“Buyer Psychology At The Heart” Of “Value-Drop Issue”
The Press Telegram reports from California. “Where is Long Beach’s condo market headed? The inventory has been on the rise, and there is no end in sight any time soon.”
“The West Ocean twin tower project in downtown is slated to open, bringing nearly 250 units to the area. A project behind the World Trade Center promises to bring more than 1,000 upscale units to the area, and there are two other projects in downtown on the drawing boards each with 1,000 units or more.”
“‘Stuff’s been sitting there hundreds of days,’ one Realtor recently said about some of his condo listings.”
“If anyone is feeling the pinch, it’s Jason Patterson. Patterson, who is referred to as the ‘Ocean Boulevard specialist,’ sold 45 Ocean properties in 2005, most of them condos or lofts. Patterson saw that number drop to 35 in 2006. He has 13 active listings now on Ocean.”
“‘I think that anyone with a head on their shoulders is going to realize that more inventory is going to mean slower sales,’ Patterson said.”
“Properties are sitting longer, and in some cases buyers are being forced to lower their expectations. ‘Things are sitting for a longer time, and we are having to play with the prices a bit to find buyers,’” he said.
The Auburn Journal. “In the Auburn area, it appears that 2006 was a buyers’ market. ‘The market has clearly been soft. It’s been a buyers’ market,’ said (broker) Maureen O’Connell in Meadow Vista, who has been in the business 12 years. ‘It’s not a horrible thing. It’s good depending on where you are in it.’”
“O’Connell said she’s seen some hesitation on the part of buyers in the past quarter. ‘Some are thinking that the market may continue to drop and it’s a mistake to make that assumption for much longer,’ she said.”
“‘We could see an increase (in prices) but we’re not going to go down,’ she said.”
“The average sale price of a three-bedroom home in the Auburn area was $495,634 in November, down from $532,375 in October, according to a report fro the Placer County Association of Realtors.”
“(Broker) Russ Broughan in Auburn, said that 2006 was a ‘correction market.’ ‘I’m sensing that there is kind of a bottoming out of the value-drop issue,’ Broughan said. ‘With realistic sellers, there are buyer opportunities.’”
“‘In the past two years in particular, you could have a house on the market one day at $500,000 and have four offers on it and it would sell at $560,000. Now that’s a mistake (to believe that is going to happen right now),’ O’Connell said.”
“If the market continues to be flooded with houses for sale, there is a possibility that prices won’t fluctuate in the coming year. ‘As long as inventory remains high we’ll have an up-kick potential,’ O’Connell said. ‘If it’s still flooded with listings, the prices won’t go anywhere.’”
The Press Enterprise. “A second year of a cooling market could bring more painful adjustments for some of Inland Southern California’s home sellers in 2007. A continued slowdown in home construction, more foreclosures and price declines are in the offing, several economists said.”
“‘We haven’t hit the bottom in sales or prices,’ said Esmael Adibi, an economist at Chapman University.”
“Inland economist John Husing said home builders will have to sell off their inventory, and financially distressed sellers will have to be flushed out of the market. ‘The people who will be hurt the most will be those who have no choice but to sell,’ Husing said.”
“Adibi disputes predictions the housing market correction would end this winter. He predicted any meaningful recovery would be delayed by a surge of new houses that hit the market when homeowners, who can’t afford mortgages that reset at higher interest rates, are forced to sell.”
“Bruce Norris, a Riverside real-estate investor and consultant, expects bank foreclosures to triple in 2007, triggered by drops in home values that will prevent owners from refinancing their way out of financial difficulty.”
“Patrick Duffy for Hanley Wood Marketing Intelligence, said it is difficult to predict the full effect of riskier mortgages. ‘We are in uncharted territory,’ Duffy said.”
“Buyer psychology is at the heart of the softness of the for-sale housing market, said Michael Carney, executive director of the Real Estate Research Council of Southern California at Cal Poly Pomona. Carney said he believes the abrupt decline in sales in the first quarter of 2006 reflected the decision of buyers to wait for bargains.”
“Alan Nevin, chief economist for the California Building Industry Association, said he expects between 21,000 and 23,000 single-family homes will be built in Riverside County this year, down from just fewer than 25,000 in 2006 and 29,000 in 2005.”
“In San Bernardino County, single-family home production peaked at 15,000 in 2005, declined to 13,000 homes in 2006 and is expected to drop to 11,000 homes in 2007, Nevin said.”
“Mary and Tom Hale of Redlands, pulled their four-bedroom home off the market in November after three discouraging months. ‘We had an open house and nobody showed. Only the Realtor,’ Hale said. He said they also have been trying to sell a second home in the Big Bear area since July.”
“Hale said because of the slowdown in construction he hopes to have less competition when he puts the Redlands house back up for sale for about $600,000 in March or April.”
Article here “Surfer’s Life Went Adrift” about guy who jumped to his death out of third story window as police were closing in on him, due to crimes he committed caused by softening housing market
http://www.smdp.com/
Boy oh boy… add to that the tens of thousands of Iraq war vets scarred for Life psychologically or physically, and this country is in for an interesting ride. And I forgot to mention everyone owns a gun too here and the murder rate in times of prosperity is like 50 times that of any western nation per capita.
A New Orleans replay on a national level, drawn out over a longer period of time. It’s going to get rough.
Well at Blomberg they saying this morning that everything is just going great !!!!!!! Somebody is a liar ? I don’t think it’s you.
Three stories? What a puss!
LMAO!
The story seems vague. I don’t really think you could get enough money to solve a housing market problem by robbing a local market could you? Other circumstances must be in play.
Meth I’d say. Hence the petty crime and paranoia.
All kinds of weird crimes going on around here (So. Oregon). Meth-heads stole 3 miles of copper wire from a National Monument I work with (cutting them off from the world for a week) and tried to sell it in town (Cave Junction, OR). Police say about 80% of robbery is associated with Meth around here these days.
Well being high would make more sense to me (on whatever) cause knowing guys that grew up on the west side of LA, they don’t jump unless they think they can make it… 1 story :bruises, 2 stories: broken ankles and wrists, 3 stories: hit your head and your dead.
If your high, not good…cause you try.
all these meth heads make me miss the good ole crackjeads and their $10 vcr’s
“Schmidt died on Dec. 26 after jumping from a third-floor
window in what police believe was a desperate attempt to
avoid being arrested for the attempted robbery of a market
near his mother’s home.
Police said Schmidt was in a back bedroom of a thirdfloor
apartment when they ordered him to surrender. That’s
when Schmidt inexplicably leaped from a window, suffering
major injuries from the fall. He was treated at the scene by
paramedics and transported to a local hospital, where he
later died as a result of his injuries.
Those who knew Schmidt are not sure why he
jumped. Schmidt, who was involved in real estate, …”
This story suggests there may be a shockingly direct link between the sudden dearth of highly profitable real estate investment opportunities and a spike in the crime rate. Unfortunately, I realistically expect many similarly-mysterious real-estate-related suicide stories to come in the next three years.
Like in 1929.
“Police said Schmidt was in a back bedroom of a thirdfloor
apartment when they ordered him to surrender. That’s
when Schmidt inexplicably leaped from a window, suffering
major injuries from the fall.”
Folks, I realize we are all housing bears, but when someone “inexplicably” jumps out a window and LAPD is involved, I am, ahem, willing to give the kid the benefit of the doubt.
