“More Homes Than Buyers Next Year” In California
The Sacramento Bee reports from California. “The Bee recently invited five real estate analysts to share their opinions. When did you know the boom was over? Greg Paquin: ‘August ‘05. Initially, we saw Lincoln start to struggle. The very first market, and not long after that Centex came out and started paying Mello-Roos fees and incentives and so forth. And they were way ahead of the game.’”
“Scott Syphax: ‘Two falls ago when I was in a sales office and agents were talking about competing with investors who had earlier bought there. It was fall of ‘04.’”
“Leigh Rutledge: It was August ‘05. For us in resale, you do your update, and there’s two new houses on the market in east Sac or wherever. And then the next week there’s 10. So the pending (sales) are slowing and the inventory is growing. This happened in 1991, too. You just go, ‘OK, It’s over.’ And I knew it was over. When you’re doing it every day, you know when it’s over and people didn’t want to talk about it. Didn’t want to talk about it. Just wanted to pretend it wasn’t happening.’”
The Press Democrat. “It was a tumultuous year for many Sonoma County businesses. The real estate industry reeled from a sharp downturn in the housing market. Prices fell for the longest stretch in a dozen years. Having peaked at $619,000 in August 2005, the price for the typical Sonoma County home dropped to $565,000. By one estimate, the housing downturn wiped out 1,300 jobs in Sonoma County.”
The Record.net. “‘The issue is, and the concern we would have, is that if larger builders think they can just build unabated,’ said Tom Doucette, president of Stockton-based Frontiers Community Builders.”
“That could flood the market, said Doucette, who has been in the home-building business for 25 years.”
The Union Tribune. “It will come as little surprise to San Diegans that a big reason for the slowdown is the sluggish housing market. Thousands of construction workers and real estate agents have lost their jobs. Consumers who once relied on home equity loans are keeping a tighter hold on their wallets.”
“‘The biggest question facing the economy is what’s going to happen in housing,’ said James Welsh, head of Welsh Money Management in Carlsbad.”
“‘If you look at the past, housing corrections typically last a lot longer than a year. It seems unfathomable to me that after such a big run-up that home prices have had, we would have just a slight correction and everything would be OK,’ he said.”
The North County Times. “‘We are all sitting on the edge of our seats,’ said Marney Cox, chief economist at the San Diego Association of Governments. Cox puts the possibility of an area recession at 65 percent. ‘North County is at a slightly higher risk for a recession,’ Cox said.”
“Even optimists acknowledge that markets are rebalancing after a full-tilt frenzy. In most Southwest County ZIP codes, prices of higher-end homes are dipping. And signs of pain are frequent. Sales values in parts of Menifee and Sun City have actually fallen below year-ago values.”
“As a result, some families who bought in 2004-05 are finding that it’s not so easy to sell their way out of debt when they’re suddenly hit with medical bills or the end of short-term ultralow mortgage payments.”
“In the July-September quarter, Riverside County had about three defaulted mortgages for every 1,000 residents, according to a firm that provides information to real-estate investors. That was the highest rate in the state in that period, and only modestly below default rates recorded during the recession of the early 1990s.”
The Orange County Register. “No person has personified the O.C. housing outlook game more than Gary Watts. His projection for 15 percent gains in ‘06 was off.”
“Us: How’d you miss on ‘06? Gary: ‘What appears to have affected my numbers for last year were two events: (a) the Fed raising the rates a half percentage point higher than I thought they would…This slowed down sales and then these slower sales ran straight into (b) a huge jump in our spring inventory when those inventory numbers usually decline.”
“‘These two forces caused the sellers, who needed to sell, to liquidate at much lower prices, just to capture the few buyers in the marketplace. Interestingly enough, maybe 30 percent (or more) of the listing market was made up of sellers who were ‘un-motivated’ and just looking to get a specific price. This too added additional pressure on our selling market.’”
“Chapman University’s A. Gary Anderson Center for Economic Research forecasts a drop of 2,000 jobs in Orange County’s construction and financial-activities sectors next year, mainly due to the slowdown in the housing market. Without the commercial construction boom, the job declines would be worse, Chapman economist Esmael Adibi says.”
“Yet the building boom is coming just as mortgage companies are shrinking and moving out of some of their big offices. ACC Capital Holdings, the Orange-based parent of Ameriquest, is leading the trend by putting up 600,000 square feet for sublease after announcing 3,800 layoffs in May.”
“As of Nov. 30, just 33,000 houses, condos and townhomes traded hands, according to DataQuick. That’s down 27 percent from the same period in 2005 and the lowest since 1995. But even as homes began to languish on the market for want of buyers, the median price of local homes continued climbing through the first half of the year, hitting a record $646,000 in June.”
“Since then, the standoff between buyers and sellers eroded and the median price dropped $40,000, retreating to November 2005 levels.”
“Builders, who were caught flat-footed in 2006 by cancellation rates of 50 percent or more, should trim inventory to manageable levels by the second half of 2007, said Jay Moss, regional general manager for KB Home.”
“But competition for buyers will remain stiff among builders, he said. He predicted that the resale market will be ‘dormant,’ making it tough for homeowners to unlock their equity and buy a new move-up home.”
“Mac Mackenzie, a real estate agent who was the county’s top salesman in 2005, worries there will be more homes than buyers in the market next year. Mackenzie is worried about bad debt and poor financial management by homeowners.”
“‘I really think that the potential of a downturn is very, very high, and that a lot of people have overborrowed to the point of insanity,’ he said.”
Happy New Years! A reminder from Nevada:
‘By the fourth quarter, the Reno metro area’s median home price was down nearly 15 percent from the all-time high of $370,000 in January. Realtors have taken the news hard.’
‘Be extra nice to your Realtor friends this holiday season. And maybe expect their parties to be B.Y.O.B.’
Happy New Year Ben! And Happy New Year to all the guys and gals at HBB! I wish everyone a healthy and prosperous 2007!
Happy New Year (TM)
And Happy New Year to all the guys and gals at HBB! I wish everyone a healthy and prosperous 2007!
And to you too!
From the heart of Silicon Valley, best wishes to all for a great 2007.
lol. Happy New Year, Ben! Thanks for keeping us edumacated with this blog
Don’t drink too much eggnog tonite!
An amazing year for the prophecy to finally come true. Year one of. . . .? 2, 5, 10? Happy New Year and God help the real estate industry. . .
Screw the REIC. God help the average working American who is getting squeezefrom all sides.
Happy New Year from Northern Cali, too. I haven’t been participating in a while, although I still read the blog daily. It has grown so fast since I first found you back in March ‘05, it’s hard to keep up and contribute before 50 comments have already been added.
Rest assured, though, that I continue to preach the housing bear gospel every chance I get, whether people listen or not. 
