Sellers Realize “Party Is Over” In California
The Ventura County Star reports from California. “The house was unfinished, but Ann and Rusty Colemon closed the deal for their new Moorpark Highlands home anyway in December. In exchange for signing before the end of the year, they say builder Pardee Homes offered them nicer fixtures and no mortgage payments until the house is finished.”
“But if they had waited a few days for a special assessment to be waived, they would have saved about $150,000.”
“The Colemons are among dozens of 2006 homebuyers in the Moorpark Highlands neighborhood who are upset about Pardee Homes’ new incentive for buyers there. As of Jan. 1, Moorpark Highlands purchasers won’t have to pay the monthly charge known as a Mello-Roos assessment, which funds community improvements in the tract. Instead, Pardee will cover the cost.”
“Those who bought before Jan. 1, however, still must pay the assessment, which they said can run between $4,900 and $6,000 annually depending on a home’s size, for more than 30 years.”
“On Saturday and Sunday, more than 100 buyers and residents picketed the sales office in the tract’s Shenandoah neighborhood. That’s the way the housing market goes, said Jim Bizzelle, regional VP for Pardee Homes and project manager for Moorpark Highlands.”
“‘The real estate market has changed,’ Bizzelle said. ‘In 2006, each individual buyer came through and negotiated a fair price.’”
“The Colemons said they thought they were helping the developer by closing a little earlier, on Dec. 26. ‘They came to us and said, ‘OK, I will give you upgraded bath fixtures if you close and help us with the 2006 books,’ Ann Colemon said.”
The Record.net. “City leaders are reacting to the slumping housing market by making significant changes to Manteca’s growth policies in hopes of maintaining home building and retaining thousands of construction jobs. Manteca’s move might be a signal that the continuing downturn in the housing market could have a substantial impact on communities that depend on that growth.”
“On the surface, the changes appear mundane: Developers will have an extra year to choose when to build homes after reserving units of city sewer capacity. And the city next year might allocate more sewer units than its current growth ordinance allows, aiming to stimulate building during an expected slow period for construction.”
“‘We wanted to cooperate with (developers) and say, ‘This is something we can do,’ said Karen McLaughlin, assistant city manager.”
“At least one person thinks that Manteca’s strategy is a bad idea and that the city is simply giving influential developers a break. Joe De Angelis, a resident and outspoken critic of city officials, said allowing developers to sit on their sewer reservations a year longer will limit competition from other builders and hurt efforts to develop more affordable housing.”
“That’s because developers will likely wait until housing prices rise again before building, he said. ‘They want to hold the (reservations) so no competition can build. They’re actually trying to actively push (home) prices up.’”
“City Councilman John Harris said the city’s decision is a chance to give both Manteca and its developers more options in an uncertain market. ‘It’s just a one-year Band-Aid, as I see it,’ he said.”
The Voice of San Diego. “The median price per square foot is down 8.4 percent and 9.6 percent for detached homes and condos, respectively, since size-adjusted median prices peaked last September.”
“The more widely reported, if less informative, plain-vanilla median price was actually up for detached homes so that it rests only 2.2 percent below last December’s value. The median condo price, on the other hand, declined to 12.5 percent below last year’s price.”
“While the typical detached home buyer may have spent a little more last month, the lower price per square foot shows that the buyer in question likely got even more bang for his or her buck. In other words, pricing power is still on the decline.”
The Bakersfield Californian. “Bakersfield’s housing market is still healthy and is simply going through a market correction that was inevitable after its meteoric rise, according to several local real estate professionals.”
“‘I don’t think it’s all doom and gloom,’ said real estate agent Jon Busby. ‘We had the investors that came and the builders that came and drove the prices up. It’s just correcting itself now.’”
“In December there were 3,181 homes listed on the market, down 13 percent from the month before, according to a preliminary report on December sales compiled by local appraiser Gary Crabtree.”
“‘Listings are going down,’ Crabtree said. ‘Sellers have come to the realization that the party is over and they can no longer get the prices they were expecting before. We’ve reached a plateau and that plateau is holding. It is not taking this gigantic nose dive everyone was predicting.’”
“After being one of the nation’s hottest real estate markets in recent years, some have described local market conditions as a bubble and predicted Bakersfield’s real estate market will be one of the nation’s worst in 2007.”
“‘They are crazy. We don’t have one of the worst housing markets in the country,’ said Ray Karpe, the incoming president of the Bakersfield Association of Realtors. ‘The market is not bad at all. The market has just slowed. It has gone from a ridiculously good market to a good market. We couldn’t maintain that forever.’”
“‘The housing market in general has been accused of being a bubble,’ said Leslie Appleton-Young, the chief economist with the California Association of Realtors. ‘In the last year and a half we have seen a significant decline in sales. But the actual decline in prices has been slower.’ But increased foreclosures and a rise in interest rates could spell trouble for the housing market, Appleton-Young said.”
“Crabtree said last year he routinely saw between 20 and 30 notices of default filed a month. The numbers jumped to 41 in November 2005 and 179 in November 2006.”
“Local appraiser Jeremy Jans anticipates the local market will actually pick up a little this spring, despite a possible increase in home listings some are predicting. ‘Although we will not get back to where it was, it will be a strong market this year,’ Jans said. ‘We are a unique market. We always react a lot slower than everyone else.’”
BTW, I have posts ready at my blogspot blogs, but there seems to be something wrong with the network. Please check back.
Ben, if you check below, this has to take the cake as the funniest thread yet……….I’m still laughing…………….
Several items come to mind regarding the waiving of the Mello-Roos. First, the developers must have already known that it would be waived, but of course they weren’t going to say anything to those who closed before the end of the year. Buyer beware, as always! Second, Just because this has been waived, don’t think that the local gubmint isn’t going to get its pound of flesh somewhere. Third, yeah, I could’ve saved 150K, IF I LIVED THERE FOR 30 YEARS! Right, what are those chances? Fourth, is this waiver transferable? When I sell will the next sucker in line get this same benefit? I doubt it, but maybe so. Lastly, what good is saving 150K when the house is going to lose more than that in the next couple of years?
“That’s the way the housing market goes, said Jim Bizzelle, regional VP for Pardee Homes and project manager for Moorpark Highlands.”
Hear it comes. The Kid Gloves are coming off. The Builders are gonna start playing “hard ball”.
It seems like there is room for an Auger-Inn type joke here.
the gloves might be off, but the leather hood is still on and the whip and billy club in hand…
Don’t forget the “gimp”…… I’ve never fully recovered from that scene in Pulp Fiction, an Auger-Inn moment indeed.
posted ” Don’t forget the “gimp”…… ”
Indeed! Seems like the builder is going “medeviel” on thier clients.
Do the houses have granite? If so, who CARES about the Mello-roos? Right!
A better term for builders would be “sleeze ball”
The Sales Reps probably refer to Jim Bizzelle as “Captain Compassionate ” around the the big table at the weekly sale meetings.
“The Colemons said they thought they were helping the developer by closing a little earlier,
Whuch you talkin bout willis
Ya common! Gimme a break! We’re helping the developer “throw in upgraded bath fixtures and no mortgage payment until completion” kinda help is more like it!
The Colemans thought you were getting a deal.
“The Colemons said they thought they were helping the developer by closing a little earlier, on Dec. 26. ‘They came to us and said, ‘OK, I will give you upgraded bath fixtures if you close and help us with the 2006 books,’ Ann Colemon said.”
All these stories that leave me asking “How could someone be so stupid ?” really just boil down to an inability to do some simple math and think rationally for a couple minutes in a row.
In a predatory universe I really can’t see how the people in these stories have anyone to blame but themselves when a 5th graders math skills and common sense would have kept them out of harm’s way.
They picked a fine time to allow emotion to enter into their decision making process.
What a bunch saps.
The sad part is that you would have thought that their attorney would have told them this was a bad idea and the builder was trying to screw them.
“That’s the way the housing market goes”- Finally! Some truth!
Now that the RE bust has been mentioned in every local paper and on every local and national news broadcast across the country, it’s hard to muster sympathy for anybody who bought in Dec. ‘06 and somehow did not have any idea that values *might* go down. lol!
If this had happened in August ‘04, maybe, but Dec. ‘06? Falling values should be expected now. Anybody who’s *surprised* by this turn of events has spent the past year living under a rock and deserves no consideration.
“The house was unfinished, but Ann and Rusty Colemon closed the deal for their new Moorpark Highlands home anyway in December. In exchange for signing before the end of the year, they say builder Pardee Homes offered them nicer fixtures and no mortgage payments until the house is finished.”
Are you kidding me? Some nicer fixtures and no mortgage payments until completion got these peoples hurried signatures? For crying out loud, these “incentives” cost the builder pennies. These people ARE the greatest fools. No pity here.
good topic- how can you tell a builder will be solvent when you take delivery ?
how can you see their books if they’re privately held ?
I bet if we checked their DNA, Ann and Rusty Coleman are the linear descendants of the Indian chief who sold Manhattan to the settlers for $24 in beads and trinkets.
heh, don’t knock the indians . . . $24 in 1624 @ 7% capital return would be $150T today. . . plus they didn’t even use that land they sold . . .
I do feel sorry for these people. What was done to them is wrong. Decent, trusting people may have thought that this really was the case… builder getting their books done by end of year.