SMPD. I once called them because someone stole a bike from my apartment and left greasy fingerprints everywhere. They did a Cluseau when applying fingerprint dust… I lived a few miles away once when I had to call the LAPD to check on a delusional neighbor who went off his meds and THEY nearly shot the poor guy.
DC Too posts ” when someone “inexplicably” jumps out a window and LAPD is involved ”
Maybe they we giving him free flying lessons?
http://www.gazette.com/display.php?id=1328149&table=story_archive&sec=1
A Colorado Springs realtor was recently shot to death by police after he broke into his ex-girlfriend’s house and threatened her and her children. No word on what set him off, but one wonders if financial distress was a contributing factor in the tragedy.
One more bully thug gone.
He looks a little like Alec Baldwin. Or one of the Baldwins.
Buyer psychiatry.
Marc, LOL
It’s nice to know psychology drives the current slowdown… and if pesky sites such as this one get to be shut down by the new provisions of the Departement of Homeland Economic Security and Well Feeling (to be created soon), all will be rosy and the economy will hum along endlessly thanks to the supply of house ATM cash.
Record low affordability and the questionable decision to try to fix the problem with subprime loans to help buyers purchase homes they really can’t afford has nothing whatever to do with the situation. If buyers merely think positively, then they will be able to get any kind of home they want (they can even get stucco), no matter the price.
Also, don’t forget the fact that the REIC already got a huge supply of buyers to buy from 2004-2006 which borrowed from the future buyer pool based on “get in now” .
Add to the above that the speculator demand is way down (with many that are current bagholders ) ,but no ,it’s all psychology . If the REIC gets a rally going this year I just don’t know who the buyers will be for the volume of homes at the inflated prices .
People will buy third and fourth homes. After all, it’s free money and everyone profits if the buying never stops.
will buybought“If the REIC gets a rally going this year I just don’t know who the buyers will be for the volume of homes at the inflated prices .”
People “will buy” in the future to get the rally going. Not!
Get Stucco,
Well that and the fact that to actually believe 2005’s prices were real means that our parents, grand parents along with generations of bankers and economists that had this crazy notion there should be “some” relationship between a person’s income and a home’s price had it all WRONG for so many years!
Based on the faulty logic we’ve been fed over the last several years 2005’s home prices should’ve arrived no later than 1997?
DinOR —
It is truly great news that the housing market has finally caught on to the superior logic of Wall Street. Fundamental value is so twentieth century! The only thing that matters in the new paradigm of the twenty-first century is high real capital gains on asset investments, whether housing, stocks or anything else that is not made out of paper. Dividends and rents no longer matter.
GS, and don’t forget if something goes wrong there is always St.Joe, or (I don’t know if anyone here is old enough to remember this), putting a dollar bill underneath a pyramid and waiting for money to pile up in your checking account.
A lot of nut cases and psychiatric cases too.
the Departement of Homeland Economic Security and Well Feeling
Marc -
Its already here, and we’re in too (Mexico makes three): http://www.spp.gov/
Mexico is a “great” nation? Who’d a thunk?
7% in the bag!!!
You heard it here first: (Orange County Register
“And no person has personified the O.C. housing outlook game more than Gary Watts. He’ s the Mission Viejo broker/economist who’s either hated or loved, depending on the market cycle or your own view on the world. He called the early ’90s drop and the recent nine-year rally correctly. But his projection for 15 percent gains in ‘06 was off. (Read his previous visit to this blog HERE!) So, Gary … what’s next?
Us: What’s your outlook for the local housing market for 2007?
Gary: Both sales and prices will be up from 2006. 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.”
You heard it here first (from moi) that OC prices in 2007 will follow SD’s lead into YOY declines. And Gary Watts will remain upbeat no matter what.
Gary Watts will remain irrelevant in ‘07, become the poster child for the scorn of the biggest financial bubble ever recorded and then rightfully sinks deeper into the abyss of eternal obcurity, never to be heard from again as he becomes permanently linked to financial failure and ruin.
You heard it here first.
Sad part is that people will blame this idiot rather than take responsibility for their own foolish buying decisions.
become the poster child for the scorn of the biggest financial bubble
Casey Serin got there first.
DL is off the hook?
don’t be too optimistic with your forecast of gary watts status.
Well, I suppose an angry broke dope specuvestor might throw a wrench into my prediction. 45% chance?
From the Press Enterprise Article…
“The median price of new homes in the Inland counties will decline by 5 percent to 6 percent this year, said Boyd Martin, chief executive of Market Profiles, a consultant to home builders. He said part of that would reflect a move to build smaller and more affordable houses.”
Has anyone seen evidence of these “smaller and more affordable houses” yet?
My sister and her boyfriend drove through Adelanto yesterday (in the high desert north of the IE). They saw lots of housing going up. I told them of my experience in the high desert. When the prices came down in the last housing crunch, LA and Bakersfield moved a lot of their welfare folks to the small desert communities. I would not venture to say they occupied the unsold homes. But the welfare / gang types moved in. I told my sister and her B/F that lots of meth labs will be springing up in that area they drove through in the next few years. Meth is the culture (and religion) of the underclass in the Mojave desert. The desert is perfect for that. Lots of secluded places that very few people want to visit. Criminals like it that way.
I wonder, are houses like entrees? Which is to say, in a restauraunt, most of the costs (rent, staff etc..) aren’t linked to how much food goes on your plate. This tends to lead to large entree sizes since it helps to persuade people that they’re getting their money’s worth. Is the same thing at work in the housing market? Since land is a big part of the cost of housing, it makes sense to put as many square feet of home on a given lot as possible, since you can double the square feet without doubling the cost to the purchaser.
+50% next year is in the bag if the $US drops to .20 euros and some Europeans decide to buy (cheap for them) properties in Cali…
But I think we’ll have other things to worry about by then.
If you think that will happen, or anywhere near that, Ben has a nice link on his metals blog to Everbank, where you can open an account in Euros or other currencies using your $US.
I already took the necessary steps
So now that you have personal plunge protection in place, are you cheerleading against the $US?
I am, well I am not cheerleading, just being prudent. I have held metals stocks for 4 years now. I guess you could say I was early. I am also of the opinion that they will only become more dear as the Fed is forced to cut rates next year and continue to pump liquidity.
Saying anyone is cheerleading against the US$ is like saying we’re here cheerleading for a drop in home prices. It is simply a matter of cause and effect. Home prices will come down because they must necessarily do so. The US dollar must come down to account for the over-abundance of dollars available and their role as a relative store of value in the face of a tapped US consumer, a declining economy and massive and growing deficit spending.
The dollar decline is akin to a decline in the credit rating of a housing speculator who can’t move his inventory and loses it to repo. Our own Federal Reserve economists have written that we are in essence bankrupt.
…is like saying we’re here cheerleading for a drop in home prices.
What’s wrong with that? Why shouldn’t the median family easily be able to afford the median home?? Why can’t people live in safe neighborhoods close to where they work without sacrificing everything??? Bring it on!
