Market “Is Precarious In A Way It Wasn’t 10 Years Ago”
A housing report from California. “Bay Area home prices were flat last month while the sales pace was the slowest pace in a decade. A total of 7,488 new and resale houses and condos sold in the Bay Area last month. That was down 19.9 percent from 9,347 for December last year, according to DataQuick.”
“Sales have declined on a year-over-year basis the last 21 months. Last month’s sales count was the lowest for any December since 1996 when 7,180 homes were sold.”
From NBC San Diego. “The pace of home sales in a six-county region of Southern California slowed in December to an 11-year low for the month, as home prices fell in San Diego and Ventura counties, a real estate research firm said.”
“Los Angeles County ‘has been a bit stronger than anticipated, but we still expect…sometime later this year, the year-over-year numbers are going to start to go negative,’ DataQuick analyst John Karevoll said. ‘The Inland Empire is just ahead of their peak, and I think prices will be probably coming down,’ Karevoll said.”
The Orange County Register. “DataQuick reports that the median price of all residences sold, new and old, in December was $642,000, the county’s second highest behind only June’s $646,000.”
“Why should this seemingly out-of-season month seem so strong? Well, as almost any year ends, NUMEROUS builders usually rush to sell more new homes before the books close on their fiscal year. Unlike an individual, builders have bosses or shareholders to report to, and those folks like to see product moving.”
“Last month, for example, new homes, typically the market’s priciest houses, were 20 percent of all Orange County sales vs. 13 percent in 2006’s first 11 months.”
“We’re not alone. In Southern California’s six big counties, new homes were 27.5 percent of the December market vs. 22 percent the rest of the year. That’s a key reason why the six-county median price hit a record $495,000 in December.”
“Builders may be moving houses, but they do so at a somewhat hidden price. DataQuick’s results do not recognize any of the many discounts that don’t show up in the sales prices, such as buy-downs of mortgage rates or free extras or upgrades within a home.”
“December’s count of Orange County residences of all stripes sold was off 29 percent vs. the last month of 2005. When you add up 2006, you see sales down 27 percent. Last year was the slowest selling year since 1995.”
“Numerous visitors to this blog have wanted to see what O.C. home prices did when measured by cost per square foot. The square-foot measure has been down for the past two months, the first drops in a decade. Square-foot costs were down 4.3 percent year over year in December.”
“‘It took four months to sell Manmeet Nijjar’s five-bedroom home in Orange, and he ended up taking $100,000 less than his original asking price. He listed his home for $975,000, without any nibbles. ‘People had a lot of choices. They were overwhelmed, I think.’”
“Finally, he dropped the price to $950,000. Two weeks later, he got an offer for $850,000. He ended up settling for $875,000. ‘I felt it was better to take a lower offer than to rent it,’ he said.”
“Lenders increased their consumer warnings in the final months of 2006 to Orange County homeowners who fell behind on mortgage payments. They sent 688 notices of default in December, marking the fifth consecutive monthly increase in such notices, DataQuick reported.”
“Foreclosure totals also rose more or less steadily in the second half of 2006. For the full year they totaled 647, more than quadruple the 2005 total.”
The Union Tribune. “Residential foreclosure activity in San Diego County rose sharply in 2006, DataQuick reported. There were 1,612 foreclosures last year, compared with 212 in 2005, a jump of 660 percent. Notices of default, the first stage in the foreclosure process, totaled 8,816 during the year, compared with 3,933 in 2005, an increase of 124 percent, said DataQuick analyst John Karevoll.”
“The county’s housing market ‘is precarious in a way it was not five or 10 years ago,’ Karevoll added. ‘It could get bumped out of whack with much smaller movements in the broader economy. It is very stretched.’”
The Desert Sun. “Some Coachella Valley buyers are convinced they have the upper hand in a market where home inventories are high. So they’re not shy about making offers well below asking prices.”
“What’s happening is buyers are coming in with some low offers and not getting them accepted, said agent Terri Munselle. ‘It’s a stalemate right now in some cases. Sellers are holding out all across the board, partly because it’s so early in the season. The sellers really believe they have February and March to test the waters.’”
“Still others in a pinch to sell because they’re having another home built or for another reason are slashing prices to attract deal-seeking buyers.”
