Bits Bucket And Craigslist Finds For January 29, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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P’cola Popper: “Jas, I don’t believe your post got as much attention as it deserves since you posted it up late on a Sunday afternoon. Repost to the Bits Bucket on Monday for a wider audience.”
Thanks, Popper. Amazing responses (all good!) thus far. I am sure that I will hear few complaints soon.
This will also answer the quiz that I posted last week on Bits Bucket about price increases in Santa Clara Co. and LA Co.
The Silicon Valley Housing Report:
http://www.financialsense.com/fsu/editorials/jain/2007/0128.html
The above link shows the graphs better.
Enjoy!
Jas
The first run on a bank directly related to housing:
http://tinyurl.com/2lor5y
Somehow I don’t think this will be the only one.
This story is something that fascinates me. Kind of like passing an accident. Cant help but rubberneck. I even trotted over to the yahoo msg boards. Heehee. Lots of “investors” screaming buy buy, it will be up to mid teens again this week. This is just an overreaction and it really is only a small ding. hahahahahahahahahaha.
Oh, my. Sorry. Had to wipe the laugh tears away.
My mother lives in Fl and sold her house this year ( I was sweating it more than she was) and when I talked to her this weekend I asked her if she had any deposits there. She said no. why do you ask? Why???? So I filled her in bare bones, and she could care less. oh well. At least her money is safe so far.
Wow, I smell smoke…
I like the subplot story even better…
“The board advises the commissioners, who are ultimately responsible for administration of money left to the library by Beulah Tingley, a former library volunteer who died in 1986 at 92.
The city’s library depends on the interest from the money Tingley left to survive”
Bless, Bless, Beulah Tingley.
Can you imagine what might have happen had this been the Home Depot Board?
Good work. I know we’ll both be happier when both this stupid RE market and even stupider stock market crash.
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ChicK,
Unfortunately, America and American People would suffer when that happens because so much of the risk has been passed on to them, including their pension funds.
I would have been happier had the Crooks not been allowed to do what they have already done.
Jas
can’t change the past. pretty hard to change the future. I just watch…
True but you and I both know it will only be allowed to go so far before intervention happens.
This is the first run on a bank that I am aware of…due to home lending problems:
http://tinyurl.com/2lor5y
I wonder how long until the next one?
The link doesn’t work.
Article published Jan 27, 2007
Linked stories
Coast Bank floats plan to satisfy borrowers
01/27/2007
City of Bradenton Beach pulls $2 million
By ANTHONY CORMIER
STAFF WRITERS
anthony.cormier@heraldtribune.com
BRADENTON BEACH — On Friday morning, the city of Bradenton Beach resolved on a rather large withdrawal at Coast Bank of Florida: $2 million.
The sum also included $620,000 from an account for the Tingley Memorial Library, said City Clerk Nora Idso, who helps oversee the small city’s $3 million annual budget.
The balance of the remaining $1.4 million was general municipal funds.
“We don’t anticipate any problems with the bank, but anytime you’re talking about public funds, you have to be careful,” Mayor John Chappie said, referring to Coast.
Idso plans to find another bank quickly.
“I don’t want to be walking around with $620,000 for very long,” she said of the library fund
History may not repeat itself but it sure does rhyme. I think that “Coast Bank” rhymes with “Old Court Savings and Loan.” Are depositors camped out with folding chairs and Thermos’ far behind?
No, they now have phones and internet access (smartphone, cellphone, crackberry, etc.) to their money so the bank run will take off as soon as the rumor starts.
Jas, When I first read your report last night I was sure you must have made an error when reporting that SCC only went up 35% from 2000-2005. I see it has not been adjusted so I guess I’m a bit surprised that it isn’t MUCH higher. Not sure what to make of that info.
Please read carefully — It went up 35% during Apr’00-Dec’06, or an 80-month period!
With the benefit of the hindsight, March 2000 was the best time to sell Silly.con Valley Scams as well as homes and put money into US Treasuries. Housing there as done very poorly since the tech bubble burst.