Like teaching a child, your hope is that something that you say will make sense and will stick.
The absolute best to you, Ben, and to all the followers of this blog. May the coming year open many more eyes, and the market continue it’s journey back to some semblance of normalcy.
BayQT~
“since I first found you back in March ‘05″
Now that would be a cool topic, have everyone go through the archives and find their first (or close to first) post on this blog. It would be interesting to see who was the earliest poster who continues to post. The only people I remember posting (who still do on occasion) when I started were desidude, deb and john law.
I’m not saying you’re not telling the truth about March ‘05, but I see several people making claims of having been a regular for years when that is clearly not the case. It could be bragging rights for some of the true veterans.
Why don’t you put a Gold Star next to your made up name so everyone will know that you have “bragging rights”.
You’re a perfect example of what I’m talking about, someone who’s been posting here for what, 3 months now. No offense mate, but my 3 year old knew there was a housing bubble more than 3 months ago. It would be cool to separate some of the big mouth, johnny come lately’s like you from some of the long-term posters.
Isn’t a more important topic those readers/posters who have made better decisions because of Ben’s Blog? Who cares who “knew” first……other than those on some weird ego trip.
Yes, I agree, but that topic has been done about 300 times.
“No offence, Mate”
None taken, I couldn’t agree with you more with all of this….
“It would be cool to separate some of the big mouth, johnny come lately’s like you from some of the long-term posters.”
That’s why I suggested putting a “Gold Star” next to your name.
dwr,
Sorry….it was a rhetorical question; not a suggestion for an actual one.
my 3 year old knew there was a housing bubble more than 3 months ago.
One’s intelligence or perspicacity is not determined by the date they became aware of, or began posting at, this particular blog. Apparently you believe otherwise, so go ahead and give yourself that gold star.
true, you’ve been around for a while.
I have been around since before registration was required.
Sometimes when I check in on the HBB now, I marvel at the newcomers.
Certainly there is alot more ranting & raving now that even 6 months ago when there was some more cogent and original analysis posted here.
Oh well, we can’t all be early adopters.
Yep. Certainly, there are a few of us who used to post as “anonymous” before registration was required (I did).
I recognize a number of posters from the original days. Oftentimes, they don’t post as often because it’s difficult to read through all the posts, now. Also, people already know what we think. Time for new perspectives (at least that’s my take on it).
“‘If you look at the past, housing corrections typically last a lot longer than a year. It seems unfathomable to me that after such a big run-up that home prices have had, we would have just a slight correction and everything would be OK,’ he said.”
Others here have alluded to this taking years to work itself out. I have to wonder if there may not be some dead cat bounces along the way too. As someone who moved to the SF bay area 5 years ago and has resisted buying, I think about this. There is a lot of pent-up demand and it wouldn’t surprise me if there aren’t periods where people start jumping in and we see sales and prices rise for a bit. But like with the stock market, the real bottom may be a few ‘waves’ away. So while we may yet have our day in the sun, determining when to actually pull the plug is going to be a challenge.
As an aside, we went looking at new construction homes in Dublin for the first time in ages. Not a lot of people looking, prices have been reduced 10% and the mantra is “This is absolutely the best time to buy in the bay area.”
“There is a lot of pent-up demand and it wouldn’t surprise me if there aren’t periods where people start jumping in and we see sales and prices rise for a bit.”
Are you conjecturing that if the stock market is subject to dead cat bounces, then the real estate market must also behave thusly? And what evidence do you have for “pent-up demand?” I am very curious, because I thought demand was currently contracting for many reasons…
The supply of GF’s will always be out there. I was talking to my family during the holidays, and none of them had a clue about housing prices declining. All are college educated. A friend of mine recently overpaid for her house by at least $30K IMO. I didn’t know about it until after the fact. I didn’t say anything to her because she is a single parent and I didn’t want her to be kicking herself. She has friends who were investing in the Phoenix market in summer 2006. These are all educated people who are not stupid.
“The supply of GF’s will always be out there.”
Let’s compare notes on this point after the subprime meltdown has taken its full course.
I would agree with Stucko here. Sure there’s plenty of fresh unqualified idiots that will buy a house. What fueled the last 2 years of this frenzy was the nutty financing.
Now the stage set is different. Not only is the sub-prime money drying up (per the earlier thread on closures today) but next year the resets begin in earnest on the ARMs, right at a time when the borrowing environment is tightening. I agree that there will be false bottoms on this correction, but I’m not seeing it in the cards for 2007. More likely, some of US, the bubble sitters will be the one’s left to fuel the false bottoms, as some buy sooner than others. (At least those purchases will be on the right side of the bell curve) Who else is left with the cash and credit?
A lot of people seem to think the downturn is an anomaly and will be short lived. Particularly those in those hot markets. I believe this attitude will swing violently in the negative direction by August 2007 when the 2007 high season is worse than 2006. Then there will be panic leading to the second wave of foreclosures heading into 2008. This in turn will feed upon itself in the 2008 season where we will really begin to see how bad it is (or isn’t?).
They’re also discounting mass psychology.
On the way up, there was no price too high to discourage buyers. On the way down, there will be no price low enough to encourage them.
People are not rational; if they were, booms & busts would never occur.
p.s.: It always cracks me up when people here say they’ll buy when prices are down x percent. By the time the market gets there, prices will be dropping so steadily they’ll be paralyzed by fear of further declines.
“By the time the market gets there, prices will be dropping so steadily they’ll be paralyzed by fear of further declines.”
That’s why it’s useful to have some objective standards on which to base the purchase decision, instead of assuming you can predict where prices are headed. These would include:
1) Does the home pencil out as a rental? (One poster has regularly suggested that home prices have fallen to 100-120 X rents at least once a decade forever.)
2) What is the area’s median home price to median income ratio? (Should be less than six for CA and less than 3 for the flyover country before you even start to think about seriously looking).
3) What are people (Realtors excepted!) saying about whether it is a good time to buy a home? When everyone is saying real estate is a terrible investment, you should consider looking around, regardless of whether prices are rising or falling, as negative sentiment automatically creates a price discount.
That’s why it’s useful to have some objective standards on which to base the purchase decision…
Agreed. Of course, you must also possess the fortitude to buy when everyone else in the world considers RE purchasers certifiably insane.
I dont see Californa anymore different than others… if you wish i would put that at 4 but no more than 5.
“Of course, you must also possess the fortitude to buy when everyone else in the world considers RE purchasers certifiably insane.”
A good way to develop such fortitude is to keep renting while Realtors are persistently insisting “There has never been a better time to buy,” when the numbers and your common sense dictate otherwise.
Could we also add less than 6 months of inventory and increasing sales to GetStucco’s list of predictors?