From Kunstler.com
“I will be so bold to say that I called the housing crash correctly last year, though the worst symptoms are slow to present for technical reasons. There’s no question that the action on the real estate scene changed drastically in mid-year. The implosion of this mighty structure of fraud, folly, and misinvestment so far has taken place in such breathtaking slow-motion that its victims have not really felt the pain from the falling bricks yet. By late summer, buyers started evaporating. Real estate signs planted in lawns last June are still sitting there on New Years. Prices have come down a bit in many markets, including most of the hotties such as Florida, Phoenix, Las Vegas, San Diego, and Boston. But the buyers are still not bidding. Meanwhile, the sellers have dug in, determined to get something at least close to their wished-for inflated prices, egged on by their representatives, the realtors. This mutually reinforcing psychology cannot hold indefinitely. Many of these sellers don’t have the luxury to wait around forever. Some have had to move to other houses in other places because of job changes, and are stuck paying two mortgages. Many are stuck with “creative” mortgages that all the evil ingenuity of the human mind conjured in recent years to enable the feckless to live above their means — adjustable rate, payment optional, no money down contracts that suckered buyers into booby-trapped obligations whose initial low-interest terms lured them in and are now set to blow up in their faces as terms automatically re-set upwards to higher rates and “optional” deferred payments get backloaded onto the principal, putting the mortgage holders so far underwater on their contracts that a tour of the Titanic would feel like a day at the beach.
The trouble is, when both the sellers and their agents decide to get with the reality program and lower their prices, they will only stimulate a massive death spiral of house price deflation as buyers see the numbers go lower and hold out longer in the expectation that prices will go down even further. That would, of course, put more sellers into gross distress and lead them either to dump their properties or enter the cold waters of default and foreclosure. The whole process could run for a couple of decades, and as that occurs it will be made much much worse by oil depletion — as so many suburban houses drastically lose locational value, combined with the consequences of poor construction carried out in cheap materials like vinyl and chipboard.
Add to this that the late stages of the hyper-boom caused so much “product” to be brought onto the market by the “production home builders” that there now exists an unprecedented oversupply of exactly the kind of crappy suburban houses (in all price ranges) that are bound to lose value going just a little bit forward. Foreclosures will only add more to the oversupply. In the subprime mortgage niche, defaults are officially reported to be running at 20 percent. Foreclosures are trailing because the process is so awkward, and many have not yet shown up in the housing markets. I predict that foreclosures on subprime mortgages will run above the 50 percent range when all is said and done.
As the music stops in the lending rackets, liquidity in the form of mortgage backed securities and other sources of hallucinated “money” will dry up, and will start to make itself felt in all the other arenas and regions that “money” has been migrating to. Jobs associated with house-building and all those ancillary enterprises — big box shopping, chain restaurant revenues, car sales — will disappear and incomes with them. Many home sales in past decade were made to people benefiting directly from the housing bubble. (The sheer number of real estate agents in America more than doubled since 2001.) This evaporation of both credit and incomes will impact the so-called “consumer economy”, said to make up 70 percent of the total US economy. In other words, the term “depression” might be applicable as this economy lurches into actual contraction of more than a few percentage points.
This scenario suggests that earnings in corporations listed on the public stock exchanges — the companies that elude acquisition by “private equity” — would necessarily see severe drops in earnings, and therefore in stock value. While many commentators view the rise in the Dow as just another symptom of inflation — asset inflation — the activity in these assets — companies making, doing, and selling things — must be reported on a quarterly basis. And if that activity is trending strongly downward, then stock prices will trend down even if the value of the dollar is going down and it takes more dollars to buy an equivalent share of stock year-over-year. So I would conclude by again predicting a substantial drop in the Dow and other equity markets. To some extent, it seems to me that the 2006 blow off in stock prices was just another symptom of the finance sector being decoupled from economic reality since real GDP probably contracted one percent in the second half of the year while misreporting and delusional thinking drove stock prices up.
One would think that the US dollar is poised to take a beating, and indeed the signs have been abundant that this is underway — especially when the value of the dollar started to implode against the Euro around Thanksgiving. It has leveled off since then. But since then there have been other moves around the world to de-link commodity prices from the US dollar and restate them in Euros, especially oil, and the dollar’s plunge will probably continue. A lot of commentators around the web have pointed out the side benefit for the US government to promote dollar inflation: to inflate itself out of crushing debt. But the government can’t accomplish this without destroying the purchasing power of ordinary Americans and whatever remains of their meager savings. I’d have to conclude that the Federal Reserve is out of tricks for goosing economic activity. Their last major trick was hitching a jive economy to a real estate bubble by making loan money available to any jabonie with a pulse and promoting the demise of lending standards. The gambit lasted five years and is now blowing up in America’s face. “
I would tend to agree with your writings. However, the countries (China, Japan, Oil Countries) depend on us too much for their exports that if they stop buying out instruments they only screw themselves. They are as dependant on us to buy their goods as we are to them financing our debt. So, it makes me think this will continue to keep going. I don’t know where it all ends
The China factor is an interesting one.
Latest numbers show that 20% of China’s exports are to the USA.
And 80% to the rest of the world. The 20% can be replaced and it will. Stop thinking that the US counts for world growth. The US is a mature market made up of busted and tapped out consumers. China is presently investing all its US dollars provided by your cocaine pumped spenders in Africa, South America and Central Asia. This is a real shrewd move and a real good move to protect the global economy against the American consumer spending bubble.
exactly. I posted the same weeks before, but still got a lot of hoots and hollers that 300 million American consumers are somehow very mighty, compared with 5 billion other earthlings. VEIEX and PRASX.
Actually, Marc, China is in deficit with the rest of most of the world. It is US that is paying the bills over there. We go into consumer recession, look out Mao.
Nope. Savings rate in China 40% ! Savings rate in good old USA -2% ! Which country is living beyond its means ? Answer: USA and the west in general. Canada included.
Marc, I think you are right. A couple of years ago China made big trade agreements with Brazil and Argentina. Last thing I knew, they were going to build a big railroad through the Andes to get the goods to the Pacific Ocean. It is still useful to read the newspapers, if you can read between the lines. At the time I remember there was a lot of analysis of China’s move, and many people in the US were worried. Of course the South Americans jumped at the chance although I doubt they thought it through (as usual).
This China picture is interesting indeed.
It’s not if the export purchasing can be replaced, it’s how quickly. If China is already exporting heavily to the rest of the world, those markets may be saturated, and the Chinese will need to retool to meet the requirements of the other markets. A year with reduced US imports would be difficult for China, the people, and their banking system. When was teh last time China experienced a capitalistic, market-driven recession?
While I believe that China and India will emerge as world economic leaders (not just oursource mamufactruring and service economies), both countries have internal problems that will hold them back from claiming that crown in this decade.
Those who claim China is on the verge of overtaking the US economy should revisit the Japan scare of the 1980’s. Yes, the US is going to have serious competition, but not just yet.
I wasn’t thinking the USA counts for world growth.
That’s why I put up the 20%.
It has an impact, yes, but don’t assume I was counting the USA just because I posted some numbers.
That’s not Marc; he properly attributed Kunstler.
Lots of great stuff in there. One point he doesn’t mention is that relatively high paying mortgage banker & broker, realtor & construction jobs are being replaced with bottom-dollar retail sales jobs. Once the tapped-out consumer pulls his horns in — and this may already be happening, per Xmas sales — those retail sales are toast, too.
True.
I would say the FED is still goosing the economy to try for a soft landing despite a housing bubble pop. See stock market way up on liquidity. I do believe foriegn governments will try and help with a USA soft landing. To a point that is. This liquidity may prevent a total housing rout and deep recession? I think home prices are still headed lower though.