The builder should be sued for not disclosing this info regarding the property!!!!!
I dont believe mello-roos is waived by the city. It is just that the builder chose to pay it instead of the buyer. What happens if pardee homes goes bankrupt ? the bill comes due and the buer has to pay isnt it?
this might be a worthy topic. what happens if the builder incentive is paying a mortgage and the builder goes under? I bet that a lot of costs will be dumped on the owners. isn’t that what they do, they offer anything to stay in business and set it up so they go bankrupt and have no assets? why not offer incentives if the builder doesn’t end up paying because the company went under.
“What happens if pardee homes goes bankrupt ? the bill comes due and the buer has to pay isnt it?”
That is just what I was thinking. Them covering the fee for 30 years gets them sales meanwhile they get ready for bankruptcy. In the end it will be the new buyers that get screwed because they will get an unexpected $150K bill !
Wonder if this thought made it into the fine print?
“what good is saving 150K when the house is going to lose more than that in the next couple of years?”
ask the 2006 buyers.
I’d feel ripped if 4 days later they lopped 6k a year off the exact same house. But hey, they haven’t seen nothing yet.
Wait till the exact same house is selling for 150k or 200k less than they paid. And when they interview the builder it will be:
“That’s the way the housing market goes,”
This is just the beginning. It’s gonna be a flight to the bottom.
So right. For example, you paid 750K and 4 months later, I bought in at 550K. Whew! There are not going to be many friends in this neighborhood.
Also, if all these Howmuchamonth Harry and Harriets, who are picketing had gotten together to begin with BEFORE buying, they may have been able to negotiate a real bargain. Say, 450K for the 750K crap that was selling. Who knows, but if they had held out together before buying the crap, they may have been able to do even better, but noooooooooo, be priced in forever or lose out! Dopes.
That’s the mentality that has made them gazillions of money in the past few years. As a reasonable person, your only option was to opt out and keep renting. Tell me about it.
“There are not going to be many friends in this neighborhood.”
Naw, you really think people are that petty?
Sarcasm off.
Sccrrewwww themmm!
F those buyers in the A.
Had prices gone up 200k theyd be bragging around the water cooler all year about how smart they are. And that BS about taxes being = for the same house. What state do they think they are in!?!
This is CA.
I bought a house a few times in CA and the typicaly situation is the neighbors come over to say hi then when you tell them what you paid they pretend to be shocked. Then they brag about how they paid five cents for the house only a week earlier and thier taxes are 2 bucks a year and locked in forever at 2 bucks a year due to prop 13, also they own ‘the bigger model’. CA is most ‘unfair’ taxation around and getting worse.
And it’s going to get even worse with the new Gov Swartzenberger health bill!
Who’s gonna pay that?
Home builders I guess!
Crash Landers: your site is great, same for the Sacramento flippers in trouble site linked yesterday. I wish somebody would put one together for San Francisco…or maybe somebody already has? Anyone know?
I know there is one for Marin County, but it’s not updated very often. http://marinrealestatebubble.blogspot.com/
The Mello-Roos isn’t actually “waived” by the taxing authority, rather it (the Mello-Roos assessment) is paid off in advance by the developer (in this case Pardee Homes) as an incentive to the buyer. Factoring for the time value of money, the actual current cost of paying off the Mello-Roos would be a lot less than the 30 year 150K figure. An individual seller of a resale home in a Mello-Roos district can pay off the Mello-Roos assessment on their property if they desired and use it as a sales incentive…however, to the common buyer a reduction in sales price is usually more attractive.
Special Assessments were very popular in the Western Chicago Suburbs. They are now going away too. Though it would benefit the buyer and the seller to lower the price instead of paying off the assessment, the developers want to keep the selling price as high as possible.
That’s the crux of the whole thing I think… they don’t want to reduce the prices and will do whatever it takes to keep the actual Selling Price as high as possible.
If they start lowering prices they are in for it…
Assuming annual Mello-Roos of $5,000, over 30 years, and assuming a present value discount rate of 10%, the net present value of this benefit is approximately $47,000. If the discount rate is 5%, the NPV is $77,000.
Are there any realtors or NAR representatives willing to discuss the issue with the Colemon’s? After all, they claim it is a great time to buy. It looks like the Colemon’s took the popularly advertised NAR advice and they got screwed out of 150k in incentives and then some. Gosh! If you ever doubted some of these realtors and builders are scumbags, here is the evidence.
My point is this ,(if I was a lawyer ).
The builder closed the loan with a sub-prime lender connection ,before the pink slip was issued ,(against normal loan terms ),so the builder could in bad faith deprive a borrower of 150K in incentives .
But I’m not a lawyer, so, to bad the buyer paid 150K for some bathroom fixtures ,they usually don’t cost that much .
Last week they fined some companies for making false claims re some diet supplement. I wish they could do the same to the NAR.
regarding the mello roos…what a freaking scam…here in lincoln, ca meritage was offering homes in one of their subdivisions with mello roos/bond for 150-300 / month…this was in april 06…magically a few months later the mello roos bond has been paid to the city/county/state? right…i think the mello roos is a “rouse” for the builders to milk even more out of the FBs…glad i didn’t buy…this market in lincoln/wheatland, ca is going south in a hurry…i’ve seen at least 100k correction in this area in what was the 500-650k price range…i.e. now are LISTED for 400-550k…and they’re still way below last couple years’ sales level(s).
viva le crash
crush
“i think the mello roos is a “rouse” for the builders to milk even more out of the FBs”
I thought this was common knowledge? From what I understand, builders typically pay the city up front for the cost of building each house. This is included in the cost of the house itself. Mella roos would then be simply the builder’s way of collecting additional cost for community upkeep, and for milking the FBs.
I looked at those homes in March 2006. People were camped out in the homes eating lunches and planning deals on the first 10 homes released. I thought the homes were a relatively good deal until I heard about the Mello-Roos. Hahahaha. I wonder how the deals are working out now for the lunch group I saw at one of the model homes kitchen table? They were about 25 years old. very excited. After seeing that I knew I still had time to sell my Townhome and get out of RE for awhile. I was thinking I missed the bubble. Looks like just made it out. Crazy back then in Moorpark. I guess it spilled over to Phoenix but only for a short time.
Please go to Bakersfield.com and chime in on the debate on the blog based on the above story:
http://people.bakersfield.com/home/Blog/schuster80/3494
Wouldn’t let me sign in without getting a password. Here’s my response:
“People in Bakersfield suffer from the same disease that infects the rest of the country: If I buy a house in a new neighborhood for an inflated price the value of the house can’t fall below the initial selling price. Guess what? It not only can, it will. If you want to know whate a $300K house should look like go out to the Oaks near the market place and that should give you and idea. Now compare that with the newer $400, $550k and up houses out in Rio Bravo area where everyhouse looks the same and it’s like the difference between shopping at Tiffany’s and Walmart. Divide any house price today by a factor and you may be close to what it should sell for at the bottom provided it’s in a good location, location, location.”
I signed in:
posted by hwy50ina49dodge on Jan 9, 2007 at 03:19 PM
“The only saving grace for Bakersfield is that it still shows up as a California city.”
Adam,
I agree, moreover here’s a suggestion to the Bakersfield Real Estate consortium and the Chamber of Commerce:
Send them a Bakersfield City welcome basket:
1 quart of Mobil 30 W motor oil
1 lb bag of baby peeled carrots
10 oz jar of Ortho Malathion pesticide
Bakersfield,
Oil, carrots and pesticide dust.
Yep, Bakersfield has had a meteoric rise in the last few year. Recently home prices have been off by as much as the cost of upgrading your kitchen to granite countertops. Yep, the bottom is here! Great time to buy.. Suckers! Oh, and don’t low ball, because you don’t want to upset the buyer and get off on the wrong foot! Bakersfield is very, very special. Unlike any other housing market in the world! One of the main reasons must be that it is running out of land to build homes on, or maybe it has cornered the oxygen market!
“Holy Cow Crap, Batman! I think Bakersfield has cornered the cow crap market. Legends of home buyer zombies are headed up there because it will be infinitely less expensive to maintain their backyard daisies, with all the cheap fertilizer and all. Foiled by those evil bottom feeder realtors again!”
“But increased foreclosures and a rise in interest rates could spell trouble for the housing market, Appleton-Young said”
And why would she even bother to bring up such an unlikely set of events? I mean, who would anticipate an increase in foreclosures, in CA?
Leslie, What is the likelihood that foreclosures “might increase” and what exactly do you mean by “trouble”?
AZ, why so sarcastic? Don’t you realize that everyone in CA who makes 75-100K a year can afford a 900K home, as well as, the vacations on the QM2, the 50K in CC debt, the Escalade/Benz, and tution for Hayley and Bayley at the Private School for Snobs, and private karate and dance lessons for both w/professionals. Geesh, you don’t give people in CA enough credit.
That’s hilarious….but spot on.
In other news, the 3rd episode of flipper nation is out today. Better than the 2nd one. Some good quotes in there.
“Don’t you realize that everyone in CA who makes 75-100K a year can afford a 900K home”
LAY & DL think they can. There’s no bubble, especially in high-flying recession-proof CA. It has such a diverse economy that only the sky is the limit in terms of what people are willing to pay for RE. Even though facts clearly show that out-migration is a reality, it doesn’t stop the RE establishment from claiming “everyone wants to live here”.