Yes. Better to buy after the bottom is in than before, IMHO. The bottom tends to be flat for a long while — just like the top has “plateaued” for a while. Anyone reading here will know it.
Do you know how many “educated” people I know rode the stock market down? Too many.
“Just recently I have had to dissuade friends and relatives from buying, people one would ordinarily consider intelligent. I think the MSM has completely lost any sense of acting in the public good. People are completely in the dark on this subject unless they’ve found sites like this”.
In the past 3-4 months I heard from three different friends that they were going to buy a house and in all three cases there was no listening to me. I didn’t push very hard, but I did get in a few points for them to think about.
It didn’t matter, they’d decided they wanted to buy and I don’t believe anything I could have said would have made a difference. Al three were single, in their 40’s and had some money - two had saved it, one had an inheritance. All three have since bought.
All three (one in Chicago and two in Queens) felt that prices could well come down, but thought since there was a lot of selection and room for negotiation, now was a good time.
I am not willing to risk a friendship by pushing too hard beyond a point. You can only lead a horse to water.
If it weren’t for my own ignorance about the bubble up until a few months ago when I stumbled upon this site and few others while checking out real estate in Seattle, I would be staggered by most everyone’s ignorance. Yet when you only use MSM to find information, at least in LA, there is almost nothing on the bubble. You could read the LA Times, NY Times and the Wall Street Journal and still feel that housing has leveled off. Just recently I have had to dissuade friends and relatives from buying, people one would ordinarily consider intelligent. I think the MSM has completely lost any sense of acting in the public good. People are completely in the dark on this subject unless they’ve found sites like this.
NYT columnist Paul Krugman called the bubble top in summer 2005 (”That Hissing Sound”, google it) and has reported on the decline since.
How many people get the NYT? The last 10 years it has been ingrained in the public’s mind that RE always goes up. When I tell people what’s going on, there is a look of jaw-dropping shock’n awe on their faces.
Lets not forget Irrational Exhuberance’s Prof Gary Shilling.
This would make it the second time he hit the mark on the
both the stock market in 1999 and housing market in 2005.
One real effect of studying the recent real estate market is the ability to detect BS in the main stream media. This causes a huge increase in the “bubble reinforcement” the observer starts seeing everywhere.
I agreed with every statement by one of the six or so FOX news commentators seen discussing real estate this weekend. If that isn’t a sign of the approaching End Times, I don’t know what is! (Of course he was “fair and balanced” out by the most incredible RE stooge I’ve ever seen.)
Its not an issue of education, its an issue of awareness. Just like people who pay MSRP for cars, they are not aware of the “invoice” price, dealer cash & other incentives. Thus they do not know the fact the dealer/seller would willingly accept significantly lower prices/offers.
Ignorance is bliss until you’re out on the street and you realize you were the victim of a profiteer who is laughing all the way to the bank thanking the world for all the GFs allows him not to be the one on the street.
Joe posts ” Its not an issue of education, its an issue of awareness.”
I could not agree more. In the next few years the poorhouse will be filled with the well paid and educated. Being schooled at Hard knocks U….Pip Pip to you a pint my man!
Sadly even with education i still find many GF buying at top.
Yes this guy rode the stock market down and even bought more and kept telling me how real estate is the best investment bar none. I was floored. What can you tell this person. He purchased his home in Mid 2006. I tried to explain to him that realtors use fake bidders to spur over bidding.
When he did buy last summer, he was telling me how he had 2 other bidders he competed with. I asked ‘Do you know what the other bids were?” >>> NO! What can I say. Inventory up 100% with sales down 50%… and he just doesnt get it.
Realtors are not like your doctor…
Ha Ha ha ha…..Linda is right! High Five to Linda!
Educated people make more errors that non educated people. Why? Because educated people think they know a lot of things. I am educated. And in the past I made a lot of errors. I still make a lot of them. The biggest error I made was to think that people are intellingent. A wish for 2007 ? Never ovestimate people, even the educated ones. I include myself in the lot too. Bonne année grand nez ! Feliz navidad! Novam godam ! Happy new year and may you live interesting times! like the Chineese say haft jokingly.
Educated people make more errors that non educated people. Why? Because educated people think they know a lot of things. I am educated.
I think, at the risk of getting political, this is why most educated people are liberal. They think they can solve the world’s problems, which is a nice though. It isn’t until you get older and realize how often you’ve screwed up your own life that you realize you shouldn’t be voting on how someone else should run theirs.
Not trying to start a flamewar, probably will anyways, but hey, who’s expecting sober commentary on NYE.
“I think, at the risk of getting political, this is why most educated people are liberal.”
What do you mean by educated? Sociology or Women’s studies majors, maybe.
Lots of great conservative educated people in Silicon Valley. They saw the Debt/Housing Bubble years ago folks. The liberal sided people are more abt to believe in hype.
Feepness, “solving the world’s problems” is something the conservatives claim they were trying to do by invading Iraq. Outlawing gay marriage is another popular conservative cause. Just how does that jibe with your claim that liberals are the ones who seek to solve the world’s problems by dictating to others?
Well Linda… lets stick to real estate.
Former CEO of Fannie Mae was in the Clinton cabinet (HUD). Former CEO Frank Reins lied to Congress regarding earning manipulations. He LIED about the $9Billion in accounting freud. Enron was a mear $500M .. While we wanted to lynch old Kenny Boy.. Old Frank walks free.
Just for fun:
Note the year is 2002, when the bubble was already in full swing in the bubble regions.
President Bush’s Policies Promoting the Ownership Society
Expanding Homeownership. The President believes that homeownership is the cornerstone of America’s vibrant communities and benefits individual families by building stability and long-term financial security. In June 2002, President Bush issued America’s Homeownership Challenge to the real estate and mortgage finance industries to encourage them to join the effort to close the gap that exists between the homeownership rates of minorities and non-minorities.
American Dream Downpayment Initiative, which provides down payment assistance to approximately 40,000 low-income families;
Affordable Housing. The President has proposed the Single-Family Affordable Housing Tax Credit, which would increase the supply of affordable homes;
Helping Families Help Themselves. The President has proposed increasing support for the Self-Help Homeownership Opportunities Program;…
http://www.whitehouse.gov/news/releases/2004/08/20040809-9.html
“These are all educated people who are not stupid.”
Sorry, but education and stupidity have nothing to do with each other. They work completely independent of each other. Some of the most educated people are also some of the most stupid.
People are confusing schooling with education and education with intelligence…believe me, being lucky is much better.
Yes. Being lucky is better. Good luck!
Your comment reminds me of the timeless remark by John Maynard Keynes, “The market can stay irrational longer than you can stay solvent.”
Anybody want to take a stab at defining educated?
“Anybody want to take a stab at defining educated?”