Once prices start downward, you won’t be able to give away mortgage money (as happened in Japan which had a 0% interest rate). Who wants to buy a house that will be worth 20,000 less next month?
Of course you could have a negative interest rate on mortages if you want, “They pay me to take their worthless money.”
Isn’t it obvious to everyone that easy credit basically made the value of money, production and ingenuity totally worthless and gave value to waste, laziness and leeching.
A piece in the Washington Post on the kinds of misallocation caused by all the money on Wall Street looking for a place to go. http://www.washingtonpost.com/wp-dyn/content/article/2007/01/01/AR2007010100763.html
Kuntsler is king of the bears. He really only talks about the credit/house bubble as a tiny part of the complete collapse of western finance/civilization when oil runs out. Scary stuff.
K ‘wants’ it to collapse next year or so but it may last 100 years who knows? Note he also predicted housing bubble collapse in 2001, its on his site in his archives. Every year he predicts every single possible disaster - war, terrorism, financial collapse, economic collapse, oil/enerygy collapse. Then when it happens he takes credit now? I dont think so Kunstler. Even a broken clock is wrong twice a day.
Yea, he’s a great presenter of the case, with an intriguing big picture focus, and I am engaged by he’s ideas about sustainable towns, walking, living environments. As a prognosticator for next year, or even 5 years economically?
Which, by the way, is the textbook definition of “deflation”.
“If the market continues to be flooded with houses for sale, there is a possibility that prices won’t fluctuate in the coming year. ‘As long as inventory remains high we’ll have an up-kick potential,’ O’Connell said.
What is an up-kick potential? Are we talking about kick ball? Please do not hold it against me I just do not understand.
The Realtwhore misspelled “nut.”
(Like imploder suggests below, nut-kick works makes far more sense than up-kick.)
Personally, I think the misspelling was not ‘nut’ but ‘butt’
“As long as inventory remains high we’ll have an butt-kick potential”
It’s just more realtor speak to sound nice and rosy, but really not saying anything at all.
To quote Shakespeare (and this applies to DL and LAY more than anyone else):
“A poor player that struts and frets his hour upon the stage and then is heard no more:
It is a tale told by an idiot, full of sound and fury,
Signifying nothing.”
I think an ‘up-kick’ is a euphemism for ‘uppercut’
As long as inventory remains high, the realtwhores will have an upchuck potential.
“If the market continues to be flooded with houses for sale, there is a possibility that prices won’t fluctuate in the coming year. ‘As long as inventory remains high we’ll have an up-kick potential,’ O’Connell said. ‘If it’s still flooded with listings, the prices won’t go anywhere.’”
Huh?
Realtorspeak (TM)
Good think you (TM) ‘d that comment. You could get in a lawsuit. Or worse, be accused of using those words on your own……
I guess the laws of supply and demand is out of fashion these days according to realtors .Black is white ,bad is good ,up is down .
I think they believe in a tweaked version of the law of supply & demand.
“Alan Nevin, chief economist for the California Building Industry Association, said he expects between 21,000 and 23,000 single-family homes will be built in Riverside County this year, down from just fewer than 25,000 in 2006 and 29,000 in 2005.”
“In San Bernardino County, single-family home production peaked at 15,000 in 2005, declined to 13,000 homes in 2006 and is expected to drop to 11,000 homes in 2007, Nevin said.”
They seem to feel that the more supply they put out there the more demand they will create. These numbers sure seem like a lot of building to me. Is there really this kind of need in these areas?
These “Inland Empire” counties are among the fastest growing in the state because the employment centers in LA county and Orange County are approaching buildout and priced about twice as high. These fringe markets will see the greatest declines in the coming years.
“These fringe markets will see the greatest declines in the coming years.
All the more because the jobs and road infrastructures have not kept up with the frenzied pace of housing tract constuction in the IE. There has been some effort to bring in more corporations and corp parks. I was surprized that a small hi-tech park was situated in a hidden tucked- away corner in an otherwise wasted old industrial section of redlands. This is the exception, as the IE has had a paucity of new technology parks, and the usual industries are either warehousing or sweatshop-type, old-industry processing operations.
The IE has a long way to go to achieve what is referred as critical mass, where jobs, housing, roads, economic development is fully integrated and balanced. Right now it it an urban chaotic mess.
Some of these inland empire areas are where all the huge prisons are being built and the overpaid guards are making $100,000 per year on average. One Lt. made $252,000 last year. Union membership is huge and the prison industry is breaking the back of California.
P.S.
Almost 1/3 (30%) of the prison population is illegal aliens —– most of whom are serving life terms.
“Some of these inland empire areas are where all the huge prisons are being built and the overpaid guards are making $100,000 per year on average”
There is the hugh Chino Mens correctional facility and Womans CF, both located out in a sparcely-populated partly rural/partly industrialized area of chino east of the 71 fwy and n of the 91 fwy. Then there is another prison out in Victorville. It is not surprising that the state would put these prisons in such dismal locales as east Chino rural pasturelands and Victorville, which has plenty of empty barren desert scrubland to isolate and quarantine a dangerous criminal population.
And it’s a life form based on silicon like in the film ?
You have folks that just want new. They will pay more for the privilege of picking their floor covering. I find young couples with double incomes + busy lives do not want to even paint a room let alone live with other peoples taste. That is why flips in nice neighborhoods sell. They look new.
“You have folks that just want new.”
If they buy out there, they’re gonna need new… a new car every three years cause the commutes into OC or LA jobs burns through the autos. (I knew co-workers that bought in Palmcaster in the 90’s that had that problem, collapsed cars, AND collapsed housing prices, AND eventually collapsed relationships.)
AMEN Imploder!!! I am sick & tired of commuting 15 miles to work (30 - 45 min each way) in the northern suburbs of Chicago . I would imagine I am spoiled rotten here. The insane commute you are describing is 30+ miles / 2 hrs ?
I suspect Palmdale and Lancaster of the 90’s will be models for the fringe markets of the inland empire: 50% declines in prices.
This type of property is doomed if it is located way out away from employment and entertainment and transportation centers. One interstate highway with massive traffic (or little if there is a fuel crisis) is your lifeline. Spend hours in the car each day and week.
Worse, as the bubble deflates and the builders keep building, these young couples will get the education I got in the 1980s - that new becomes old and tired pretty fast. Unlimited supply drives prices down hard as well. If you have to sell, you are screwed competing with the builders. Oh and what happens if the next neighborhood isn’t quite up to yours in quality? What happens if they string new high voltage lines nearby? New water tower? Half the houses vacant because of decline in value and people walking away?
OMG!! 30 - 50 miles YIKES!!! I absolutely will NOT live in CA. The idea of getting on the road @ 6 and not getting dinner till 8 makes me PUKE. I will learn to love the snow & the cold. It has been 40+ degrees all week here GLOBAL WARMING !!! BRING IT ON!!!
30 to 50 miles is a mild commute by SC standards. Commutes of 60-90 minutes are not uncommon.
Many people who travel that far give up on health in order to maintain career, marriage, and family. No wonder obesity is an epidemic! Some companies moved at least part of their operations out of California in hopes of attracting talented employees. Like in Phoenix. But Phoenix has similar (to a lower degree) commuting problems. The LA client’s Phoenix office is in an area where people would not want to roam at night. During the day the white collar professionals rule the roost and occupy the restaurants. although, if I chose to give up consulting and be a direct hire for that client, I know of a great-looking apartment complex with all the luxuries I need within one mile. Instead, I’m anticipating a client change and will move within 5 miles of the client’s office. Americans have to change their habits and move closer to the city cores or their jobs. Businesses should try to situate themselves near mass transportation hubs in order to entice intelligent professionals to not rely on their cars.