“‘On the upper, high end, prices are staying up there,’ said agent Kim Hyde. ‘But at $1 million and below, I see a lot of people negotiating.’”
“With nearly 8,300 homes on the market in the valley in mid-December, the competition often translates into some pretty good deals for buyers, real estate agents said. ‘The mid-range is still awfully stagnant, and that is where the bulk of the inventory is,’ Munselle said.”
The Ventura County Star. “Ventura and San Diego counties saw another slide in year-over-year home prices…Ventura County’s median of $593,000 was down 5.9 percent from $630,000 the previous year.”
“Mark Schniepp, executive director for the California Economic Forecast, said there’s usually no worry when a housing market that has seen increases at breakneck speed starts to slow. In fact, it could help the economy.”‘
“Though a slowdown in housing that leads to lower home prices affects real estate agents, lenders and others involved in the residential market, it wouldn’t necessarily affect other sectors of the economy and could actually be healthy for the market, Schniepp said.”
“‘A housing sector which cools off and somehow makes housing more affordable is a benefit to the work force,’ he said. ‘It would actually be a welcomed event, providing it would occur without chaos.’”
‘Last month, for example, new homes, typically the market’s priciest houses, were 20 percent of all Orange County sales vs. 13 percent in 2006’s first 11 months. In Southern California’s six big counties, new homes were 27.5 percent of the December market vs. 22 percent the rest of the year. That’s a key reason why the six-county median price hit a record $495,000 in December.’
‘Builders may be moving houses, but they do so at a somewhat hidden price. DataQuick’s results do not recognize any of the many discounts that don’t show up in the sales prices, such as buy-downs of mortgage rates or free extras or upgrades within a home.’
Kudos to JL for finding these bits of data. Interesting that Dataquick didn’t mention it yesterday, yet today one of their analysts says YOY prices will be coming down, even in LA.
“DataQuick’s results do not recognize any of the many discounts that don’t show up in the sales prices, such as buy-downs of mortgage rates or free extras or upgrades within a home.”
The bad news: SoCal homes were at a record low level of affordability in Dec 06.
The good news: Affordability looks better after you subtract out the value of all the free stuff the buyers were tricked into paying for on their subprime loans.
Yep GS . Its interesting how sub-prime lenders somehow are able to make low/no down loans plus give all these incentives . Interesting how that doesn’t affect sub-prime loans on the purchase appraisals . I guess every buyer would pay the same price as the buyer who got 47k in concessions ,no difference ,no affect on market value . Secondary market investor knows about it ,it’s all been disclosed ,yep ,right .
“Last month, for example, new homes, typically the market’s priciest houses, were 20 percent of all Orange County sales vs. 13 percent in 2006’s first 11 months.”
Practically all the new SFH Developments in the OC, particularly the South OC,feature pricy $700,000-1 million+ large 4 bd/3 baths. The NEW turtle rock/shady canyon tracts in Irvine south of the 405 feature these types of pricy units in gated, well-laid out master planned communities. They were also some townhomes and apts laid out in the recent shady cyn developments east of UCirvine but these would not be cheap.
The Massive New tracts along Portola Pkwy also are mostly $700,000 and up SFunits. South OC does not build inexpensive affordably priced sfhs, period. That is not good for the large irvine commercial-industrial corridor stretching along the 405/5 fwys, which actually features modern well-laid out corporate parks, many hi-tech, with superb transportation access. Problem is lack of affordable housing in the S OC. Probably a large % of the workforce has to come in from N oC, IE, or even from LA.
Note: The recently built 1000+unit Village Apts near the Irvine Spectrum was built to provide ‘affordable’ multi-unit housing in the S.OC, smack in the middle of the hi-tech new industrial complex where the 405/5 meet at what is called the El-Toro Y.
modern well-laid
Translation: impossible to walk anywhere for lunch, let alone to and from work.
I have the bad feeling what now are just stats will trickle down to actual dramas on the streets soon. For now it is abstract, but everywhere the plummeting indicators show a tidal wave of human misery rising.