Higher education: knowing ever more about even less.
Man this scenrio is so TRUE! We just bought a truck and the finance guy was really, really on top of all the paperwork nad the details. I have to say it was the single most pleasant car buying experience we we’ve EVER had. Anyway as we were making small talk, the BA real estate scene comes up. We do like to ‘bait’ people to see what they’re thinking and boy what a suprprise to hear this guy talk about the current and future market. This otherwise educated, detail oriented guy is ‘in’ RE for the investment, not just for a place to live. Seems he has a house almost completed and is trying to sell his current place. Well he’s a little nervous but thinks (like so many others) that it will get better in the spring. I always ask anyone who says this to please explain to me why Spring 2007 is going to be better than Spring 2006. The best explaination he could give me was “well school will be out soon and that’s when people really start looking to buy, and well my place is in Cupertino and gee sales weren’t that bad last Spring”. WOW. I said I had heard of a great strategy for moving property quickly in this market. Look at the most recent sales and price there or lower. Well he said he’s just not going to do that since it will be better in the spirng……..!
SuzyK posts ” Well he said he’s just not going to do that since it will be better”
Few people smart or dumb can seprate fact from thier “whishfull thinking” or there will for something to be one way over another.
Classic case of our times we have a moron who will “doubble down” in Iraq despite the facts. Watch it happen look at all of the American GI’s that will die for basicly the same stumbling block.
I am wondering if the real estate market *might* behave the same. I don’t know.
Can’t speak for the rest of the country but in the bay area there are many people like me who could buy (and without the inventive financing) but have chosen not to. And there is still a steady stream of high tech foreigners arriving and wanting to buy. People are out looking and watching very closely. It would not surprise me at all if at some point they started to believe it was time to jump in.
The BA simple does not have the supply overhang that elsewhere does. Now, that isn’t to say it isn’t going down, but it will be a monetary issue only.
Which still won’t be fun, but not as bad as LV, SD, or Florida.
Maybe it does, and maybe it doesn’t. Rents are half the cost of purchase, and we have the highest rate of Interest only ARMs in the country. There’s plenty of speculation in the BA, just not the same kind of speculation you see in other parts of the country.
Well Zack some others in the Bay Area are also in the same boat along with you. I can buy two homes with cash, but that would be enriching the seller.
Pent-up demand? Eh? Rather, the complete opposite - with money NEVER easier to get, the demand has been satisified years ahead. Oh- wait - maybe I misunderstood. Maybe it’s pent-up demand to SELL. Sorry, can’t help you with THAT one.
Very few market go straight up or down. The BBC reported that in the UK housing bust in the 90’s, they had three separate false rallies, each then followed by lower lows.
I admit it. I will probably buy the second bottom.
I don’t know if I will ever buy at this point. I’m hoping I’ll be able to snatch a bigger rental, though (hopefully)…
freepress post ” I admit it. I will probably buy the second bottom.”
I need a place too. But we must beware of the “sucker rallys”
Zack
You are correct. This downturn hasn’t even started. One indication is, we have yet to see a rash of tv shows telling Joe Sixpack how he can profit from the real estate downturn (lol). There are a few of these rip-off shows out there but back in the late 80’s and early 90’s there was a blitz of these scam tv shows telling Joe Sixpack how he could become a millionaire. Remember the Vietnamese guy with his yacht where blonde bimbo’s were laying around on deck while he drank Dom Perigon and told us how he brought his parents over after he had made several million? Funny stuff.
For a $1,500 information package, he would tell you how you can get his, “How to make millions in Real Estate Foreclosures course.” But wait! There’s more! As an added bonus he will include a list of lenders who will finance any foreclosure you want to buy! All you have to do is be one of the first 50 callers and that $700 value is your absolutely free….”
These “Get Rick Quick” shows, will be the first sign that a big slow down is under way. Forget the 10% to 20% reduction crap on property which went up 100% + in the biggest speculative bubble since the railroads.
I suspect that even when the bottom is reached, we are going have a looooong period where buyers will be in short supply for various reasons. Incomes for one. Fear that they will be buying before the bottom is in is another.
It’s almost impossible to judge tops and bottoms from prices. Schiller is right. It’s the psychology of the masses which determines tops and bottoms and while GF’s are still buying, mass psychology has not completed a full “U” turn.
Appreciate the thoughtful comment Mike. I remember some of those commercials.
I’m in no hurry. Believe it or not, within 2 years of our arrival our rent had dropped 45%. It’s been back up a little since but not much. And this is in an attractive, well-located gated community. So we’ve been saving a ton…in fact, the difference between what I’ve put away and what friends/relatives have in unrealized gains is not all that much. Except mine is real money.
I remember seeing those late night commercial shows back in 91. I was 19 at the time and remember thinking that guy was selling a boat-load of crap. 15 years later I still think the same thing.
“I’m Tom Vu - you come to my seminar, you make lots of money.”
Rob
Well there are certainly a lot of folks posting on the various housing boards who for one reason or another have been waiting to buy a house. Whether or not that qualifies as “pent-up demand”, I think it is a sure bet that many of them will buy well ahead of any eventual bottom. That’s what happens in bear markets, each little rally gathers in a new crop of buyers who are then soundly spanked as the market resumes its slide.
I will probably buy when it becomes cheaper than renting. If panic takes the market down a little further past that point, so be it. If I am buying value based on fundamentals, others will buy at or near the same level and the bottom will form. Speculators making a bet on future appreciation buy at all the wrong times.
With that attitude you will never buy. Can you pinpoint a time in So Cal that owning was less expensive than renting? Nothing wrong with being a renter but that is a worthless statement.
Owning was less expensive than renting from about 1997 to 2000.
Yup, I only bought my townhouse in LA after looking at some rentals and figuring out that it was cheaper to buy. Rentals for tiny studios/1-bedrooms in the area (Los Feliz/Silverlake) started at $600 and for $800/mo mortgage I got a 2-bedroom 3-level 1,400+ sf townhome (rented out the second bedroom for $600/mo) w/ great views of downtown LA.
That was 1997, btw.
Same situation with me in early 1999. I had to move out of my rental in San Diego and my wife was pregnant with my 2nd child. At the time it was MUCH easier to find a nice home to buy than it was to find one in the rental market. Fortunately I had 20% to put down and had my pick of nice homes. Like someone earlier posted, it is nice to be lucky. I bought out of necessity…not trying to time the market, yet it worked out perfect for me. lUCKY.
Same here. Bought a house in Oceanside (San Diego) in 1998 for less than rent. Decent 3/2 in a working-class neighborhood.
There have been quite a few times when homes could be purchased for less than rent (assuming a 10-20% downpayment).