During my years of employment for somebody else I always rented. It made far more sense for me to rent near the city core than to spend big bucks on mortgage/maintenance/taxes and putting up with crowded interstates/trains.
I am now self employed and work at home. My choice is still renting, this time a house. If the neighborhood pisses me off enough then I am gone in 30 days. (Has not happened yet; so far no dogs barking all night long, or trash music, or crack houses, or gang bangers, or double homicides). It would be a hardship for me to give up this level of flexibility.
And I do not miss “home equity.” I have been building up my retirement equity, it just is not in RE. (I could put my retirement equity into any of the largest houses in the community, but by my own reasoning this would be very stupid.) My retirement equity pays dividends every month, does not need insurance, does not need maintenance, is not assessed a property tax, is not assessed monthly or yearly fees of any kind, does not cost me 6% to buy or sell, and does not hinder my ability to move on when I am good and ready (Try doing these things when you and your retirement equity are chained to a dang building).
I have though about all of the positive and negative reasons for homedebtorship and I have concluded that the positives do not outweigh the negatives. The Amercian Dream? More like the American Nightmare, if you ask me. Never could understand this.
So I agree with you Bill in Phoenix. People need to rethink their habits, and alot of other things too.
“They seem to feel that the more supply they put out there the more demand they will create. These numbers sure seem like a lot of building to me. Is there really this kind of need in these areas? ”
Made 200 trips out into the IE boonie regions 1n 2005-2005 and have seen a tremendous amt of new housing tract construction. Out in banning/beaumont I got a close up look at a 500-700 unit tract of cookie-cutter mcstuccos going up at a frenzied pace. Multiply this by about 100 developments of this size occurring in the IE(50-70,000 units). Add to this thousands of other small to medium-size projects going up or completed last several years and you get an idea of the amt of new tract housing construction in the IE.
There is a lot of open spaces out in the IE to build large SFH’s and tracts.
The huge IE building boom has in large part been in response to the vast exodus of LA families needing large SFH’s at an ‘affordable price’. Only 2-3 years ago large sfh’s in IE were still below $250,000. They have shot up in prices since then and have become overpriced at $400,000. Overpriced because the IE is largely a crap-zone, with large parts of it hot, miserable,trashed-out, dumpy,smoogy,long commutes,no hi-payng local jobs,heavliy immigrant,and generally a haphazard badly-planned urban sprawling mess.
“long commutes,no hi-payng local jobs,heavliy immigrant,”
Roger that. Three strikes and you are OUT!
My brother is a subprime loan broker….he would tell me the absolute laughable ways that he qualified folks in the Inland Empire. When th IE house of cards collaspes…look out below!
With all that home construction and people moving in wonder what it does to the resources like water, power etc. Imagine the sewage that gets collected from these thousands of households (”50-70k”) multiplied by at least 3, and gets dumped in the ocean half treated. Algae will thrive and as a chain-reaction the fish stock will deplete.
On the brighter side though, the state employment ranks and sub-contracting will increase just trying to manage this enormous growth. Of course it looks like these “50-70k” homes will not be all occupied!
The one thing that seems to be left out of these comments is price. It does play a small part in the supply/demand equation, and should be included.
“up-kick potential”
The potential of being kicked up the nuts.
My thought exactly
What about the IQ and financial sense of the reporters that ask the questions and get these ‘runaround’ type answers? Reporters have to report and not provide an opinion piece, but it seems to me that the reporters are not calling the BS for what it is. Unfortunately, the reporters spread the so called ‘expert’ take without any due diligence and forget the service to the common folk who line up to buy the crappy homes because the gurus said so.
Seems like most reporters also own and are hoping against hope that the day of reckoning will not come! What a bunch of idiots!
‘If it’s still flooded with listings, the prices won’t go anywhere.’
Anywhere but down!
“‘We could see an increase (in prices) but we’re not going to go down,’ she said. The average sale price of a three-bedroom home in the Auburn area was $495,634 in November, down from $532,375 in October, according to a report from the Placer County Association of Realtors.”
The Placer County average sale price for a three-bedroom home fell at an annualized rate of 57.6% between October and November. But don’t worry, folks, because prices will not go down any further. ‘Step right up, and catch your falling knife here!’
Stucco, you always get it right. I have been following one street in Placer County called Hillwood Loop. In the last 60 days: Four houses have gone into foreclosure with an average loan of $599,000. Yet 8 sub prime lenders have funded home sales (probably fraud) for an average loan amount of $756,000!
The Sacramento market and particularly Placer County is way to frothy to even see the bottom. That light at the end of the tunnel is a freight train loaded with foreclosures. Chooo, choooo!
Maureen O’Connell needs to get off the tracks and see the reality. I think Placer has about 3,000 homes listed and is adding 300 week to the NOD lists. It will be brutal during the Spring Sting Slaughter.
Hey Paladin, would you say there is “nut kick” potential in Placer County’s frothy market.
All I know is they built a crap load of houses in Roseville and not enough restaurants. The waits are like two hours for the “Olive Garden”, people actually wait two hours in Roseville for the “Olive Garden”, what the hell. They even make you wait to sit at the bar. All the State workers coming home after their one hour commute from downtown Sacto, too tired to cook something for themselves. It can take hour to drive from downtown Sacramento to Roseville, but supposedly we have all these Bay Area idiots commuting back and forth. I think the whole bay area commuter is bullshxx, those guys must not sleep. It was gimmick, now we do have the bay area flipper investor, screw them I hope they run into a “nut kick” situiation. That is realtor speak you know.
I think there are going to be more than “nut kicks”. You will see some major castrations. I walk with my wife in Rocklin in the mornings and in the four to six blocks we cover there are three homes owned by lenders and another one in foreclosure. And the pain has not even started yet. Wait until the Spring Sting.
Yep, all the realtwhores are hyping the spring rebound, its going to be the spring sting. Sacramento is going to get flooded by foreclosures. Who knows it may become the in the in thing, it seemed to be the in thing to be an FB, now it will be the in thing to become FBIFC. Fuxxked borrower in foreclosure.
The “April Ass-Pounding” will be horrific!!!! Can’t wait!
The One, the Only…. Auger inn! The Man!… LMAO!
April Ass-Pounding a rough version of the “Spring Sting”.
‘“Properties are sitting longer, and in some cases buyers are being forced to lower their expectations. ‘Things are sitting for a longer time, and we are having to play with the prices a bit to find buyers,’” he said.’
Money talks, b^llsh!t walks. JUST LOWER THE PRICES!
I’ve seen comments on other boards that in past declines the prices were “sticky” on the way down for the reasons illustrated in the quote above. Keeping with the idea that it is “different this time,” I would venture to say the prices won’t be “sticky” this time because the flood of foreclosures will force sales at any price and drive prices lower much faster than previous declines.
I still think they will be sticky on the way down. It’ll take two to three years. That’s quick for previous markets, but not fast by any means.
But I say that with a lot of caveats.
If sub-prime lending does not go belly up, the market will be sticky. There will still be ignorant people who can afford to buy with toxic loans.