Sure, I am burger flipper manager at Mickey D’s, but I can afford a million dollar McMansion and 4 investment properties throughout the southeastern US. And people, even on this blog debate whether a depression is coming. Forget debating whether one is coming, the debate is WHEN. This economy is so screwed. A little OT, but my stepdad said this weeked, while visiting him, that the economy will be okay because the FED can “tinker” with rates. WOW! I couldn’t even respond to this because where does one begin?
Burger flipper?? Casey Serin was UNEMPLOYED when he bought 8 homes! Why bother even working. oh man.
http://xroads.virginia.edu/~hyper/Allen/ch13.html
‘[T]he Harvard Economic Society … on October 19th [1929], after having explained that business was “facing another period of readjustment,” it predicted that “if recession should threaten serious consequences for business (as is not indicated at present) there is little doubt that Reserve System would take steps to ease the money market so check the movement.”‘
“Don’t you realize that everyone in CA who makes 75-100K a year can afford a 900K home”
I know of a few who do make that much but cant do it without IO loans. Even at 100K income thats nearly 9x price to income nearly twice the historical norm of 4.5x income.
Thanks for the nod to outmigration. This is actually a very real dilemma for the CA population. Unless you work in the sociological field, you never hear about it which is really disturbing. I predict we will see 12% increase in CA outmigration in the 2006 census estimates and a 20% decrease in international immigration.
Anecdotally, I have heard so much talk from people about “cashing out” and leaving CA.
One of the more senior folks at the visual effects studio I work at said, “I feel like we’re the old lady who just won the jackpot at the casino … but we’re still putting in quarters.”
Just like 2 years ago, all I heard was random banter about RE, now I keep hearing random banter about moving to a ‘cheaper’ zone.
Purely anecdotal. …but that’s what got a lot of people into this mess.
I talked to a moving company the other day in Chico ca.The woman claimed that the move-ins vs move-outs was about the same. She did say that older people were moving out. Anyone know what the facts are?
OC Dan, you forgot to mention the private trainer, the botox and the nanny…
“Geesh, you don’t give people in CA enough credit.”
I think because everyone else already did (pun)- haha.
And if forclosures and rising interest rates mean trouble what happens when leanding standards tighten and the economy slows down?
2 words should explain it: Leverage Unwinding.
Leverage Unwinding = a popsicle on a 105 degree day…things become sticky real fast.
When I was in Bakersfield in July 2005 it was about 110 degrees - a veritable blast furnace. How do people take that heat and what does AC cost?
I saved a link to an LA Times article, from last month, that might give the head-in-the-sand disbeliever crowd a little something to chew on. Leverage unwinding catalyst with dynamite sticks everywhere and a short fuses that are all burning:
http://www.latimes.com/business/la-fi-option11dec11,0,4921051,full.story
Posted LATimes link story.
Will says “I am rather screwed,”
Indeed old bean, but Will my boy you still have the pint!
Palisades Park,
Of the people in the area that I know, they generally spend $350-450/mo on their electric bill during the summer to run AC on a 2500ish sq. ft. house. When it’s really hot, you stay inside. People I know who have moved there from the coastal areas of Cali are usually blown away by how hot it can be for weeks at a time. I guess you get accustomed to it and to cringing when the electric bill shows up.
An important statistic to note: In CA 2003, only 8 of every 1000 buyers chose the option ARM mortgage. In 2005, 200 of 1000 chose it. And, I would guess it was just as bad if not worse in 2006. There is no way this ends well, or quickly for that matter. With prices already back to pre 2005 levels, all of these individuals are under water with no way to sell. The chances of them having the cash to bring to the table are slim to none. The suicide loans were, indeed, financial suicide. Over the next 3 years, I anticipate a tsunami of foreclosures. And there will be no buyers for these REO’s. Banks will be holding properties for years. Unless they want to sell them for $.20 on the dollar.
I just got back from a drive through Somersett in Reno. I am thinking of taking pictures and sending them in as the scope of the building and development just blows my mind. I grew up in Reno, but have not lived here for quite some time (and don’t intend to). It appears, on the surface, to be the largest residential development the city has ever seen (maybe I am wrong). There is simply no market for the volume of high price homes already in place in Somersett, let alone in the pipeline. Wages won’t support them. I have already found some foreclosures up there. Some of the neighborhoods are ghost towns. Erie.
This article is an excellent read. Was this on the Blog? I don’t remember it.
Bear, you are so right. The problem is that if you bought at the height of the mania, for example, say, 750K, you are not a little under water as many think. You are, or, will be 100K-200K very quickly. No one who bought using these suicide loans is going to have that kind of cash on hand. Also, for homesin the 750K range, UNLESS, you plan on living their the full 30 years, if you didn’t put a large chunk down, you will never recoup the money it costs to keep the house, i.e. interest, taxes, upkeep, maintenance, sweat equity, etc. You would have been better served renting. Interest and prin. alone will cost you 2.25 million. With everything else you will be pushing 3 million. Even at 50 years (600 months, you could have rented at 5K/month)! Ouch! Anyway, those people will never recoup the total cost of these monsters. Alas, they believe that they will sell someday for at least the same amount they bought at really believe they have hit it big, when in reality, the cost was monstrous. Don’t they teach kids anything anymore.
Carry costs, baby. Carry costs, baby!
Imploder, I don’t recall how I stumbled across the article, but it is definitely chilling, when you run through the implications and consider that HELOCs, 2nds, 3rds and who knows what else might be burying those FBs. And, it’s not published by some lunatic conspiracy theory kooks either so even those dismissive about the bubble are compelled to think seriously about it…
AZ my intuition tells me there are a lot of people in this similar situation.
They bought in 2005/2006 and now they are 100’s of g’s in the hole?
1099 in 2007, with ez payment plan for 2008, 2009, 2010…
Meanwhile, the NAR keeps calling the bottom several times each year in 2007, 2008, 2009…
“what happens when leanding standards tighten and the economy slows down?”
Blue Falcon, it’s anyone’s guess, but it’s going to get bad before it gets better.
I think that is what she expects and that statement is her CYA in 2008
2007 = PANIC
2008 = DESPAIR
LAY & DL will be ancient history by then - linked to the biggest RE bust ever. If they managed not to take their own advice (foregone conclusion since the advice was aimed at the RE Investment seminar dopes so they could clear their position), then they’ll be just fine, rolling in $$$$$$$.
AZ - it doesn’t matter when they leave now. The damage is already done. We just have to hope it is of short duration. I would rather have short and violent than prolonged and torturous….
I just realized that auger-inn could comment to this one too!
MBA…sick and funny!
“I would rather have short and violent than prolonged and torturous”
I’m sure most people would. Unfortunately, it doesn’t work that way. The market could suffer a severe price down-spike but I don’t expect a recovery for 5 years after it levels off… unless… it’s truly different this time.
Many of us don’t need the “recovery,” just the down-spike.
The Colemans bought “now” and, consequently, they were priced in forever.
“Those who bought before Jan. 1, however, still must pay the assessment, which they said can run between $4,900 and $6,000 annually depending on a home’s size, for more than 30 years.”
“The Colemons said they thought they were helping the developer by closing a little earlier, on Dec. 26. ‘They came to us and said, ‘OK, I will give you upgraded bath fixtures if you close and help us with the 2006 books,’ Ann Colemon said.”
Those are some mighty expensive bath fixtures.
“Those are some mighty expensive bath fixtures.”
I’m sure they’ll get plenty of use out of them. After all, they’re experts on “taking a bath.”
Good point, Emcee! Realtor-speak: “Buy now or be priced out forever!” Perhaps the NAR or CAR should adopt a more realistic slogan, like “Sell now or be priced in forever!” or, “Now available…Catch a falling knife over a period of 5, 10, or even 20 years. Real estate always goes up…eventually.”
They jumped the gun. In races there’s normally a do-over. In contracts, unfortunately for the jittery Colemans, there are none. The Colemans will ultimately end up throwing in the towel. What is still unclear is who will clean up the mess.
I dunno if Pardee people visit this blog or not, maybe someone can take this message to them.
If this happens …
“On Saturday and Sunday, more than 100 buyers and residents picketed the sales office in the tract’s Shenandoah neighborhood. That’s the way the housing market goes, said Jim Bizzelle, regional VP for Pardee Homes and project manager for Moorpark Highlands.”
“‘The real estate market has changed,’ Bizzelle said. ‘In 2006, each individual buyer came through and negotiated a fair price.’”
Sell the open lots to a bottom feeding builder (cos no one above you wants to touch it … take it from me …) like beezer or someone. You’d get next to nothing for the lots … but you’d be able to out without losing too much anyway, cos you bought these at literally pennies on the dollar … face it) They can build cardboard boxes at rock bottom prices and dump them on the market, just cos you’ve done the good work for them by building $$$ houses in there first. You old customers have nothing to protest and you get to walk away un scathed.
BTW you can find a Beezer development and do the same thing there.
Cool.
cow_tipping.
That’s the way they do it here in Portland. The expensive houses go in first, followed shortly thereafter by the ordinary stuff; then, a few months later, the apartments go in. Seen it time and time again.