Anticipate lots of DCBs on the way down. Think we’re seeing one right now in Q4, as a matter of fact. This is just the beginning of the downturn. These DCBs exist because people are still to optimistic about real estate. Too much attention being paid (by bulls and bears) for this to be anywhere near the bottom. It’s when nobody’s looking or paying attention that one should consider buying a house, IMHO.
Patience will be greatly rewarded.
In the Bay Area, it was cheaper to buy than rent from 1997-2000. Then it wasn’t anymore. Yet I talk with people like you all the time, who’ve apparently forgotten things that happened less than 10 years ago. Sheesh.
The bottom is just like the top…you don’t know it’s hit until months after the fact. Sometimes years. So I can say with near certainty that I won’t buy at the bottom.
If I could comfortably afford a place that I love and want to stay in for 7+ years, I would buy it. Renting a house on the West side is the same price as a mortgage and apartment-dwelling leaves MUCH to be desired. Renting in some areas might be paradise but in LA, it generally means that you live next to students, illegals or morons. I’m not going to put my life on hold for up to 10 years waiting for the bottom. I think I’d end up shooting someone first.
Renting in Irvine is less than half the cost of a mortgage.
“but (pat. renting) in LA, it generally means that you live next to students, illegals or morons. ”
No Fu@king Sh#T! You got that right!
You can find the bottom… many have. Simple map out normal market stats. For Santa Clara - San Jose it was $110/sq ft as of 1998.. add appreciation of 1-2% (around 5%) over inflation over 10 years and you get bottom range (give or take 5%).
Given the run up many will need >45% deline from the top to get back to normal mean.
Second, get out there and do walk-ins when you see an open house. Maybe 2-3 a month in your target areas.
If the realtor asks you… just say after 40-45% decline then we will talk.
Last decline in Santa Clara County was 35-40% in 1991-3. It will be much bigger this time.
Hold fast, Zack. You’re definitely not the only Bay Area renter. We’re sitting it out in a nice San Mateo rental, and happy to be doing so. I’ll pay a 15- 20% buying premium over renting, but we’re nowhere near that yet.
There will be waves because there will be waves of new foreclosures as first the IO/Neg Am/0 down ARM people get forced out, then 10-20% down on ARMs, then many of the 10% down people will walk including those on fixed rates, then the 20% down people will walk as they go underwater. Not all will walk, but many, when looking at 100K+ to bring to the table either won’t have a choice or will say “F’ it”, I’ll take my chances with the foreclosure. If this happens to enough people, the govt will likely have the IRS stand down or redo the law on this.
The prices rachet down each time with more potential buyers taken out of the market along with increasingly bad psychology. Some will step into buy, but won’t be at the bottom till most of the upside down owners are foreclosed, short sell, pay it down or just hold on (and don’t quit). This takes 4 to 5 years to work itself out. Then the wise investors will be back and put a floor on the market when properties will easily cash flow and be rented back to the once home owner crowd that doesn’t have the credit to buy (nor the will in many cases).
Exactly, Army!
The Orange County Register. “No person has personified the O.C. housing outlook game more than Gary Watts. His projection for 15 percent gains in ‘06 was off.”
“Us: How’d you miss on ‘06? Gary: ‘What appears to have affected my numbers for last year were two events: (a) the Fed raising the rates a half percentage point higher than I thought they would…This slowed down sales and then these slower sales ran straight into (b) a huge jump in our spring inventory when those inventory numbers usually decline.”
Hard for me to believe that a half-point rise in short term interest rates would have caused such a problem but I guess it’s a good excuse to use.
Gary Watts performed a rectal extraction and found an excuse that made him sound smart and thoughtful.
Us: What’s your outlook for the local housing market for 2007?
Gary: Both sales and prices will be up from 2006. From the article. Gary’s “preditions for 2007:
“Sales should rise to our 10-year average of 40,100, which puts sales up 10 percent, and prices should rise 7 percent for homes and the 4 percent-5 percent range for condos.”
What kind of logic does this guy use for his forcasts? He eating crow already, why not make a honest prediction and begin rebuilding his reputation?
Looks like he’ll have another year of lambasting by the housing bears. Guess he likes to look stupid, or maybe he just is? Or maybe he’s completely “invested”?
“What kind of logic does this guy use for his forecasts?”
Never look back.
“Hard for me to believe that a half-point rise in short term interest rates would have caused such a problem but I guess it’s a good excuse to use.”
He needs to use this excuse since telling the truth and saying that you can’t keep on raising house prices at 15% a year while you keep wages flat will point out that housing is in far bigger trouble then just a little interest rate adjustment can help. And people in the RE industry are desperate to keep the bubble from popping, at least until they unload inventory on some greater fool and get out from under the falling prices.
Wait until the fed lower rates next year, what will his excuse be then?
Carl “No person has personified the O.C. housing outlook game more than Gary Watts.”
And not a peep out of this turd, untill the end of the year. Then a febal excause…. the dog ate my homework.
http://paul.kedrosky.com/archives/2006/12/26/influenza_of_19.html#c49002
The big-box builders have no choice but to keep building and cutting prices. If you look at their balance sheets, they are billions in debt and have only millions cash. Just repaying the interest on those loans end up costing up to $500M/year. The builders will lead the way down. Lennar has already stated that they are following that strategy. The private builders will all be driven out of business, as they don’t have the huge lines of credit to be tapped. IMHO the bottom will come in 2008 and there will be no meaningful appreciation until 2015 for the bubble areas on the coasts and the Upper Midwest.
“Mac Mackenzie, a real estate agent who was the county’s top salesman in 2005, worries there will be more homes than buyers in the market next year. Mackenzie is worried about bad debt and poor financial management by homeowners.”
“‘I really think that the potential of a downturn is very, very high, and that a lot of people have overborrowed to the point of insanity,’ he said.”
==========================================================
what a worm this guy is. EVERY realtor i’ve talked to in the last 3 years has screamed buy buy buy before you are priced out forever and now that the correction is picking up steam he’s blaming the home owners for borrowing to much!!
I commend this guy for telling the truth: something realtors don’t do very often.
irvinerenter posts” I commend this guy for telling the truth: something realtors don’t do very often.”
Very kind and very generous words.
Look him up, he is a listing agent. He does the seller-side not the buyers.
–
“County’s top salesman in 2005” is unlikely to lie about “the potential of a downturn is very, very high.”
As to “a lot of people have overborrowed to the point of insanity,” I blame Bankrupters lot more than the borrowers. My family has been in debt business for a very long time and bad lending is lot more likely to cause problems than bad borrowing. There is no such thing as “bad borrowing”! When you are not lending your own money bad lending is not hard to do.
Jas
Thanks for your commentary Jas. I was afraid I would only be able to read you on safehaven once in awhile.
