA’s which they will have to loot to keep their houses if they run into job losses. There will be a lot of 10% early withdrawal penalties. Eventually they’ll start getting their Social Security and downsize. So they’ll find a way to keep their houses but their golden years won’t be quite as golden as they could have been.
And let’s face it, most Baby Boomers will be in the workforce for much longer than they expected. The good news for them is that the vacuum created by those Boomers who can retire will ensure their skills will be in demand. We read a lot about this, but it hasn’t really happened yet that I can say. I would guess that after the next recession, any half-way competent Boomer will be in demand. Certainly not as good as being able to retire, but better than the soup lines.
Great…now I have to compete with delayed retirement boomers in addition to my fellow gen-xers. Damn this bubble, when I graduated from college I thought I’d be able to take advantage of the retiring boomers and relatively fewer gen-xers….
Er…not to pour salt in the wounds, but have you seen the population size of the Gen Yers you will also be competing with?
Joe Schmoe:
Does anyone else think these discussions of the bear market are surreal? Do people have any idea of the bloodbath that is coming?
Millions have bought houses they simply cannot afford over the last 3-4 years.
entire TOWNS will go into foreclosure
McMansion “trade-up” owners will go under, too.
This thing’s going to take down millions!
afraid you are right Joe.
God bless America!
Joe’s original quote was edited.
“The realization that residential real estate has not historically provided meaningful real returns on investment will come back to the fore…”
But so much of current pricing has been based on RE always goes up at least 10% every year. Once it’s accepted that this is no longer happening, my guess is prices won’t just be going down 5%.
“San Diego proved an extreme version of what was happening in markets across the country, as inflated markets started to cool. Year-over-year price declines continued monthly from June, eventually reaching a low point of $482,000 in November. That was a $36,000 drop from the previous November, according to DataQuick.”
I am reminded of perhaps the stupidest quote of the entire housing boom, dating back to the ancient days of June 2005. Anyone else remember this gem?
But new houses–even multimillion-dollar ones–come with few frills in San Diego. The Rothschilds spent another $850,000 upgrading their home, adding wood flooring and granite countertops, installing beams across the ceilings and turning mounds of dirt into a lovely garden. Did they ever feel nervous about spending so much? Not a chance. Brokers tell them their house would now sell for $2.8 million, or $600,000 more than they’ve spent after renovations. “It’s a merry-go-round in San Diego,” says Ryan. “You got to get on the ride. One house parlays into the next.”
Wow, stupid housing boom quotes!
I’ll never forget David Lareah calling people who wanted to pay off their houses “unsophisticated”.
The shills on LA radio stations. One of them, he sounded the part, would keep using the term, “savvy, affluent homeowners” to describe his cash-out refi customers.
Well, he’s right, though. When you can get 30 year fixed rate loans for 6%, why would you pay your loan off? You can put that money aside and earn a few percent more in a mutual fund. At the end of 30 years, just liquidate as much of the fund as you need to, pay off the loan if you want to - or sell the house - and pocket the difference.
Is that a joke or are you serious? Warren Buffett does not agree with you, for starters.
“You can put that money aside and earn a few percent more in a mutual fund.”
What if the mutual fund goes down in price? Oh, I forgot — the Greenspan put has morphed into the Bernanke put…
Ultra-high net worth investors are expecting 7% from the stock market in the next few years. Perhaps it will be 10%, but it could also be 4%. Paying down debt is a guaranteed return of whatever your interest rate is–even more guaranteed than US treasuries. If you hold any treasuries in your portfolio (above basic liquidity desires), AND have a mortgage, you should really be paying off your mortgage.