No way there’s a housing bubble in Bakersfield. I mean c’mon, it’s such a desirable place to live. (sarcasm way off)
“‘I don’t think it’s all doom and gloom,’ said real estate agent Jon Busby.
You are correct Jon. The bottemfishrman are having a party, abig one in anticipation of launching their boats around summer of 2008
Guys - There ARE benefits to living near a trench of sh!t. Just think of the $$$ you could save instead of buying Scott’s fertilizer or Chemlawn…
Should I comment?
““Bakersfield’s housing market is still healthy”
So are a lot of other markets — in the sense that the economy remains relatively sound, historically speaking. Unemployment is low and the population is stable or rising, which, along with other economic fundamentals, should mean that a healthy number of homes should be selling at healthy prices.
The problem is that speculative excess has driven prices and sales well north of “healthy” territory into the “crank binge” level — and a correction back to merely “healthy” prices, justified by what are still decent fundamentals, would involve a 30%+ haircut in many areas.
*** Unemployment is low ***
True, and this is mentioned in the news often. But what are the wages of these ‘Employed’? Here in So Cal the majority of jobs seem to be ‘Service / Retail’. Are these the ‘Employed’ that are propping up the housing market? Not here in So Cal. Wait until gas bumps back up to $3.50 per gallon later in the year.
Unemployment is low…
How many of those newly employed are working as Real Estate agents, construction, housing improvement companies, Title companies, etc…these upcoming loss of jobs will have a major impact on the actual unemployment rate. Having moved from the Coastal area, I can tell you for a fact that incomes in Bakersfield aren’t even close to incomes on the Coastal areas or LA, Orange County, etc. Personally, I have been waiting on the fence since 2004, because I knew prices would start to drop…took a year longer than I thought…but I am also going to wait about another year to pick up a foreclosure.
“The house was unfinished, but Ann and Rusty Colemon closed the deal for their new Moorpark Highlands home anyway in December. In exchange for signing before the end of the year, they say builder Pardee Homes offered them nicer fixtures and no mortgage payments until the house is finished. But if they had waited a few days for a special assessment to be waived, they would have saved about $150,000.”
Just for fun, I will throw out some wild-ass guesses:
Mortgage payment = $4,000 / mo
Nicer fixtures = $20,000
Time to finish building = 12 mos
Wild-ass guess on the stupidity premium =
$150,000 - $20,000 - 12*$4,000 = $82,000.
It said they were moving in January 2007.
STOP THE PRESS: WE TURN AWAY FROM YOUR REGULARLY SCHEDULED PROGRAM TO BRING YOU THIS IMPORTANT ANNOUNCEMENTl
EGGO WAFFLES HAS JUST COME OUT WITH A NEW FLAVOR. IT IS CALLED “FLIP-FLOP’. LOOK FOR IT IN YOUR GROCER’S FREEZER. Now back to your regularly scheduled news about flip flops in California.
“‘Listings are going down,’ Crabtree said. ‘Sellers have come to the realization that the party is over and they can no longer get the prices they were expecting before. We’ve reached a plateau and that plateau is holding. It is not taking this gigantic nose dive everyone was predicting.’”
You are right. No nose dive. Maybe that’s why 1.5X to 2.5X median wage jobs are leaving the state! Idiots…
As for prices holding… nope. They’re going down about $500/day.
I’ve gotten into the habbit of recording the inventory (a la OCrenter’s most excellent blog). Some areas are interesting enough to write it down twice a day!
I just had a coworker tell me, “Why aren’t you buying, you can easily afford a $1million dollar home.” It started with “I wish I could afford a million dollar home!” Idiots. The conversation ended with “if prices don’t go down, I’ll move out of sate.” His expression was priceless. But… its different here…
Neil
“We’ve reached a plateau and that plateau is holding.”
This is what everybody told each other on the Maginot Line.
Truly classic, Imploder! Just wait until the bloodbath really starts. Your Maginot Line comment will be truer than you think!
Sorry boys but I’m going to have to give you a D+ for your attempts at a historical analogy. There was really no blood bath at the Maginot Line. The Maginot Line was the French defensive position that the Germans basically ignored. The Germans knowing it was a ridiculous concept, somewhat like saying “real estate always goes up” just went around or over the Maginot Line.
The French used to talk about the “Impenetrable Ardennes (Forest)” the way the REIC speaks of the “permanent plateau”. The Germans plowed through the Ardennes just the way that prices will plow through that “permanent plateau”.
After running through the Ardennes the Germans trapped the French and the British Expeditionary Force at Dunkirk. Instead of moving forward the Germans halted and much of the British army was allowed to escape. I think Dunkirk would be a better analogy here. Except this time there won’t be enough fishing boats to evacuate all of the victims. The Real Estate Dunkirk is in front of us and that is where your bloodbath will take place. The Maginot Line will forever be a tribute, like David Leareah or Leslie Appleton-Young, to foolhardy arrogance and wishful thinking, lies basically.
The Maginot Line will forever be a tribute, like David Leareah or Leslie Appleton-Young, to foolhardy arrogance and wishful thinking, lies basically.
ROTFL
That I can agree with.
Dear NYcityboy, Thanks for the D+ and thanks for the un-need history lesson. I’m fairly well versed on WWII history and was well aware that the Maginot line was bi-passed…
I just thought it was a funny line.
The Maginot Line was the French defensive position that the Germans basically ignored.
NYCityBoy, thanks for the refresher in history. I had a history professor who quoted an editorial cartoon from that time. I’m not sure it translates all that well into English, but it went something like this: The Germans have panzers, and the French Imagined they had a line (the word “imaginó” in Spanish sounds a lot like Maginot).
I does sound as if DL et al are imagining things.
Imploder posts ” I just thought it was a funny line.”
So did the Germans.
Imploder posts ” I just thought it was a funny line.”
So did the Germans.
LMAO!!
A. E. Newman wins funniest comeback line of the night!!!!!!
To NYcityboy:
You obviously are a great student of WWII, and i will expand upon the Germans plowing thru the Ardennes Forest and turning the allies flank. What made this possible was the concept of Blitzkrieg, of sending masses of tanks thru the supposedly inpenetrable ardennes forest, and once they crossed the Sedan river in a daring rapid thrust, pushing tank spearheads rapidly ahead to surround and break up french formations. This daring thrust of tank units combined with highly mobile wheeled infantry units shattered the second-rate french units and allowed the German Army to wheel behind the first rate french and british armies and pin them in a pocket against the coast. Thus the dunkirk fiasco.
The main genius behind these daring tank thrusts was Heinz Guderian.
imploder posts
“This is what everybody told each other on the Maginot Line.”
Didn’t the Germans slip around back? Then take them from the rear? Or did they Auger-in?
They slipped around the rear, and didn’t Germany have allies?…. yes Greece, did Greece help?
Italy I think not Greece.
Well, I got it
sm_landlord says………..Well, I got it.
Painful I’ll bet
“Why aren’t you buying, you can easily afford a $1million dollar home.”
Neil, how did you respond? Seriously, did you just cut to the chase and say, “Because I’m not a dumbazz…?”
Maybe you didn’t. You seem to be the diplomatic type.
Phillygal,
I had to be diplomatic (this person works for me and we’re doing 360 reviews soon).
Since I’ve been asked this before, I only pause for about a second and reply “I wish I could affor a $1M home…” and then went into how HSBC bank is predicting a 7% decline in 2007 and 8% in 2008 for the area. I then noted that since saving that kind of money makes a huge difference in my fiancee and my standard of living, we’d wait and pointed out that I have friends who outearn me who are selling their homes for $1 million because they can’t afford their house. The coworker brought up condos (why? I can’t grow a tree…), townhomes (but its so much cheaper out of state.)
I did have fun ratteling off the states of the large moves fortune 500 companies have commited to…
The sad part is, the statement about friends having to sell homes for $1 million+ wasn’t made up.
We have a group that grown to 50 or 60 who buy sporting tickets together. Its already obvious that the group will be smaller in 2007. 
Oh, I predict the drop will be greater (per year)… but no need to upset coworkers.
Thansk for the diplomatic compliment. I do try to be… (not always)
Neil
Thank you for that - you make me feel better.
I get asked all the time when I’m going to buy a house / condo /etc.,etc.,etc.
Lately, I’ve been feeling anxious about it again, despit making a ton of money shorting subprime.
I feel like I should have a mortgage right now, but this crazy market has put off my timeline. …oh well.
Just say: “We buy no line before its time.”
Nice and cryptic, so no one gets offended.
‘Just say: “We buy no line before its time.”
Nice and cryptic, so no one gets offended.’
My name is Orsen Wells and I am offended…
Since we’re in the California Thread:
Tammy Waller, Realtor and Chico Area Specialist, posted one last time concerning her analysis of 2006, with a promise to post her 2007 predictions. I applaud her for responding to our comments.
Her Web site statement (which started the comments):
Chico Market Watch
The Year End Stats Are In!
“Since September 2005, the Chico market has seen an increase in the quantity of available homes active on the market. Although the media has bombarded the public with the so-called “bursting housing bubble”, claiming housing values to be dropping like a rock-the reality is our market has seen an increase in value of property since 2005-approximately 2.2% increase. The double digit increases enjoyed over the last several years are no longer, but rest assured, the doom and gloom of double digit decrease in values is far from the truth.”