“…bad lending is lot more likely to cause problems than bad borrowing. There is no such thing as “bad borrowing”! When you are not lending your own money bad lending is not hard to do.”
—————————–
Agree 100%, Jas. Good to see you posting again. Happy New Year!
EVERY realtor i’ve talked to in the last 3 years has screamed buy buy buy before you are priced out forever and now that the correction is picking up steam he’s blaming the home owners for borrowing to much!!
Who else CAN he blame? At the end of the day, no one forced borrowers to borrow.
It’s refreshing to hear a Realtor(tm) use the “I” word to describe an obviously insane situation. I blame lenders more than borrowers, just as I blame dealers more than addicts. It just leads to more practical sets of reforms.
Wow. Scary. I sold a house in Menifee this year, closed May ‘06. I felt like a barely got out in time and it looks like I might have been the one that turned off the lights!
“Wow. Scary. I sold a house in Menifee this year, closed May ‘06. I felt like a barely got out in time and it looks like I might have been the one that turned off the lights!”
I figure that the top was about 11/2005 for the IE, so yes you were very lucky, IMHO. BTW, ever go skydiving since you were so close to Perris Valley?
I sold the house for a relative, I didn’t live there myself. So, no, never went skydiving.
“But competition for buyers will remain stiff among builders, he said. He predicted that the resale market will be ‘dormant,’ making it tough for homeowners to unlock their equity and buy a new move-up home.”
Builder’s conundrum: If I don’t use incentives, then I can’t sell at a price which hides falling market values. If I use incentives, I prevent move-up buyers from unlocking the equity they need to move up into my newly-constructed tract home development.
I don’t understand this “unlocking equity” idea. I thought that was called selling? Isn’t the real problem that selling won’t leave these people with enough equity to buy an overpriced POS?
It’s bull. You never unlock equity by taking more debt to pay for the groceries or buyinf a SUV. The only equity you unlock is fatter profits for these vampires bloodsuckers from the banking industry. ” Created inequity” would be a more convenient expression.
If you are very old and despirate and have a lot of equity then it can work just fine. That is pretty much the only reasonable context for such a strategy.
But combined with Murphy’s Law, following such a strategy might make you live to be 110.
There are definitely still greater fools in Eureka, CA.
This is perhaps the one place in California that has not seen any significant decline in housing price. New condos are being built in Old Town right along the Boardwalk…900 square feet 1 and 2 BRs starting at $565K and three now say “Sale Pending.” One person here remarked that Humboldt County is stuck in a time warp. I think that statement is very true–people here keep buying and home listings have fallen to about what they were a year ago. I’m getting real frustrated by all this and just want this place to behave like Sac or SD and BUST!!
Anthony, my wife and I were in Eureka this summer and I saw all that new construction along the Boardwalk; I didn’t know they were that $$$ even for being on the water…
Quirky town by the way, and I kind of liked it. I ate the biggest pancakes in my life at some diner there!
WTF is Eureka?? As someone that has lived in CA most of their life I can honestly say that if 90% of the state’s residents cannot point to the general vicinity of your area on a map, it is most certainly NOT recession proof.
Eureka is way the heck up north on the coast, some 300 miles past San Francisco.
Perhaps it is my age, 47, but I know quite a bit about California, partly because I lived there for 38 years of my life, and partly because while a child, our parents would take us on a lot of weekend road trips. I would expect lots of Californians to know where Eureka is. Right up there on the northern coastline and there is also a Humboldt State University (CSUC). I was also fascinated with maps as a teenager.
But Anthony … it’s different in Humboldt County!! What is the average salary? What is the median price of a home? How many “equity barons” are moving up your way? Patience Anthony .. your day will come … ask the others to save the party hats from their bust celebration so you can use them at what will probably be the last bubble bust party in California.
“One person here remarked that Humboldt County is stuck in a time warp.”
Maybe they’re all just “smoked out” on Humbolt’s biggest “cash crop”.
No way! $500K for a condo in EUREKA? That is absolutely NUTS.
‘No way! $500K for a condo in EUREKA? That is absolutely NUTS.’
A lot of cash is flowing into Eureka. The entire state’s construction and real estate industry now has lots of free time and an obvious penchant for skunkweed.
LOL ! so is for a 800ft condo in Santa Clara. Really not worth that much.
Is Eureka in the State of Jefferson? If so, that may be the money magnet….LOL
We also could buy but choose not to. We keep track of when might become a good time via the local stats (updated weekly) at:
http://www.viewfromsiliconvalley.com/id125.html
Plus the trend data, updated monthly, the latest of which is at:
http://www.viewfromsiliconvalley.com/id287.html
Maybe when y-o-y prices are negative for a couple years & costs start to match rents, buying will again make some sense…
Thanks! I appreciate the links.
Happy New Year
and someone has do an intervention on Gary W.
Appears as if he still rolling his own.
Is it just me, or when you read his statements do you hear the expression, “if you can’t dazzle them with brilliance, baffle them with BS.”
I feel dazzled with BS
“‘I really think that the potential of a downturn is very, very high, and that a lot of people have overborrowed to the point of insanity,’ he said.”
So, what’s the point of insanity?? Nothing down?? IO ARM?? Piggyback loan? All the things that inflated the bubble to begin with?? Anyone who bought after 2001?
If this guy was the top RE salesman, I’m assuming he never tried to talk someone out of getting mortgaged to the gills.
“Buy now or be priced out ,”is what all these top salespeople preached during the mania . The real estate people had the same talking points for selling and it was all BS. There is no question that many GF’s were told that they could always get rid of the sub-prime loan they got because the market would go up .
Right now a buyer would be taking a risk buying in any area that has excess inventory,to many new home tracts, or a high amount of sub-prime buyers and speculators .
The Scott Syphax quoted in the SacBee as knowing 2 years ago that the boom was over is the same Scott Syphax that runs Nehemiah, the “non-profit” that puts borrowers into overpriced homes with no money down. You may recall that back in May IRS said they would shut these outfits down, but so far nothing has happened and they are all still in business.
Wow. Good info, mort_fin.
I’ll bet they were still “helping” these poor (usually very unqualified) buyers get into overpriced homes these past two years. This is sick.
A very happy start of 2007 to everyone here - and thanks, Ben, for making this possible. I’m certainly more ‘educated’ here than I am anywhere else. I trust you lot much more than any of the MSM/Realtor/Economists talking heads - so far The Blogs haven’t been wrong about anything.
Here’s to a debt-free, HELOC-free, rightside up and renting 2007!!
“…so far The Blogs haven’t been wrong about anything.”
That’s too broad a generalization. If Mish were right on his blog, we’d have entered a steep recession sometime in early 2005. Here it is the end of 2006 and his followers missed out on the big gains that have occurred since July. Plus unemployment remains relatively low, wages are going up, and the yield curve may soon un-invert.