“Case Number Case Type Case Status Filing Date Case Title Party Date of Birth D.O.C. Number
05-2006-CA-047519-XXXX-XX REAL PROPERTY/MTG FORECLOSURE ORIGINAL DISP 06/21/2006 J M SULLIVAN VS C J WOOD DEFENDANT (1) 01/04/1976
05-2007-CF-049458-AXXX-XX SEXUAL OFFENSES ORIGINAL PEND 01/14/2007 STATE VS WOOD CHRISTOPHER J DEFENDANT (1) 01/04/1976
Cnt Record No. Charge Dt Statute Charge Disp Dt Final Disp Citation No.
1 1 01/13/2007 AGGRAVATED BATTERY DOMESTIC VIOLENCE
2 1 01/13/2007 KIDNAPPING
3 1 01/13/2007 AGGRAVATED ASSAULT
4 1 01/13/2007 SEXUAL BATTERY W DEADLY WEAPON
5 1 01/13/2007 FALSE IMPRISONMENT ”
The guy was trying to film bondage porn to get out of foreclosure???
Ohh and to extract this nugget, go here:
http://webinfo4.brevardclerk.us/facts/name_search.cfm
and type “christopher john wood”
The dude was arrested yesterday. Records show personal bankrupcy/foreclosure a few weeks ago. Also his wife was apparently the victim as reported in cnn.com
I think the news story of the La Jolla fraudster who beat up the news story has been officially usurped.
“news reporter”
….DAMN!
“Mark Schniepp, executive director for the California Economic Forecast, said there’s usually no worry when a housing market that has seen increases at breakneck speed starts to slow. In fact, it could help the economy.”‘
I’m amazed at how clueless some folks are when you mention that expensive housing is bad for a the economy. A large percentage of my well educated, decently payed, 20 and 30-something friends have been leaving CA over the past 4 years, and the 40+ crowd around me seems totally confused as to why.
Mark Schniepp, executive director for the California Economic Forecast, said there’s usually no worry when a housing market that has seen increases at breakneck speed starts to slow. In fact, it could help the economy.”‘
Hey, Mr. Economist, what happens if the housing market decreases at *Great Neck Speed*? What will that do to the economy, you pinhead!!! Her’s my quote to you “What goes up, must come down” I just can’t wait for this years Super Bowl, so the Spring non-buying season will start. With listings exploding, and sales flat, we should hear some pretty good BS over the next 90 days.
“‘A housing sector which cools off and somehow makes housing more affordable is a benefit to the work force,’ he said. ‘It would actually be a welcomed event, providing it would occur without chaos.’”
*******
I like that:
“… somehow makes housing more affordable…”
As if lower prices are magical (or something).
I’m not going to place a bet on its occurrence, but perhaps a little bit of “chaos” could be just the thing for the SF market.
“In fact, it could help the economy.”
He has a point. Falling home prices translate into a wealth effect for anyone with savings. Oh rats — forgot the savings rate is negative in the US.
“Mark Schniepp, executive director for the California Economic Forecast, said there’s usually no worry when a housing market that has seen increases at breakneck speed starts to slow. In fact, it could help the economy.”‘
The last two times the housing market ran up at breakneck speeds it was followed by a recession. Given the history, why wouldn’t you worry?
Never let ‘em see you sweat!
The Orange County Register. “DataQuick reports that the median price of all residences sold, new and old, in December was $642,000, the county’s second highest behind only June’s $646,000.”
Oh great! Now, instead of reporting declines, we’ll get “median price in the top 10 all time highest for region this month”.
Check this out from the post at Irvine Housing Blog:
PRICING (Portola Springs - Decada)
Phase 1? (July 29, 2006)
Residence 1 - From $691,490
Residence 2 - From $723,420
Residence 3 - From $742,325
Residence 4 - From $779,080
Phase 2A (Effective 1/13/2007)
Residence 1 - From $580,000
Residence 2 - From $602,000
Residence 3 - From $628,000
Residence 4 - From $648,000
The sale of new homes with huge incentives is what artificially inflated the median. When the builders lower their prices 15%, the median can’t be far behind. Look out for a huge OC median drop in early 2007.
BTW, Portola Springs is an Irvine neighborhood.
Wait until all the whiners complain about the builders hurting the value of resales.
The issue in Bay area is not enough SFH being built. There’s space but regulation prevents from supply to come up and free markets to work. there’s enough demand if prices fall to more reasonable levels. people with money and decent jobs cannot afford homes or refuse to buy at such ridiculous levels..