The Thread here so far:
Comment by AnimatronicBeautician
2007-01-08 13:12:55
Wow!!, you guys are amazing. First of all, you obivously are not familiar with my market area. The statistics quoted, are actual sales data, check them out for yourself and do the math. The media in my area wrongly suggested housing prices this past year to have dropped 20% in Chico specifically, this is in fact not correct. Ask about sales volume, that is another thing altogether. imploder, you may want to brush up on the difference between reporting the past, in this case 2006-versus a prediction; the last time this “chicky” checked my stat’s did not, have not and will qualify as a “prediction” on future market conditions.
Have a Great 2007!
(Comments wont nest below this level)
Comment by imploder
2007-01-08 20:11:22
Telling people to “rest assured” and referring to the ’so-called “bursting housing bubble”‘ is inferring that everything is “just fine” . That IS a (not so subtly inferred) prediction.
If that is not your prediction. OK, what is your prediction for 2007?
Comment by AnimatronicBeautician
2007-01-09 07:31:39
My comments, as stated before, are quite simply, a response to the past year of media coverage. Folks that I have come across have voiced concerns, due to local media reports, that they had already lost tens of thousands of dollars in their homes equity, that was not the case. I believe in reporting facts, whatever they may be, positive or negative, not just jumping on housing bubble band wagon and going with it. As to my prediction for 2007, I will write back after Thursday, I am attending our Tri-County Economic summit and will have more information then.
Comment by imploder
2007-01-09 12:09:26
Here’s what someone from your area noted:
Comment by Big Bob Slob
2007-01-09 01:15:30
Let’s look at the real numbers in Chico not hidden within deceptive Averages and means.
The following houses are on the same street and are the exact same design, each have 1320 square feet.
1880 Devonshire Sold 2nd Quarter 2005 for $334,000
1868 Devonshire Sold 3rd Quarter 2005 for $322,000
1837 Devonshire Sold 2nd Quarter 2006 for $316,000
1841 Devonshire For Sale now $285,000
This is a 16% drop in values since 2nd quarter 2005 and a 10% year on end drop. Why? The biggest reason is that lenders are not lending to just anyone anymore.
Big Bob Slob’s prediction for 2007:
The values of Chico homes will continue to drop at least by 10% over the next year.
Reply to this comment
Comment by Big Bob Slob
2007-01-09 01:41:00
I should also note that Tammy’s numbers are very wrong. I don’t know how she came up with these figures but they are bull.
Sorry if I offend anyone, but if your user name is AnimatronicBeautician, I have a real problem with anything you bring to the RE debate, unless it is backed by real stats, not just rhetoric! Boy, the tricounty economic summit. Is that like the G7 summit?
To be fair, posters gave her those sarcastic nicknames and she ran with them.
Imploder –
Sorry I got Tammy riled up with that original post! I looked back and caught her first reply, but didn’t realize you and Bob had a dialog going. Hysterical ……. Nice work by both of you!
Chico is a little hard to gauge if you are looking only at the median change. I know Bob has evidence of price declines in his neighborhood, and I notice some as well. I don’t know what data Tammy is using, but for the sake of argument lets just say that the median price is unchanged. The WHY is, I’m sure, where Tammy and I would dramatically disagree. I’ll wager I’m more familiar with the entire SFR market than Tammy, because I’m in the ‘hobby business’ like everyone else here, of watching it, not making money from transactions. Even our RE friend we used for 4 transactions in Chico, says I know properties here better than her, and she has been here 30+ years …..
In 2004, $150sqft was a lot to pay for a house, ranging up to maybe $200 for a new custom home, or for an older one, in one of the “Nob Hill” neighborhoods of Chico.
By 06/2005 (the peak), $200-260ish. So, at the peak, you could get a pretty decent 1500/sqft house for 300k.
Then the fun began, as sellers, led by the builders, began raising to $250-300. Nothing sells, and to this day, for the most part, it never really has. But there they all sit …… so some prices begin to decline. Sales decline, but remained fairly steady. The price? Lowest priced crap in town is about $200/sqft now, and the upper end (or upper price per sq/ft) homes are not selling at all. What is selling? The 250k-350k homes, but they are still at $200+sqft! I don’t call this a decline in price, until we see the pricing below 06/2005. The median? Could be little to no change, but what you get for the money is still at peak or higher prices. I would recommend avoiding this Chico market like the plague, until it shows a substantial correction. Buyers of homes here will lose as bad as anywhere, even if they are cheap.
Contracts here at anything over $150sqft, is catching a falling knife in the top of your head.
And Tammy,
If you read this, I’m callin’ you out for a public debate on the ‘State of Housing’ in Chico. Let’s meet at the new town square ….. and bring my buddy Ken DuVall. I wrote this ‘Letter to the Editor’ for Chico’s Enterprise Record in May, 2006. After a month of debate about the letters length, the Editor accepted and printed the following in July….. but not until they could ‘Break the Housing Story’ first, when they came out with “ CHICO HOUSING, 61% OVERVALUED! Then the writer (naturally) proceeded to interview 3 realtors in the area for rebuttal, and put the sheeple at ease that “It’s Different Here”…..
Letter:
After months of enduring the positive spin put on the crashing real estate market in the “Real Estate Patterns” articles by local realtor Ken DuVall, I couldn’t help myself but respond to his most recent piece titled “Whatever it takes” (07/14/2006).
He again assures us that 2006 will be the 4th best on record, with a 5.7% appreciation, but later advises that sellers must, “deal with the reality of today’s market”. He recommends if you really want to sell, “try pricing it 5% below what similar properties are selling for. Or, cut the price quickly and continuously until it sells”.
Uh, am I the only one that sees this is not the path to a 5.7% appreciation over last year? Chicoan sellers know what’s going on. Their homes have been languishing on the market for months, at prices well below the 2005 peak. Home prices have increased far beyond any historically known relationship to salaries, and factors that drove these prices up (cheap money, investment greed, sloppy lending) are disappearing. Take a look at home builder stocks for the real show. D.R. Horton, Toll Brothers, Pulte, Hovnanian have all lost over half their value. Not the recipe for appreciating prices me thinks!
Ken is correct advising sellers to cut prices. This is a hard pill to swallow, but the future economy will not be kind to real estate values, as investors flee back to commodities and cash. The swell part about housing prices returning to normal: sales and commissions.
LeFantome’
Chico, CA
Lefantome’, I’d be more than happy to meet with you-but it’s too darn cold for the new park :0) Coffee?
lefantome,
I guess I did well selling in Chico in 09/2003. I sold my house in Mansion Park for 342K. (1,235 SF = $277 per sq foot).
Damn! You beat us …. We sold a home in mansion park (W. Lincoln Ave) in 9/2003 for 330k, and it was 1250sqft + a cottage-garage! And I worked my butt off getting it ready to sell for 2 years…..just what I needed to hear; I can’t even do well in an “up” market …..
1250sqft + a cottage-garage = 1600+sqft = about 200per sq ft…..
California couple breaking the piggy bank:
http://rehq.blogspot.com/2007/01/cnn-tells-of-local-family-breaking.html
MARY BASORE: “This is my 34-foot RV that I love.”
“Even a 34′ Rv will become “unlovely” after living in it for the next 5 years at Wal-Mart parking lot.”
Heck this is going on in my So. Cal. neighborhood! A house down the road went into default about 6 months ago and has since become an REO (The people are still living there!). I hear the guy took out a HUGE six-figure home equity loan while it was in default and then let it go into foreclosure and subsequently to auction! Isn’t this FRAUD?? How could they take all that money out in a home equity loan and then let it go back to the back a couple of months later plus still live there??? I am an honest, bill paying person who rents! I would NEVER dream of doing something like this! What nerve!
Another couple that thought they could generate wealth through debt, debt, and more debt. It was a very nice touch on their part to take on debt on their paid off vehicles, thus ensuring that they will lose not only their house but their vehicles, too. At least keep one, so that you have someplace to live. And I love their mantra: “We will get through it.” Yes, just keep repeating that over and over and I’m sure it will all be OK.
“Zillow shows a unremarkable house right next to the Tujunga wash purchased for $258,500 in September 2002. The current listing shows a house on the market for 59 days reduced down from $649 to $629k. So far pretty unremarkable. But to read the story of the couple who live here, they are tapped out. They pulled out $300k to start a Juice it Up! franchise (which requires between $235k and $283k for startup costs according to their website), bought a boat, 34 foot RV, remodeled their house (kitchen, floors, carpet) and are shown with a mountain of bills and no more equity to tap. They have even taken out loans on their paid of vehicles to pay the bills.”
I can go bananas over criticising this couple! WTF- paying $300,000 for a juice it up franchise using home equity? I could have brought into a dominos pizza franchise for $30,000 back in the 80’s(Dominos was a hot frranchise concept back then). Tapping your home equity for $300,000 for any franchise, expecially in the competitive overcrowded fast-food market, is a highly questionable business decision.
Sunland is out in the sticks, way off the beaten path, and Not that great of an area to boot. DId they really think that their home was worth $649,000 in todays decelerating RE market? That the $400,000 equity increase would stay permanent? And purchasing a 34 ft RV? This couple thought they would live the California dream NOW, without actually putting in any sweat equity-actually saving money thru hard work and earnings instead of magically using ‘free house equity’ cash withdrawls to finance a business, boat,RV, and home improvements. What a crock!