If/when he finally capitulates and becomes a bull, then watch out!
Indeed. But the fundementals are still horrible. Everything is soo surreal that it’s completely insane even trying to explain it. Want one example how “well” things are going in US ?
Try FORD motors.
Losing 8 billion dollars per year. Losing market share big time. Closing plants and laying off 30,000 people. ZERO assets left and having to borrow 18 billion dollars. GM? Not that great either. Chysler ditto.
Question: Why are corporate insiders selling their stocks like crazy?
60 selling like crazy for 1 buying.
That ratio of insider selling is more significant that the new uhighs on the “COW Jones” and the phony-baloney fantastic macro-economic mumbo jumbo which I do not believe.
Don’t read much of Mish, but this blog’s been spot on!
Anyway, a festive Yule to all.
The blogs are more correct than the MSM about almost every topic I have an interest in. I do see alot of bullish critism of Mish and I admit that he is bearish.
To me, though, his attitude is built on something fundamental. An economy, like the weather, runs in seasons. Mish is simply pointing out the obvious in our economic cycle - it’s been summer, it’s been indian summer (thanks Greenspan), and we are pushing into late fall.
I can, if I wish, ignore the fact that winter comes periodically. After all, when it’s 80 degrees and sunny, it’s easy to forget February. Our household makes a point to worry about next winter in the spring and summer but it amazes me how many households do not do anything about winter until the snow flies, despite the fact it comes back every year.
Economic seasons run much longer than climatic ones. People tend to hope and forget about the down turns even if they have lived through a protracted one.
Precise market timing, as you discussed, is as difficult as predicting the exact date of the first snowfall. Maybe I this summer we would have been better off to do more summer things rather than stow wood in our shed to have it ready by September first. Our first snowfall wasn’t until extremely late (after Christmas) and we did have an indian summer. But in living here in 20 some years, I still don’t know the weather well enough to predict it with precision.
I admire those people who time markets well, because I don’t have the guts to do it. I personally would rather leave some money on the table but know I’m prepared for the next economic season.
“As a result, some families who bought in 2004-05 are finding that it’s not so easy to sell their way out of debt when they’re suddenly hit with medical bills or the end of short-term ultralow mortgage payments.”
That’s a given. Most people are very optimistic that they won’t get any catastrophic medical problem, even obese smokers. Those are the ones who get the major surprise and have to sell their overinflated home for a huge loss.
The smart people are renting on the cheap and investing the remainder in Health savings Accounts, in addition to fully maximizing their IRA contributions and 401k contributions. My uncle was smart to get long term care insurance for himself and my aunt. The long term care paid for my aunt’s 24/7 assisted living for nearly 2 years before her death. My resolution this year is to get into an HSA. I have health insurance with the deduction that qualifies me for an HSA.
There are some pitfalls in long-term care insurance. It’s not for everyone: http://consumerlawpage.com/article/insure.shtml
Happy New Year bloggers! Bit of trivia I learned tonight: Next year will mark the 100th anniversary of New York’s first ball drop in Times Square.
Most people are very optimistic that they won’t get any catastrophic medical problem,
even obese smokers.especially young, fit health-nuts.Bill,
With all due respect, there are two groups of people I’ve seen die young:
-drug/alcohol users who die of an overdose or accident
-young, healthy people who never smoked, drank or did drugs; who exercised regularly and ate very well (some only organic, etc.)
While one would logically assume heavy drinkers/drug users could die early, it’s rare to find someone who thinks “healthy” people are just as vulnerable.
We know a good number of young, “healthy” people who have died or are currently living with cancer or major heart problems (multiple heart attacks by 40).
We all like to think we control our own destiny — especially where death is concerned. Unfortunately, life has a way of throwing us curveballs. Best not to get too “cocky” (for lack of a better word) about how much control we have.
So…The medical types are wrong to say that your chances of getting heart disease or cancer are reduced if you get regular exercise and don’t smoke? I want to see if you agree.
CA renter wrote: “…it’s rare to find someone who thinks ‘healthy’ people are just as vulnerable.”
Amen, brother! I’ve seen ‘em–organic, yoga, daily walks and some of the nicest people you’ll ever meet.
Ask cancer survivors if they’ve ever heard “sympathizers” say: “You know, I could be hit by a bus tomorrow.” You’ll get an earful! (The comeback is: I too could be hit by a bus tomorrow, but I also have cancer.)
These well-wishers always pick something random and rare: plane crash, etc. What they never EVER say is: “You know, I could have cancer right now and not know it.” Which is much more likely to be true, but it scares them, so they say something to distance themselves from cancer. (Thanks for the empathy, my friend!)
If anyone here has idealistic kids who want to save the world, please suggest oncology nursing. We desperately need compassionate people, but they all seem to head for the Peace Corps or Legal Aid.
So preventive medicine is hogwash. That’s your conclusion. May as well start smoking at 47 right? I’ll start eating buckets of KFC and put on 50 lbs. I guess you did not see the documentary “Supersize me.” I don’t want to insult you but I suspect you are one of those who (ahem) apparantly do not exercise and are just in denial in order to justify your sedentary lifestyle. Give me documented evidence by scientists to support your thesis that physical fitness and avoiding smoking and junk food have no effect. Then I will believe you. URLs please?
Bill,
Sorry for the late response, as I often do not get a chance to read/post until late at night.
If you are still checking back…
I believe lifestyle choice are more likely to affect the back-end of your life, not the front and middle. It is just what I’ve seen, though all the medical personel (doctors, nurses, etc) who are intimately involved seem to see the same thing. ANY young person can get cancer (BTW, AtomicRobotWoman is a cancer survivor — ovarian, IIRC, which is a VERY deadly form of cancer). I have only seen one instance (a cousin of mine who died in his late 40s — he was a smoker) where a person’s lifestyle caused them to die young (other than overdose or accidents, as mentioned above).
EVERY SINGLE young person I know with these diseases — and that’s quite a few, unfortunately, was fit, healthy and not a drug user/drinker (maybe moderate)/smoker. None were obese or even overweight.
Want a really sobering experience? Go to one of your local cancer centers. Spend a day there and see what you find. I think you will be very surprised.
Best of the New Year to all the bears in and on the bubble. gordo
The Sacramento Bee reports from California 12/31/06
Karevoll: You’ve got this enormous amount of inventory … and it will go down — it will go down by spring, significantly. A lot of these people will say, “Well, I can’t sell it for $500,000, so I’m going to sit on it.” They’re going to just take them off the market. That’s going to bring a bit more balance to the market.