If there is no recession in 2007, the market will be sticky. If people can keep their jobs, they may well fight to keep their homes.
If BB and the Fed flood the economy, it might kick-start the hoe ATM allowing GFs to prolong the pain.
Sub-prime lending is already showing signs of stress.
“(Broker) Russ Broughan in Auburn, said that 2006 was a ‘correction market.’ ‘I’m sensing that there is kind of a bottoming out of the value-drop issue,’ Broughan said. ‘With realistic sellers, there are buyer opportunities.’”
I still don’t get this happy talk by Realtors. They make money on transactions. If they scare sellers they could really kick up transactions for the short-term and try to stash some cash. Without such a shock sellers don’t seem like they want to sell. They are currently “holders”. Later they might go into foreclosure and lock out the agents.
It seems to me that there is potential for new real estate agents in the market. You could come in now, scare sellers, and get a lot of transactions going. You would not have the credibility issue of years of cheerleading that prices always rise. You could tout yourself as “The Honest Agent”.
“cue the dancing bear” “”cue music” bup-bup bup-bup-bup-bup….
“Therrrrre’s never been a better time to buy!”
they could really kick up transactions for the short-term and try to stash some cash.
If these agents had any smarts, they would already have stashed their cash and started training for a new career (geriatric nurse, for example.)
“(Broker) Russ Broughan in Auburn, said that 2006 was a ‘correction market.’ ‘I’m sensing that there is kind of a bottoming out of the value-drop issue,’ Broughan said.”
REIC members can’t tell the difference between peaks and troughs b/c to them both ‘feel’ the same, flat. They cannot visualize the graphical representations of market expansions and contractions nor do they understand the underlying calculus. As a result, at this juncture in the RE cycle, whenever a member of the REIC uses the phrase ‘bottoming out’ we should interpret it as ‘topping out.’
The only load thats a “drop issue” or bottoming out” is in back side of this fools trousers.
You have to keep in mind their audience. If they’re not complete morons (many certainl aren’t, but the newly minted ones…) when they sit down with sellers they’re advising them to lower prices. However, when they’re talking to the press, they’re talking to those few remaining endangered “buyers.” They’re the ones that they have to persuade to get off the fence and into the negative equity trap.
“The West Ocean twin tower project in downtown is slated to open, bringing nearly 250 units to the area. A project behind the World Trade Center promises to bring more than 1,000 upscale units to the area, and there are two other projects in downtown on the drawing boards each with 1,000 units or more”
Have watched those twin 30 story towers slowly going up for several years. They are adjacent to the brand-new pike amusement/harborwalk, 15 minite walk from the LB convention center and bustling pine ave shops, and 20 minites from shoreline village and the Marina. The city of LB has gone all out to create an attractive urban waterfront, with shops,cinema,boat rides,aquarium of pacific, queen mary,pike amusement zone, ect.
problem is that the view from those condos will look out over the busy LB port,terminals,cranes, shipping containers and cargo ships wallowing in the harbor. There is no attractive white sandy beach in LB, and there has always been a 2-3 mile inner deteriorating slum ring which surrounds the LB dwtn.
Even the presense of the LB police station and court blvd right across the street does not alter the fact that much of the population of central/dwtn LB consists of assorted dregs, gang elements, section 8′ers, poor immigrants, fixed income seniors,ect. LBdwtn can talk about bringing in more hi-income professionals as residents, but I doubt that they can attract these type of folks into an area which is predominantly low-income demographics.
BTW, LB had a previous burst of Condo-constuction, mostly midrises, back in the 80’s, which was a complete bust.
Happy new year to all the hard-core regular visitors on this site, and to Ben who has the best RE bubble blog on the planet.
I see those 2 twin condo towers everyday from the office and on my drive.
They are still building right into the teeth of this bust.
” see those 2 twin condo towers everyday from the office and on my drive.”
They cannot halt construction on it now. They are moving verrrry slowly on it however. I would hate to have to live in those suckers. Imagine exiting onto the 710 fwy or returning back to your pad, sucking up the exaust fumes from the 18-wheelers and port pollution/spew. And taking a nice evening stroll along ocean ave and getting’jacked’ by some gang hoodlums from the nearby slumzones. Those LB police officers were shot by that illegal- alien gang scumbag at Lb blvd and broadway, right in the heart of dwtn.
Sorry but this is the reality of dwtn LB living. The gang scum ooze from the apt projects north of 8th st and make forays into the dwtn condo/apt mixed-used areas. During daylight it is okay most of the time but at night or dusk LB dwtn gets as bad as LA dwtn.
“Buyer psychology is at the heart of the softness of the for-sale housing market, said Michael Carney, executive director of the Real Estate Research Council of Southern California at Cal Poly Pomona. Carney said he believes the abrupt decline in sales in the first quarter of 2006 reflected the decision of buyers to wait for bargains.”
These guys are all just rear view drivers who change their stories after the fact to keep from looking like idjuts.
Here’s an interview in the OC register dated june 2006 at the end of the second quarter. He was singing a totally different tune and no mention of of “Buyer pullback psychology:
Q. What’s your outlook for Southern California and Orange County?
A. I believe we’ll still see price increases for the foreseeble future, for at least a year.
http://blogs.ocregister.com/lansner/archives/2006/06/insider_qa_csu_pomona_prof.html
“Q. What’s your outlook for Southern California and Orange County?
A. I believe we’ll still see price increases for the foreseeble future, for at least a year. ”
What? I see more and more for sale signs when I go to the South Bay. Inventory is building up. How can prices go up when inventory builds up? The client I work for has had problems finding engineers to work in LA. They offered $15,000 referral fees for the last 2 years and no one wants to work at that company. Main reason? Housing costs are too high. I know this. I talked with HR people about this when I had to interview some prospective engineers when I was working out of the Los Angeles office for three years recently. It’s a very ugly situation. Millions of people are in denial in La La land.
“What? I see more and more for sale signs when I go to the South Bay. Inventory is building up. How can prices go up when inventory builds up”
Bill, you know the south bay so i will expand upon your comments. The Sbay is Largely a dull, densely populated plain jane stretch of SFH 3/2 stuccos. PV is mostly 1-mil+ unaffordable ranch spreads or super rich villas with an exclusive country club aspect. Torrance is showing some cracks on sfh prices, especially it’s eastern zips. The narrow 1 mile wide coastal belt of expensive Sbay homes bordering the pacific in such communitie as coastal torrance,redondo beach,hermosa beach , manhatten beach, and el segundo, are barely clinging to their outrageous $700,000- 1-mil+ sfh prices. SFH’s in Manhatten bch and hermosa within walking distance of the beach are really stacked 3-story condos, the lots are puny and lot lines 2-3 ft between homes. 1-2 miles off the beach the Sbay is really a dull, heavily trafficked, ugly cluster of SFH’s, apts condos, with working class,lower income districts abutting/intruding into the overpriced beach enclaves. Go 1 mile east of Manhatten beach and you get into lennox and hawthorne, gang heaven. Back of torrance is Lomita, carson, wilmington and harbor city, which have degenerating urban slum pockets. The Sbay is waaaaaay overrated IMHO. Torrance is the big cahuna of the Sbay, how torrance goes so does the rest of Sbay. And last i checked on dataquick torrance is showing stagnation or significant yoy declines in it 5 zips.