Are you sure the problem is not that too many flippers bought homes? Because I will venture to guess that once most of the flippers realize their folly and cash out of their investments, the apparent housing shortage may prove to have been a mirage.
“Finally, he dropped the price to $950,000. Two weeks later, he got an offer for $850,000. He ended up settling for $875,000. ‘I felt it was better to take a lower offer than to rent it,’ he said.”
Something seriously wrong with this picture! Almost as bad as when Congress votes themselves a 25% payhike, then when the public gets outraged they say “Ok, Ok we’ll take 20%
The price ($100K off) almost seems ok but if you saw the price in 1995 it was probably only $300K to $350K. So a good start but houses still overpriced in CA.
‘I felt it was better to take a lower offer than to rent it,’ he said.”
This was a very smart move.
I saw that too. He will be complimenting his own genius 3 years from now.
“It took four months to sell Manmeet Nijjar’s five-bedroom home in Orange, and he ended up taking $100,000 less than his original asking price. He listed his home for $975,000, without any nibbles. ‘People had a lot of choices. They were overwhelmed, I think.’”
He is a businessman. That is a smart business move, to sell a house in Orange, CA for $875,000 and swallow a minor $100,000 reduction in the original listed price. All the more because Orange is on it’s way to becoming ‘Santa Ana-tized’, with large areas of declining aging residential areas rapidly being infiltrated by, you guessed it, immigrants. Old town Orange used to be a showcase historical town square but that entire area is feeling the effects of reverse gentrification: an older Scal genteel middle class burg backsliding into a decaying immigrant suburban slum zone such as Santa Ana has become.
“Why should this seemingly out-of-season month seem so strong? Well, as almost any year ends, NUMEROUS builders usually rush to sell more new homes before the books close on their fiscal year. Unlike an individual, builders have bosses or shareholders to report to, and those folks like to see product moving.”
What dope cooked up that batch of smelly brown feces?
That right there is why I read this blog.
So many of these stories where they drop, 100,000 are about homes that are 400% overpriced - there are not many homes anywhere worth over 500,000 . It is still all play money. the average person can only afford 100,000 so until the prices start dropping below 100,000 there are no homes for a huge amount of people
This is a true statement, and I KNOW it - it is just that 100 sounds so LOW because we are all so used to ridiculous prices. Avg Joe should NEVER EVER buy a home over 200k - EVER…..
It is funny how living in California warps your sense of real estate prices. I grew up in a farm community in rural central Wisconsin. Most of the cities housing stock is still priced under $150,000 even with bubble prices. Where I live now, a $hitbox starter home is $600,000.
Not for long.Let’s see where there at in 2008!
“‘On the upper, high end, prices are staying up there,’ said agent Kim Hyde. ‘But at $1 million and below, I see a lot of people negotiating.’”
Yeah, I love how this realtwhore defines “medium” or “low end” housing: anything at 1 $million or below. And CA’s median HH income is ~$57,000/yr.
This is a Starbucks market. Would you prefer your McMansion in tall, grande or venti size?
I wonder if there will be a third season of Real Houswives of OC, after housing get a bit more hairy.
hate to brag, but had the graph with the December ‘06 foreclosure numbers up last night. check out the linear increase in % of NOD’s going to foreclosure. also check out how consistant was the increase in both numbers starting mid 2006. link
Remember what Socalmtgguy said back in early 2006, the resets start in mid 2006. sure enough, the foreclosures really started to increase starting mid 2006.
“Los Angeles County ‘has been a bit stronger than anticipated, but we still expect…sometime later this year, the year-over-year numbers are going to start to go negative,’
Really? Finding this one made my day. I’ve been watching it in Silverlake LA for a while.
1515 Murray Circle, 90026
http://www.zillow.com/HomeDetails.htm?o=North&zprop=20744724
Sales history:
06/23/2005 FB pays $929,009
Foreclosed and sold 10/23/2006: $682,351
25%+ drop in under a year and half? I’d say things are “going to start to go negative”.
btw the less than worthless zestimate is still over 1M.
Even then it seems overpriced 3 bedrooms 1 bath. It should be 200K
Could this be a case of denial, not taking a lower offer and ending up in foreclosure and getting totally F*ed.