Oh yes, they’ll get through it .. yes they will …
Lets see … their Juice business is prolly pulling in $$ now, its prolly free and clear in a distant relative’s name … and the bank gets handed the dump of a house … which they cant unload for 400 … yea they’ll pull through …
BTW that dump was over priced in 2002 … at 629 … its over priced if it was a hidden diamond mine.
Cool.
Cow_tipping.
“But if they had waited a few days for a special assessment to be waived, they would have saved about $150,000.”
Ah, the next GF (or FB?). It never ceases to amaze me how many of these knuckleheads are still out there. Even with the MSM projected a less-than-rosy picture of RE, people still buy. Nothing like catching a falling knife.
I’ve got a theory that the current GFs are persons who can’t name the vice president but can recite every winner of american idol.
They have no clue.
Cant name him, but if they voted, that is who they pulled the lever for.
what lenders would make a permanent loan on a houuse under construction. typcally lenders won’t lend on a tract home unless the home is substantially complete and floor covers are installed? the appraiser reinspects the property just b4 closing and verifies completion.
maybe they paid cash?
I didn’t see your post but I made a post up above involving this same issue you bring up . If they had a loan on the property than it was a illegal closing as far as I can see and this would be the buyers complaint . No pink slip ,lender should not of closed the loan . And when I say that the builders get what-ever they want with their sub-prime lending buddies ,this is more evidence of it .
I believe that Mello-Roos paid for by the builder will not be transferable when any new buyer chooses to sell thereby making the $150,000 number to be much bigger then it appears.
Are you saying we should think of the $150,000 in perpetuity terms?
HEll yes! If that is a selling point, I would def. want that forever. If that is a note that is paid off in 30 years, than is should be just that, not somoone else’s responsibility just because of change of ownership.
i thought mello-roos was for 30 years only, regardless of who stays in the house. that means, if you sell the house after 20 years, the new owner will only have 10 more years to pay. please correct me if i am wrong. thanks.
At the end of 30 years of that neighborhood infrastructure, guess what?
It is time to recapitalize and renovate. That starts the M-R clock over again.
“It is time to recapitalize and renovate”
Not always…sometimes Mello Roos is just a bribe to the county to let a developer build in an area, and doesn’t go to supporting infrastructure; the roads are owned and maintained by the HOA, no new schools or parks are built, etc.
Why would anyone sign up for a new house with a $6000 year assesment in the first place. This doubles an allready huge property tax bill. When they can buy a house in an established neighborhood and just pay 1.2%. (or wait two years and buy a house for half off and half the property taxes). The mistake of these people was buying the house with such monstrous assesments.
Over on AR, I had to read this real estate agent’s blog several times to believe what I was reading…..saving, little or no personal debt, life w/o revolving debt, buying only what you can pay for….etc.
http://activerain.com/blogsview/31930/Down-To-Earth-Home
THAT is nice to see!
She’s a Dave Ramsey disciple. My favorite talk radio host.
She’s from Dallas, TX, what do you expect? More people there live within their means as they are not as materialistic as some of these crazy Clownifornians willing to spend 50% or more of their salary on a house payment!
not according to TXchk. She often says “keeping up with the Joneses is on steriods there”
Not in the neighborhood where I lived or the people I worked with not to mention none of my friends! Maybe the people in North Dallas, Addison and the likes, but not where I was!
Nice, thanks for posting the link.
She was essentially called a traitor
by the guy from:
The Real Estate Investment Institute http://www.reii.org
“Did I miss something, your’s is strange advice for a real estate professional?”
I guess I’m not surprised that he’s confused concerning the concept…
Reading farther, to be fairer, they were both extremely civil during the thread.
“‘Listings are going down,’ Crabtree said. ‘Sellers have come to the realization that the party is over and they can no longer get the prices they were expecting before. We’ve reached a plateau and that plateau is holding. It is not taking this gigantic nose dive everyone was predicting.’”
Unless this time is different, prices will not take a nose dive, but will rather slide steadily downhill for another five-or-so years, dragging any sellers who try to wait it out to a large loss of household net worth. Such is the nature of California real estate corrections.
Even with the mass “creative” financing of late and the negative savings rate? I think this time it will be truly different!!! I think it will sink sooner rather than later!
Don’t forget the policy response to the looming debacle, which could involve pulling out all the stops to keep the debauchery going rather than face the hangover sooner…
That would just force companies to move jobs over into lower cost states.
This time is different. People can get information.
Got popcorn?
Neil
GS, I agree. They are not going to allow a meltdown. No one can take the political heat of such an event.
Hoover figured he wasn’t going to allow a meltdown either…
Helicopter, so you think this time it will really be different. I don’t know what to hope for.
“GS, I agree. They are not going to allow a meltdown. No one can take the political heat of such an event.”
Which is why you should be prepared for the ’scapegoat event’ that will be deployed as a cover for the meltdown.
‘Everything was fine until that nuke went off.’
Like the dismantling company that almost set one off as they were trying to dismantle it.
I think it was in TX somewhere.
‘Everything was fine until that nuke went off.’
Crisrose, let’s hope to God that doesn’t happen.
The coming crisis may be as bad as 1929, but nowadays the government has a lot more cards than it did back then. I’m no economist, but I thought the whole point about letting go of the gold standard was done precisely because they wanted to the freedom to tinker with the currency. Barring a nuke or something equally cataclismic, in this blog they keep going back to the same options: short and steep vs. long and painful; inflation vs. deflation. I wish I had a crystal ball.
I had a working crystal ball, too.
I can’t help but wondering if we’re going to see some mix of all the factors. To a certain extent we are seeing a mix now- this credit housing expansion is inflationary . However, most electronics and food (whose prices haven’t budged in years…) are deflationary. Mish’s prediction of deflation in the a coming recession makes sense - where in the US is there left to expand for most corporations?
However, I can’t help thinking that most governments around the world are going to attempt to quietly inflate their way out of their societal obligations (almost every developed country has the same “baby boomer” retirement problem as the US) and general debt. What if we saw slowly worth less money and a decrease in either nominal or real prices of most goods?
What if that we will see a quick and dramatic decline in housing prices (say in 2007 or 2008) and then watch the prices slowly creep to bottom in over a series of years?
I still don’t know if any of that will happen but it will be interesting to find out…
I also think it will be different this time. Last time lenders made sure the borrowers could make the loan payments, and there were not many bankruptcies and foreclosures. People were able to sit in their homes and make their payments, so there was not a huge amount of product forced onto the market. I don’t think that is the case this time because too many people are in loans where they simply cannot make the payments. This will force product on the market and it will make prices drop faster.
I agree, last time we didn’t have the toxic loans resetting when people were underwater, which I think will speed up the process this time.
This time around, though, it seems that a larger percentage of loans have been packaged into MBS with fewer retained by banks. When a loan is packaged and sold, do you know who makes the decisions regarding whether or when to foreclose or negotiate with the FB? Is it the servicing bank? The Wall Street firm that packaged the loan? Someone else? I ask because it seems like the answer may also have a bearing on the response that is made to the rising foreclosures. An originating bank, for example, would seem more likely IMO to want to avoid a foreclosure for many reasons (bad publicity hurts business; likely have a lot of loans in local market, and foreclosure hurts their collateral on their other loans, etc.). But if someone else is making that decision (e.g., Wall Street banker), they might not be as reluctant to foreclose. Anyone know who “the decider” is in such a case?
In spite of many banks selling the loans they still might keep the loan servicing at a monthly fee per loan .In this case they might be under contract to proceed with certain procedures in the event of a default per the servicing agreement .
Interesting observation.
Local banks might want to “manage” a foreclosure epidemic, and thus be willing to be flexible on things. However, on a pool of loans spread out over the country, the holder of the mortgage doesn’t give a d_mn. He just wants to recoup what he can as fast as he can. I think it’ll be much more agressive on repos and sales.
Of course, on the other end of the spectrum, many of these loans would never have been made by a bank if they had intended to keep them on their balance sheets and take the risk. But they didn’t. They just generated the fees and sold them on to the greater fool.
To me, that describes the entire episode. Too much easy/free money ran prices up too far and too fast. Now on the downside, we’ll see prices come down faster and further than people expect. I also expect homes in the 25% percentile to get hit harder than those in the 75% percentile for two reasons. 1 - Most non-doc loand and 2 - most subprime loans were made to those purchasing homes at the lower end of the housing spectrum…
JMHO
“1 - Most non-doc loand and 2 - most subprime loans were made to those purchasing homes at the lower end of the housing spectrum…”
3 - Avalanche of falling McMansion prices will crush older, smaller homes lower down on the quality pile…
Take a look at the Housing Tracker website for LA http://www.housingtracker.net/old_housingtracker/location/California/LosAngeles/. The 75Th percentile has lost over $170k since 8/14/05. Don’t you know???? Everyone should live in a million dollar home!! Even if you only make $50k a year while those of us in the $200k + range rent!!! What a wonderful country!! Sarcasim off….
I don’t know how far reaching this will be. This friday the 12th, our local PBS station, KVPT in Fresno Ca, will be doing a show on how the Santa Barbra police department can’t find recruits because of the outrageous housing delima that have put themselfs in. The name of the show is California Connected. Might make for some entertainment. Oh dear, what’s Mrs. Carlson going to do when conswela has to drive all the way from Oxnard to feed her little poohbah??