This guy is talking out of his axx. Oh yeah all the people out their are not going to sale and thats it, if they get a divorce, job loss, job transfer, get cancer, house is foreclosed on, they are just not going to move because they cannot get 500K. Bullshxx. Do they understand that this housing market is just beginning to hit the fan.
All those FB flippers are going to hang on to their properties too. LMAO. These REIC shills are delusional, lying or both.
jerry posts ” All those FB flippers are going to hang on to their properties too. LMAO. These REIC shills are delusional, lying or both.”
Verses the ones that just cut the price and take thier beating now…. they will die the death of a thousand cut, it will be perhaps years of hell and will end up in the same place …. broke or with a large loss.
One thing is for certain, “enormous amounts of inventory” in December do not translate into significant drops in said inventory by spring.
Wonderful the homebuilders are still full in force building more homes in Santa Clara County. 3-4 months they will be complete.
Add more existing homes! Spectacular!!!
It’s been a great 2006 - wish I could ring in 2007 with some of the regulars in here, though I’ll be in great company tonight. God Bless Us Everyone! And to you, Ben, special thanks and sincere gratitude for being the creator and sustaining force behind this most excellent blog.
Happy New Year everyone. 2007 will be a great year!!
“The declining dollar has a beneficial factor for San Diego, since it will encourage foreign visitors to come here as an inexpensive vacation spot,” said Kelly Cunningham, economist with the San Diego Institute for Policy Research. “That’s good for our visitors industry and good for San Diego.”
San Diego, the new TJ?
Cool. I was wondering how I could make some extra money. Can anyone tell me where to get a donkey?
Gary Watts “the Fed raising the rates a half percentage point higher than I thought they would…”
Uh yea that was it except the 10 year treasury hardly budged and thats tied pretty close to the 30 year fixed mortgage rate. I guess 30 year fixed are not what Gary recommends to his buyers?
happy new year
“I guess 30 year fixed are not what Gary recommends to his buyers?”
I am sure Gary normally suggests buyers play it safe with a 30yr fixed, and with a twenty-percent down payment to boot!
Happy New Year to Ben ,the Man Of The Year . Also ,good luck to all the bloggers in 2007 and onward .
CHEERS to ALL!!
Happy New Year Ben, and to all of Ben’s Bloggers. Personally reading the news about Fannie Mae tightening really put me in a good mood.
Watching times square gave me Deja Vu. I realized it was like watching those folks in the movie Independence day partying on the top of the skyscraper waiting for the Aliens to come down.
Kind of like the spring ‘07 realtors waiting on the driveway looking up waiting for the helicopters dumping money, or looking out for the banzai charge of GF’s…
Happy New Year, Ben, and to the rest of the bloggers! I started reading the column about 18 mos ago when I looked around at the prices of houses, looked at our combined salaries, and thought Who the F&*$ is buying these big, expensive houses? True I live in East Bay (SF area), but we make above the median income and we could not even afford our own house now. Thanks, Ben and the rest of you, for educating me! Good luck to all you renters out there, sellers, buyers, or plain average folk like me, just trying to keep a roof over my head. It should not be this hard, or this expensive.
“The buying pool has shrunk to include only the people who absolutely need to buy a home,” Moeder said. “In 2007, we’ll continue to see buyers who are less enthusiastic than they previously were and sellers who are still in denial about what’s happening in the market. We’re not talking about the end of the world, but prices will be stagnant.”
The buying pool has shrunk to nothing, then. Nobody needs to buy a home when rent is $0.38 per dollar of ownership cost on comparable homes.
While prices in all other parts of California go down, check this out:
http://www.humboldtcountymls.com/real-estate-property_12773_1.html
This is in Eureka (north coast CA). Check out the square footage of this 1 BR condo…this is more expensive for like construction in SD. Worse yet, 3 of these condos have sold in the last few weeks.
This place is defying logic—a haven for FBs!
Anthony. I am surprised that these Eureka folks aren’t asking at least $600K. After all, it has granite countertops and a one of a kind view of the water. Here’s hoping for it to fall by 2/3 or more.
Happy Holidays to all of the great bloggers. Ben, you are da MAN. And, I have been reading and posting here from the start of the blog.
From San Diego, CA:
Happy New Year, Ben & to all the terrific posters here. Have a happy, healthy & prosperous new year!!!
Happy New Year folks!
For the New Year: Housing market got buffeted in 2006, expected to stabilize in 2007
http://www.marketwatch.com/news/story/real-estate-markets-softened-2006/story.aspx?guid=%7B1A4BEDE7%2D1C0D%2D4F61%2DB645%2DC92ED858F8DE%7D
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.”
And it does appear that this period of correction may be soon drawing to a close, said Lawrence Yun, senior economist for the National Association of Realtors.
“The past three, possibly four months have been seeing more stabilizing patterns,” Yun said.
Inventory appears to be topping off, monthly declines in home sales seems to leveling and mortgage purchase applications appear flat, he said. All are indicators, Yun said, “that perhaps the bottom has already passed or (the market) is trying to reach the bottom over the very short term.”
The Fannie Mae Question for 2007
We still haven’t seen a quarterly or annual release of numbers since 2004. Every year that goes by, this stat just becomes more and more absurd. Has there ever been a publicly listed company that was allowed to continue trading without reporting for years at a time? At this point in time its looking increasingly obvious to all but the most obstinate, that Fannie Mae has some SERIOUS skeletons in their closet.
IMHO we’re going to see massive demand to see this issue addressed this year.
And hang on to your hats when we actually see what lurks behind closed doors over there…
They have too many political allies. Fannie really spread the money around DC. Nothing will happen to them.
The Sacramento Bee “expert” panel is really something to behold. Choice quotes:
WHEN DID YOU KNOW THE BOOM WAS OVER?
Rutledge: Mine was August ‘05…For us in resale you’re on the computer and you do your update, and there’s two new houses on the market in east Sac or wherever. And then the next week there’s 10. … So the pending (sales) are slowing and the inventory is growing. This happened in 1991, too. You just go, “OK, It’s over.” And I knew it was over. When you’re doing it every day, you know when it’s over and people didn’t want to talk about it. Didn’t want to talk about it. Just wanted to pretend it wasn’t happening.
Syphax: The goal before was a 30-year mortgage that you paid off, and you had a mortgage-burning party at the end of 30 years. Now, with interest-only and these other products, it’s more about having ownership of the property and hopefully being able to use that for both tax and equity advantages. Part of the question that people in homeownership advocacy circles talk about is whether or not that’s a maturation and sophistication of the home-buying public, or whether that’s really an acknowledgment that many people are just going to rent with style for the rest of their lives.”
Karevoll: Keep in mind that prices have doubled the past four years, right? So they’ve gone up 100 percent. Do we get to keep 90 percent of that, or get to keep 85 percent or 95 percent of that? Really, it’s a good problem to have.