If you drive down Anza street between Del Amo and Sepulveda, there are some “okay” and some junky apartment complexes, and between Torrance Blvd and Sepulveda the houses are very dull. I agree with your assessment. I lived in Harbor Gateway for 6 months and had to park my brand new Toyota out along Carson Street, within easy strike of vandals. Thank goodness it did not happen. I got out as soon as possible. My thought are that people are so used to living in postage stamp-sized boxes near the beach and don’t know any better. They prefer to pay $700,000 to $1.5 million than to rent a studio for $1,000 per month. My yearly rent was as much as what many of them pay yearly in property taxes, and I was renting on Anza Ave not far from Torrance Blvd.
Ha. I work for an engineering firm in San Diego county and we continually have 60+ engineering jobs (and a few support) that we can’t fill. Nobody wants to move from outside Southern California to here due to cost of housing. Who wants to move out of a nice 4 bedroom house to live in an apartment that costs $200 more a month? Company VP talked about the desire to hire engineers with 5-10 years experience. Yeah, right. Our only chance is to hire engineers from other companies in the area that would fulfill this need. Thanks Intel (closed San Diego office), Sony (major layoffs), Nokia (major layoffs), and Nothrop Grumman (don’t know how major, but still laying off engineers), can we get somemore? Lucky for San Diego, Broadcom, Qualcomm, and us are hiring these guys.
The situation is, these places are reasonably priced - if you are single and are open to renting studio units. I had excess money after taxes and living expenses and kept squirreling that away during this bubble in the South Bay. Many engineers are married and have children. So SFHs are their first choice - not studios.
Happy New Year Ben. Anyone as aware of the market as you will do very well.
There are some trapped folks all over the place. Who said SPRING STING? Good one.
“Mary and Tom Hale of Redlands, pulled their four-bedroom home off the market in November after three discouraging months. ‘We had an open house and nobody showed. Only the Realtor,’ Hale said. He said they also have been trying to sell a second home in the Big Bear area since July.”
“Hale said because of the slowdown in construction he hopes to have less competition when he puts the Redlands house back up for sale for about $600,000 in March or April.”
Amazing. They’ll be renting by 2008 after forclosures on both properties, or be trying to with lousy credit.
Ruth, I think credit for the Spring Sting goes to Robert Cote on the Bubble Markets Inventory Tracking blog: http://tinyurl.com/y24g6n
Robert called the sellling season for 2006 “Silent Spring” and was looking for a good term for the same in 2007.
Wait, we have to get our rhetoric together for solidarity purposes. Someone on Patrick suggested dropping “Silent Spring” around message boards and blogs so that the MSM would catch on and label Spring 2007 the “Silent Spring.”
Are you saying approx. a year ago was “Silent Spring?”
Of course “Silent Spring” isn’t just alliterative, it alludes to the book by Rachel Carson which is sometimes credited as being the origin of the modern environmental movement.
http://en.wikipedia.org/wiki/Silent_Spring
What amazes me is the numbers of people who are in this market and who don’t understand the market at all, not the ones who are honestly trying to buy a home to live in it to raise a family, but the ones who bought with no intention of paying back (GS thanks) ever, the flippers, “investors” and other greater fools.
It’s different in Valpariso, IN:
http://activerain.com/blogsview/30447/Creating-Urgency-in-a
Anyone who is stupid enough not to buy TODAY, is an idiot….I guess. LOL
Anyone who believes realtors have integrity should read this post and see just how self-serving they really are.
Thats pretty bad. Like a car salesman.
What does Valpariso have besides Orville Redenbacher and a 4th tier law school?
BTW, did you read the comments from the realtors trying to tell themselves that the Michigan market was done bottoming and on it’s way up this spring? Is Ford hiring again?????????
I could not help myself so I posted this on the blog
From Webster’s dictionary:
Urgency
1. Pressure; importunity; earnest solicitation; as the urgency of a request 2. Pressure of necessity; as, the urgency of the occasion.
Urgent
1. Pressing with importunity. 2.pressing with necessity; violent; vehement; as an urgent case or occasion.
Importunity
1. Pressing solicitation; urgent request; application for a claim or favor, which is urged with troublesome frequency.
So what in the definition of the words do you think your “Team” as problems with?
The violent, vehement part? or the urgency of a request or occasion part? Could it be all of you have done the “Urgency” thing with troublesome frequency? I think the pressure part worked good in the past but it’s different this time. Who do you know or have known that has an Urgent necessity to buy a house?
I will go back under my rock now.
Open the windows and step away from the curb. There will be a LOT more high fliers in the Real Estate Industry spreading their wings for their Soft Landing. Okay folks ..Move along..Nothing to see here…just another Real Estate Wizard greasy spot!
Whew!! I am so glad the slump of 06 is finally over! I thought we were never going to hit bottom there for a while. Whoever is in a position to buy better snap something up quick berfore you get priced out forever. Happy new year all.
stay tune for the “suffering of 07.”
Oh, it is over, no doubt. Now on to the slump of 07….and 08….and.?
“‘I think that anyone with a head on their shoulders is going to realize that more inventory is going to mean slower sales,’ Patterson said.”
No, Patterson. Slower sales mean more inventory, and not the other way around. What are your qualifications again for discerning heads upon shoulders?
““Buyer psychology is at the heart of the softness of the for-sale housing market, said Michael Carney”
No, Carney. There are no buyers. It is the seller psychology where the, er, heart of the softness lies [the anatomoy of metaphors mixed here are your own].
Agree with your second comment, but there was some truth in Patterson’s comment, as he was talking about BUILDING more condos, which would naturally slow the sales of existing ones.
The owners of the existing condos can sell as quickly as they want.
At the market price.
Mary and Tom Hales. Picture of double down clown flippers masquerading as the jokers in a blackjack deck out at the Morongo Indian Casino.
My New Year’s wish. A picture of Gary Watts hanging ‘in a 15% bag’ while scores of F&CK’d homedebtors beat him to death with his own prediction stick.
Happy New Years to all. You rock Ben. Thanks for all of the great info to everyone here, and may the housing fall be with us.
I bought my first house in 1989, with a mortgage at 11.5%. Even then I was thrilled at the idea that I could “fix” my rent, pay off the house by the time I was 55 and reduce my income taxes. I was more thrilled a few years later when I could refinance and lower the interest rate into the single digits (I didn’t take any cash out, why take two steps back I thought.) I feel as though I am the only one in the US who has not taken out a home equity loan and I completely agree with each and every point in Marc’s detailed post. What really perplexes me however, is where the money is coming from??? If you look at the tax foundation’s website you’ll see that the vast majority of American HOUSEHOLD’S make less than $50,000 per year. That being the case how are these people obtaining and making the payments on $250,000 mortgages. Even with the (in my opinion) criminal irresponsibility of lenders, I don’t see how most American’s take home pay could justify mortgage approval. Any thoughts???
I would love to know what the folks who manage the bank owned properties think about what is going on, are there any who read this board who care to comment??? When I worked for a bank years ago if a certain percentage of loans went into to default (real estate or other) meetings were held, underwriters called etc. There have to some very nervous people.
This is what I’ve been wondering as well…specifically with these subprime shops all over SoCal and especially in the OC. These guys have to be crapping in their pants right now…
I think so, sending out resumes etc. Until I read these blogs I really didn’t think the idiocy could be so pervasive, the dot com crash was far more closely regulated.