Why don’t they pick up a different bunch of day laborer-illegals each day to police the city?
That is the SoCal business model now.
test
Not sure why first post failed. Anyway, saw that CC show last year. Basically, if the two main arteries linking $anta Barbara to the rest of the world get severed in a major quake (101 & 154), the city’s toast. Couldn’t happen to a greedier bunch of smug NIMBYists.
Did a work-business trip out to SB today, jan 9th. SB requires a large workforce of contactors,laborers,blue collars to maintain that city of smug rich nimbyists. Did see a large gang of illegals camped out in Goleta waiting for work-where do they live, or do they bus them in? There are a very few hi-end tech companies out in goleta/SB airport area but thats it for SB hi-paying jobs. It looks like SB lives and dies on tourism, and these days the tourists just do not seem to be flocking out to SB. Beautiful area, gorgeous coast, nicely restored old town, musuems galore but stagnant economy, too dependent upon tourism IMHO.
Yeh, they could plunk down a few affordable homes so that the regular working folks don’t have to fight commute traffic to Santa maria/Oxnard via the single 101/154 arteral lifeline.
That show’s a repeat from last year. Basically, the only thing linking $anta Barbara to the rest of the world is the 101 & 154. If a major quake takes them out, all those well heeled residents are pretty much on their own –unless they happen to own a helicopter. One can only hope those greedy “no building apartments or affordable housing in MY city” fuckturds get what’s coming to them.
Or a full sized passenger jet like resident Travolta.
I can’t say that building apartments or affordable housing has done much to improve the quality of life in North Hollywood or Valley Village. In fact, before those things were built, we actually had family friendly neighborhoods with American style restaurants and stores, and no gang members. I could never afford to live in SB, but more power to the nimbys there for protecting the place, S. Cal. should have at least one nice place left.
“I could never afford to live in SB”
Never say never!
San Diego has the same problems. Police are leaving, down 150 cops, in droves because the pay just can’t support their family. The mess the city government is in (approaching bankruptcy if the pension benefits aren’t rolled back) isn’t helping.
reminds me of an article I saw years ago how the mayor of Aspen Co had to commute to work
These entitlements are going to kill every local gubmint in the US. All they really are are Ponzi Schemes. If I tried to get everyone in the neighborhood to pay into something for a gazillion years with the hope of a platinum parachute at the end of the line, I would be jailed so quick I wouldn’t even have time for the one phone call! Even SS is a joke. Let people do what they want with the money. If they can’t save then work until you die. Even with proper money management, I expect that working until I die is part of the equation because the way everything looks to this soon-to-be 40 yr. old, even a couple of million isn’t going to be enough to keep things going without some sort of cushion.
Besides, with the cost of health care going up, I love how everyone wants to retire at 50. Great, how the bleep are you going to pay for health insurance for the next 50 years. Not bad if you retire at 50 and check out at 60, but retire at 50 and keep going until 100, with the 2 bypass surgeries, the whatever other surgeries, all the other care, and viola, several million in expenses. Might as well just go until I die on the job. Serve them right, anyway, for working me to death!
I am 47 and I am keeping myself in as good a shape as I can, because I anticipate having to work through age 70. And I project that i will be a millionaire within 5 years (no real estate). I read about health care costs in the hundreds of thousands of dollars. I listened to some lady at a Sears auto repair place talking to some other lady about her health care bill - in the $300,000 range. Illegal aliens flooding emergency wards raise the costs for the legal US citizens. Taxpayers foot the bill. I have the high deductible health insurance and will look into setting up a HSA.
How about if they give cops free McMansions as part of their pay package?
posted ” Oh dear, what’s Mrs. Carlson going to do when conswela has to drive all the way from Oxnard ”
The big Hotels and other large users of labor all have private bussing and transportation, from citys just like Oxnard, or Oxnard it’s self…. for the rich folk in SB.
“The Colemons said they thought they were helping the developer by closing a little earlier, on Dec. 26. ‘They came to us and said, ‘OK, I will give you upgraded bath fixtures if you close and help us with the 2006 books,’ Ann Colemon said.”
Yes, they did it out of the goodness of their hearts, to help the builder out…and not for the upgraded fixtures, right?
If someone negotiated a better price for a car than they did, would they picket the car dealership and demand that they get the same deal?
Also, if prices went up, would they volunteer extra money to the builder, so that they were paying the same price as the new buyers?
Give me a freaking break, I knew that the “victim” stories would be coming out while this played out, but I expected a little less bias from the media than it’s showing; in other words, what ever happened to taking responsibility for your actions and free will?
I agree with you that all the greedy buyers change their tune after they find out they could of got a better deal ,but in this case the buyer might have some points.
(1) The builder had knowledge that borrowers would save 150k if they closed on time in 2007.
(2) The builder knowingly offered a small incentive to get them to close ahead of time to deprive them of 150K they would of had coming by giving a false reason for the builders reason for closing ahead of schedule .
(3) The builder might of closed the loan in a illegal manner in that you can’t close a loan on residential without a pink slip ,(notice of complection ).
(4) The deal reeks of bad faith on the part of the builder ,but buyers are greedy so we tend to not have any pity for them when they get ripped off by a builder .
Housing Wizard, you make good points. There was bad faith on the part of the builder. Not that I have much pity for them, but to me this couple looks more like a “victim” than the Seattle couple they featured yesterday in the LA Times.
Right . In the case where a builder has to lower prices because of market conditions ,the prior buyers can’t complain because those are the market conditions and it’s to bad that those buyers didn’t get the appreciation they were expecting .
Also, I’m seeing a number of people who went on a number of liar loans for investment purpose that are claiming they were victims ,but they were just gambling and it didn’t pay off .
But,there are some cases where the buyers or sellers are victimized .
To sort out the true victims from the BS gamblers is going to be hard because everybody is going to cry “foul “.
You’re right on the money, Wiz.
I love all this stuff which is coming out! “We thought we were helping the developer,” said the Colemons.I could almost get hysterical with laughter! “I went to buy a car but the salesman needed to send his kid to Harvard so I didn’t negotiate. I paid full price.” Give me a break, sweetheart. You thought you had done a deal where you won - and you didn’t. Tough sh*t.
That’s the essence of a good con - make the mark think he’s conning YOU.
You can’t con a con, can you. At least not in this story.
‘We are a unique market. We always react a lot slower than everyone else.’”
Bakersfield reacts a little slower than everyone else. This could be true.
Due to pesticide on the brain…there will be a scientific study one-day to prove it.
–
“‘We are a unique market. We always react a lot slower than everyone else.’”
Two moronic mantras when it comes to housing:
1. They are not making any more land.
2. My (or our) area is unique, or special.
I heard the second from a broker in Indio/Palm Desert in 2005. In 2006, we was complaining that listings have shot up from 2,500 to 7,000.
Jas
“They are crazy.”
No. You are a liar, who conveniently ignores all data which doesn’t filter well through rose-colored glasses.
I knew the real estate bubble was peaking when Bakersfield prices finally took off. I grew up in Bakersfield. My mom bought a house in the northeast side in 1989 or so and the value actually went down below her cost for several years before finally rising in the last couple years. Her husband couldn’t sell his house so he rented it out until last year and I told them to hurry up and sell it because the SF speculators were driving up the “value” of the homes in Bakersfield and the party wouldn’t last long. He sold just in time and now the values are nose-diving again. Not only is there high unemployment in Bakersfield, there is lots and lots of land that is perfectly flat and a compliant city council to keep allowing the developers to convert agricultural land to homes. Nobody in Bakersfield wants to buy used - they all want to buy new - in the older sections , there are abandoned homes and burned-out husks everywhere.
I actually still like Bakersfield - it does have attractions, but if I were to move there,which I’m not going to do, I wouldn’t buy now. I could rent a house for $800 easy - a nice one.
“it does have attractions”
What? Buck Owens and the buckaroos Theater? The majestic Kern River Falls? Tell me…on a westerly windy day, after the fields have been pesticide sprayed, what does the air smell like… to you?
It smells like deja Vu
It smells like . . . victory.
LOL!
I think it has some good qualities as well. However, many of them have been lost in the run up in prices and we now have - $hitty traffic, too many immigrants, too many gang members, prices are too high and out of whack with our wages, too much crime (see gangs and immigrants),. etc…..
That’s an interesting observation, that you knew the market was peaking when Bakersfield took off. Strangely, it was some time AFTER I thought the market (everywhere else) had peaked, when these condo-ized trailer park lots in Phoenix area began to appreciate wildly. Like, in the last eight months. Maybe it’s a pile of buyers who were priced out elsewhere.
“It’s all relative. The housing market in general has been accused of being a bubble,” Appleton-Young said. “There has been talk of a bubble for four years. In the last year and a half we have seen a significant decline in sales. But the actual decline in prices has been slower. What is protecting the market is we have an improving economy.”
Yeah, but what happens to prices when interest rates eventually go up?
Realtor Economists love to use a straw man argument to discount the reality of a RE bubble.
Very common tactic.
What happens to prices when lots of reset ARMs drive up foreclosures, followed by REO fire sales? Oh, sorry, I forgot — it is different this time…
“What is protecting the market is we have an improving economy.”