So the percentage of NODs that result in defaults has gone from 5% to 25% in two years? If this doesn’t scream “meltdown” I don’t know what does.
testing
I was starting to panic when I couldn’t read or post for a few minutes.
Some database problems tonight.
“He listed his home for $975,000, without any nibbles. ‘People had a lot of choices. They were overwhelmed, I think.’”
Since when does having a lot of choices overwhelm anyone?
“The county’s housing market ‘is precarious in a way it was not five or 10 years ago,’ Karevoll added. ‘It could get bumped out of whack with much smaller movements in the broader economy. It is very stretched.’”
But not at all unlike the way it was seventeen years ago, at the onset of the last bust.
–
“The sellers really believe they have February and March to test the waters.”
While the water gets muddier and muddier and muddier, i.e., large number of homes comes to market, a process that begins in the second week of January and peaks in June-July.
The Season of Truth is approaching as the winter comes to an end. Nine more weeks. When the data for mar-may is released all the wishful talk about the housing bottom would end.
Jas
And then we get to hear them say “We’re off to a slow start this year, but we should be back to normal by summer.”
“We’re not alone. In Southern California’s six big counties, new homes were 27.5 percent of the December market vs. 22 percent the rest of the year. That’s a key reason why the six-county median price hit a record $495,000 in December.”
That in turn explains why the record is misleading, as builders have generally been using incentives typically valued at $50K or more in the form of new cars, exotic vacation or cash back at closing, all financed on the home loan as though part of the structure. Subtract the value of incentives off the new home purchase price and you will get quite another picture of the December price level.
“‘A housing sector which cools off and somehow makes housing more affordable is a benefit to the work force,’ he said. ‘It would actually be a welcomed event, providing it would occur without chaos.’”
True. It is happening here in the south bay. Lockheed is sending 1,700 well compensated engineers out of state (1,000 to Houston for the shuttle replacement, 700 to Colorado for the new rocket joint venture). Boeing is doing trickle layoffs and moving 1,000 engineers to Colorado (same rocket joint venture). Nissan already left… My company is slowly transfering people out of state yet we have an in state hiring freeze (hmmm… makes one wonder, eh?). I know Doctors who would love to bring their kids into the practice, but new workers want livable salaries and they’ve told me (over dinner) that manning up an office means more work for less pay (to the doctors). I know another very successfull importer who cannot hire at wages that make any sense. Thus jobs leave the bubble areas (slowly, but surely).
Remember, if you hire in new people at high wages, the old people start to get restless unless you bump their pay…
California might have been a “neutral state” in the United van lines survey (kudos to them for publishing such data year after year…), but I’m seeing jobs leaking out of state. What the heck will we do in April or May once the construction jobs start to go… poof!
Neil
testing
10 years ago
people made down payments
the market had beed adjusted by the oil patch meltdown
adjusted by the 1986 tax refrom bill
His name is Manmeet, heh, heh.
Here is a post from Jon Lanser’s blog at the Orange County Register about how the price per square foot for homes in OC has declined for the first time in 10 years:
http://blogs.ocregister.com/lansner/archives/2007/01/oc_squarefoot_home_costs_down_1.html
It’s interesting to note that the data on price per sf for re-sale homes is flawed since it doesn’t account for many remodels (and typically and increase in the size of the house) that have occurred. So, the reality is the numbers for $/sf are even worse. Also, you would assume the quality of the house improves when people remodel, so a price drop on a per sf basis means even more bang for your buck.
As I mentioned in a previous post, I know a really nice house with ocean view in Laguna Beach, CA that was built in 2000 is in escrow for $575 per sf. That kind of comp will not make existing and potential sellers happy so long as the appraisers/loan company underwriters do the their job (questionable).
>>>>>>>>>It’s interesting to note that the data on price per sf for re-sale homes is flawed since it doesn’t account for many remodels (and typically and increase in the size of the house) that have occurred. So, the reality is the numbers for $/sf are even worse.>>>>>>>>>>>>
How do you figure an addition would not show up in the square footage?
Gene, based on Jon Lanser from the OC Register, the data they use for the $ per sf calc doesn’t get updated with the remodeled sf number via the county (see link for the fill description). Not sure why, but based on Lanser’s comments it’s the way it is.