The smart ones already jumped ship, like http://www.housingbubblecasualty.com/ The rest are stumbling around dazed saying “Wha’ Happen? Where are my comissions?”
“These guys have to be crapping in their pants right now…”
One of the recurrent themes on this blog is the human mind’s capacity for denial.
I hope they all get ulcer’s the size of onions.
Yes and No. Don’t forget Madison Avenue pays a lot of money to these neurologues, psychologists, psychiatrists to make people crazy and dumb dumb dumb. One famous marketing and advertising guy from these big outfits once said. “Our main objective is to make people neurotic and depressed and desperately in need for satisfaction.”
There is one funny book about advertising (don’t remember the author but the title is very funny.)
“I sold sex,drugs and rock and roll.”
Given the use of RMBS this time, it is the Servicers rather than the Banks who will have to get busy. It would be interesting to hear from them - I think CBRE are pretty big in this area - anyone…?
Biggest losses will be in the lower rated tranches favoured by the hedge funds. I would think that the Monoline insurers should be fine as long as the AAA/AA was at a reasonable level, although it would tip very rapidly for them given their wafer thin margins.
The Banks will only be bothered by the Balance Sheet element (if any) or where seasoning isn’t complete and they have to buy back.
Regards,
Loafer
So are we going to see a 24 month supply of homes for sale at 2005 prices in Sou Cal in 2007, a 36 month supply of homes for sale in 2008? Some people have posted the meek 5% price cuts of houses that are 50% overvalued. Who do those sellers think they are going to sucker in? Wait long enough and the next overdue Northridge-style quake will take care of the real price cuts. They should be falling 10% per year to be priced right by 2011.
“Mary and Tom Hale of Redlands, pulled their four-bedroom home off the market in November after three discouraging months. ‘We had an open house and nobody showed. Only the Realtor,’ Hale said. He said they also have been trying to sell a second home in the Big Bear area since July.”
In addition to the Redlands house, the Hales own two houses in Big Bear… one purchased in 2003 for $270,000 and one purchased on 9/20/06 for $859,000. Looks like they might be a bit overextended…..
A little research …. revealing. They portray themselves as innocents. Really they are shoe string flippers. Three months on the market and they are discouraged. Ahhhhh. Poor Tommy.
interesting–thx. Both myself & another here posted in the last week about the huge number of prop’s in BB that seem to be for sale. Looks like time for another quake there, eh?
OT but a guy named John Fleming painted my first car. A 1968 Mustang. Is that you; John?
Beware of shock waves…………
http://www.centredaily.com/mld/centredaily/news/opinion/16359338.htm
Damn California earthquakes!
“As this housing wealth disappears, people cut spending. We have already seen an enormous drop in the amount that people borrow on their homes, from $600 billion in 2005 to about $350 billion for 2006.
It was this borrowing, enabled by soaring house prices that allowed people to borrow more against the value of their homes that fueled the U.S. economic recovery since 2001.”
Question for the lenders in the virtual room:
Can people still borrow against their homes when prices are falling?
They have to have equity. Few do.
With the fraud that we have seen, it’s the new ATM equity draw. I doubt it will be as common, but the desperation seen (and with more coming), it may pick up.
Fannie Mae backing has new guidelines, or requirements, as posted on this board, that take effect January 31, 2007.
The lenders have successfully sold the subprime loans to Fannie Mae (as backers, insurers) and we can thank Franklin Raines for rubber stamping these “loans”. He walked away with hundreds of millions and the taxpayer will pay.
Socialism for the financial institutions.
God! Why didn’t I make a goddamn banker!
You are just jealous. Ruth! I am joking.
It proves that money really grows on trees when you are a
banker and that communism works only if you are in banking.
That’s the real function of Fannie.
The IMF protects the banks internationnally and these creeps and crooks from Fannie plays the same role in the US. That’s about it comrade commissar !
Fannie is a private sector company and its securities are in no way guaranteed by the US governrment. And there will be no bailout if US voters make it abundantly clear that any politician who votes for one will be toast in 2008.
Get of your a$$es and quityourbitchin. You have no one to blame but yourselves.
A quasi private company. They are “implicitely” guaranteed. That’s the beauty of Fannie and all those quasi private companies. Do you seriously think that all this funny crooked and criminal accounting was allowed because it was a private company ?
On a strict sense Fannies is a private firm but with ultimate guarantees. I doubt it very very very very very very much that the politicians and their little buddies would let Fannie go under and be liquidated.
The trick is that they never help directly. They just flood the system with tsunami after tsunami of incredible liquidity.
ISTR that OFHEO doesn’t even have the authority to liquidate them.
And those with equity aren’t borrowing. If they didn’t get HELOCs when prices are going up, they’re unlikely to get them when prices are going down.
“And there are downside risks from the global economy: foreign central banks are keeping our long-term interest rates extremely low — below short-term rates — by accumulating 10-year U.S. Treasury bonds.
They could lose just some of their appetite for this debt at any time and send U.S. long-term rates upward.”
(Cough…)
http://tinyurl.com/um2ag
One more time
Hocus Pocus
Let’s say, for example, that to carry out its legitimate functions, the United States needs $300 billion in credit and $100 million in currency :
1. The U.S. Bureau of Printing and Engraving at the U.S. Treasury is instructed to print $100 million in Federal Reserve Notes, as currency for the privately owned Federal Reserve.
2. The privately owned Federal Reserve System pays the U.S. Bureau of Printing and Engraving $20.60 per 1000 bills it prints! That is approximately two and a half cents for each bill, regardless of their face denomination, ie. $1, $5, $10, $20, $50, $100 bill. WHAT A DEAL!!
3. Next, the United States orders the same U.S. Bureau of Printing and Engraving to print $300 billion, $100 million worth of U.S. Treasury Bonds.
4. The privately owned Federal Reserve then purchases $100 million of U.S. Treasury Bonds (redeemable at full face value plus interest) from the United States. To pay for these, the Fed uses the privately owned Federal Reserve Notes that they just purchased for two and a half cents per bill! Next, the privately owned Federal Reserve purchases the other $300 billion in U.S. Bonds with a simple ten second computer entry that transfers $300 billion in “credit” into the United States’ Treasury account. Where did the privately owned Federal Reserve System get the $300 billion? It created it from NOTHING.
The People are then obligated to repay the privately owned Federal Reserve, with their tax dollars, at full face value, plus interest (which is converted to gold at par, through the International Monetary Fund). The privately owned Federal Reserve Notes and federal government credits were created for virtually nothing.
Conversely, the repayment of just the interest on these bonds requires a Citizens’ physical labor from approximately January 1st until May 1st and giving 100% of their substance to the privately owned Federal Reserve. What does the privately owned Federal Reserve or the federal government give back to We the People in exchange for the sweat of our brow? NOTHING! ZIP! NADA! That constitutes servitude without just compensation.
COST TO WE THE PEOPLE: $300 Billion, $100 Million, plus continuously compounding interest.
COST TO THE PRIVATELY OWNED FEDERAL RESERVE: About $26,000.
Nice. Washington, Franklin and Jefferson who had a lot of slaves, really invented a great system for them. Franklin boasted after the revolution, that paper money was a fantastic invention because you liquidated the debts owned to the stupid creditors just by printing even more paper. John Law and Louis XV did the same thing. Lenin did even better in Russia.
Hocus Pocus: Harry Potter works at the FED ? I knew it! That’s their secret weapon of eternal prosperity. HP.