No what has been keeping prices up is every sleezy trick by realtors. IO loans, no doc, fake bids to drive prices up.
“There has been talk of a bubble for four years”
I remember reading an article in The Economist in 2003. It was an excellent bubble primer. At the time I was not sure if it applied to California, but it made me wary of ever raising prices. As far as I can tell, they were the ones who called it earliest, but being right too soon can amount to being wrong. People like Appleton-Young have been able to point to the fact that house prices were still rising for years in order to keep the bears out of the debate. I can’t wait to see how they will be spinning this in the next couple of years.
“As far as I can tell, they were the ones who called it earliest, but being right too soon can amount to being wrong.”
Leamer was on to it pretty early…
http://money.cnn.com/magazines/moneymag/moneymag_archive/2003/07/01/344703/index.htm
Boy, she makes so much sense. And in 2003 too!!!
Can anyone guess who said this way back in 2003?
“SHOULD I WORRY IF MY P/E IS WAY UP? Housing bubbles typically don’t pop like stock bubbles. Instead, home prices usually deflate slowly. Transactions dry up before prices drop because homeowners tend to hang on rather than sell at a loss–as long as they can make their mortgage payments. For this reason, some real estate experts think the critical relationship is not between home prices and rental costs, but between the housing market and income levels.”
Shilling???
I called the bubble in 2002 when the news reports of twits camping out to buy ‘homes’ started airing.
I called the top in 2005 with the Time Magazine cover article.
The bottom will be when the drooling neighborhood halfwit tells you housing is a ‘bad investment.’
Advice for home buyers in todays market……….
Buying a home in today’s market is more akin to buying a car. The minute you drive it off the lot it is worth 40% less than what you agreed to pay for it.
Per a post on my blog:
Anonymous said…
latest scoop, a dismantle employee, informed HSBC, of the white washing QC head was doing , and triggered the absolute, THE end of times as we know it for SFC.
Crispy: the post is a little cryptic for me (what is a “dismantle employee”? Also, SFC? did they mean HFC?), could you clarify it a little? Thanks.
SFC - Secured Funding Company is what I thought at first. Also, interpreted it as a digruntled employee. Now I am not so sure - I am confused now. LOL
It sounds like an employee caught the head of Quality Control at SFC in some kind of skullduggery, informed HSBC, and then was dismantled
Here just in. There is a nice 4000 sq. ft. house on a large lot with decent ocean views, yard, etc. built in 2000 with high quality finishes that just went into escrow for around $575 per square foot!!!!!! Asking price was $2.5M, then $2.4M. I think it’s going for about $100K less.
That my friends is a great new datapoint for the downward trend on prices in Laguna Beach, a place where “prices will never go down because it’s such an desired location.”
I think it will only get better from here. Waiting to be able to buy a place in Laguna that’s in average shape and about 2000 sf for around $800-900K. My guess is in 2009.
From your lips to god’s ears!
There’s a place in South Laguna that was bought in April 2006 for $1.8 million (two-family home). It’s been on the market for several months and now reduced at about $1.4 million.
Another good data point. From what I am seeing, the market in Laguna Beach has dropped a lot from spring ‘05 to now and should keep going for a while.
Any other points for view or observations from the blog members?
Here’s a laugher: A home in Arch Beach heights, which only has about 650 sq. ft., (a hobbit’s home!) was marketed by private auction, starting bid at $795,000. Seller didn’t get any satisfactory bids at the private auction, it’s now listed at over
$1,000,000.
“They need to do the right thing for the community,” said Ron Howard, a systems engineer who bought his home in October. “We trusted them, and they turn around and go against their own mantra.”
ROTFLMAO. Welcome to the real world, Bagholder Boy, and not a minute too soon. Never confuse empty, feel-good advertising slogans about trust with a company’s true agenda: BOTTOM LINE PROFITS, even if they come at the expense of rubes like you.
Sammy posts ” they come at the expense of rubes like you.”
Too kind. That guy has no real world anything…. dufoos!
From rumor to fact in one day:
Another Sub Prime goes DOWN - http”//bakersfieldbubble.blogspot.com
Heh heh heh…yeah, brokeroutpost.com is a good way to get a “heads up” on these implosions…besides Popular Financial, there’s talk of Lime Financial contracting, if not imploding.
We should really start thinking of starting a sub-prime lender Dead Pool just to make things interesting…
Aaron Krowne has a lender implode-o-meter at: br.endernet.org/~akrowne/ml-implode.html. Not quite at the level of F@ckedCompany, but a good start.
I would bet 50% of us here were visitors of F’d company?
Maybe not 50%, but a sizable percentage.
Where’s Bay Aryan when you need him? Oh, that’s right: he changed his handle to LV_Landlord or va_investor or something
I think VP_Cheny is Gekko?!?!?
“Bay Aryan”
Geez, That’s a pretty “brisk” handle…..
I subscribed to F’cked company for a month but it took 3 more months to removed my subscription. That guy was a crook. Also a little awkward explaining the name of the site to my credit card company as the URL sounds pretty dubious to most people!
Go to Brokers Universe too. Lots of good dirt there also. This is like taking candy from a baby! LOL
“Popular Financial Gets Smoked :
WASHINGTON, Jan 9 (Reuters) - Popular Inc. (BPOP.O: Quote, Profile , Research), Puerto Rico’s largest banking group, said on Tuesday its U.S. consumer finance unit will exit the wholesale subprime mortgage origination business, resulting in charges of $39 million.
The San Juan-based company, parent of Banco Popular, said that as part of a restructuring, Popular Financial Holdings Inc. will instead focus on profitable businesses, and merge support functions with Banco Popular North America.
The company is the latest of many to curtail or get out of U.S. subprime originations, which involves lending to consumers with less-than-stellar credit histories.
Profits in the sector have shriveled due to increasing competition for a shrinking pool of borrowers, and amid signs that defaults and delinquencies are rising.
Popular plans to incur the charges in the fourth quarter of 2006 and first half of 2007. It disclosed the charges, which include $20 million of impairment, in a regulatory filing. ”
======================================
The interesting thing about that particular melt down is that its not a US backer ! The others, as far as I know, had US based backers - GMAC, ML, etc. This one is FOREIGN ! That is an ominous sign ! Foreigners are starting to catch on that it isn’t wise to loan money to the US mortgage companies.
I wonder how many other mortgage companies are fighting with their financiers right now.
Well, if the public knew why the market inflated in more detail I think they might understand why it has to crash /correct /contract.
I was talking to a 79 year old lady today who brought up the fact that real estate was going down and she blamed it on foreclosures coming . This older person said to me in essence that she has never trusted real estate . Than I found out that her family lost their house during the Great Depression .
That got me thinking about how easy it was to sell the hype of this real estate market to people who have never seen a downturn .”Real estate always goes up”, was such a absurb concept to this older women when I told her about how the marketing of real estate has been in recent years .
Definitely some delusional buyers (and realtors, lenders, etc.) these past few years.
Somehow, most of them aren’t even aware there was a housing bust in the late 80s/early 90s. They also don’t understand the concept of rising interest rates as ALL of them have told me they’ll “just refi” when their loans reset or if they run into trouble.
Lessons are best learned through personal experience, I suppose…
Here’s what Governator Arnold said today:
“We are the modern equivalent of the ancient city-states of Athens and Sparta. California has the ideas of Athens and the power of Sparta,” Schwarzenegger, who played Hercules in his first film role, told legislators at the capitol. “Not only can we lead California into the future … we can show the nation and the world how to get there.” We can do this because we have the economic strength, the population, the technological force of a nation-state.” — http://tinyurl.com/yzwwej
For me personally, it’s good to hear this sort of thing from a leader even though it sounds like “since I can’t talk you into letting me run for President, let’s create a state that is more powerful than the country it’s in”. Watch for hime to lead a secession in 10 years and become imperial leader.
I don’t quite think that but the pork barrel proposals, healthcare, low carbon fuels and others seem to be targeted at bursting the housing bubble by accelerating outmigration of businesses.
I believe that Arnies first film was called “Stay Hungry” a film about body builders banding together so save their gym and the old folks home next door from rapacious property developers. A pretty amusing, tongue in cheek movie as i recall.
free-er healthcare= CA the home of the lame
Arine is delusional. All he is doing is adding more to the debt load of CA. The economic growth he is touting is mostly tied to the REIC, so as that goes so goes the CA economy. As the credit bubble implodes the revenues for the state will dry up quicker than Arnie can break a leg and the state will once again be on the verge of bankruptcy. With all of the socialist programs he is proposing, expect the migration gradient to accelerate. Those that earn money and pay taxes will leave quicker and those that want handouts will come here quicker. Net Net the population will stay close to the same but the demographics will change radically. Eventually the state will consist of 50% poor (gov’t assistance), 25% gov’t workers and gov’t retires and 25% uber rich who don’t really care where they live. The middle class will be long gone. At that point I hope the state does succeed from the union, because it will be the equivalent of a 3rd world nation.
This is getting scary - Another DOWN:
http://bakersfieldbubble.blogspot.com
Looks like you need to go elsewhere to get your trailer home financed!?!?!?
I was wondering what happened in the trailer home market in the last 5 years . Did the trailer market inflate beyond reason or was it kept down because of so many people being able to get loans on houses and condos ?
az_lender has a good handle on this market, it’s her bread and butter.