My prediction is that Silly.con Valley will turn into a Hellhole within the next four years because its economy was built on fraud, since 1995, that can’t be sustained for very long.
Jas
Median price, 35%, yes. However, a friend of mine purchased a small SFR in for 390K in October 2001, that would likely selly for roughly 600K at this moment. Sad but true.
Regardless, nice reporting.
anoninCA,
Those numbers are not that far off from what Jas is saying. Your friend “has” 52% appreciation over 63 months. What’s the compounded yield on that, 8%? Of course, if he used leverage, then got better returns on his equity. Considering what it may have cost to rent a place, his return is not astronomical.
Jas, I did read it carefully and that was my surprise, that it only went up 35% over that 80 month period. I expected that it would have been much higher considering what the bay area experienced, etc. I lived there in the early 80’s and was under the (apparently mistaken) impression that it was also seeing impressive YOY gains in the RE market these past 6+ years. No big deal, thanks for correcting that impression. I agree with your assessment that it will tank when the RE ball gets some momentum rolling down hill.
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Auger-inn,
I was surprised myself. I was living there during 1999-2000 (I retired and left in March 2000). That is why we need to look at the data. Anecdotal evidence, or memory, is not always the best guide.
Jas
I think it depends on what data you use. Also the ‘+’ is a big difference - if you use a 9-10-year period, prices increased 100% easily - in fact around 200%. Prices in CA bay area increased greatly during the ‘97-’00 period, paused for 1-3 years (1 in the north bay, 3 in south bay), then started up again. Overall SCC has experienced the same gains (about 150-200%) as other bubble areas - FL, VA, and LA, it’s just that it was spread out over 10 years instead of 5.
The OFHEO data shows increase 200-2006 in SCC of 87% - from an index of 169.79 in Q1 ‘00 to 319.57 in Q3 ‘06.
I think that SCC truly has a higher “support” level than do other bubble areas, since it’s very tech-driven and tech is still the fastest-growing industry. Still a bubble, but won’t fall as far as others areas IMO. I could be wrong though - tech may actually take as big or bigger hit if the general economy goes down the tubes (can’t buy that new PC/TV/iPod/etc if you’re spending all your $$ on food and mortgage).
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I agree. The reason for choosing Apr’00 was that the homes that closed escrow in Apr’00 were sold at the peak of the tech bubble. There was a sharp rise in home prices during Jan’96-Apr’00 in Silly.con Valley when the prices were mostly flat in Socal.
Jas
In today’s Honolulu newspaper, a good story about condo conversions.
http://www.honoluluadvertiser.com/apps/pbcs.dll/article?AID=/20070129/NEWS01/701290324/1001
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Worth passing on…
The article has this great quote:
“[Borrowers] lost the motivation or incentive to send in the checks.”
David Liu, director of UBS’ mortgage strategy group, Jan 28, 2007
http://calculatedrisk.blogspot.com/
I still think that a book of quotes on US housing would be a best seller.
Jas
5% to 7% default numbers in OC. No problem. Simply planned collateral damage by the Fed doing the bidding of government to flood the banking system with money to get the unwashed masses into property for many reasons. 7% default - 93% stable. Once this property mess bottoms out, even if the default numbers are 20%, and prices have tanked to a reasonable level, buyers will move in. Foreign or domestic.
Burn that image of 10 cents on the dollar for property out of your brain and stop reading crap like Financial Sense and use your own common sense. 10 cents on the dollar ain’t gonna happen. $5,000 an ounce gold ain’t gonna happen either. If you had followed the advice of these bear gurus for the last 6 years you would be living in your car and getting your nutrition from McDonalds.
This free money period has been planned. The most important reason being, once ex-renters are committed to paying mortgages (as opposed to rent) they are stable, taxable, cash cows which can tracked and milked when needed. Banks should issue a cow-bell with each mortgage.
Another reason. As “stable” home owners age, they can “un-lock” that equity in their tacky little sh*tboxes and crappy cramped condos and get reverse mortgages to pay for those hip and knee replacement operations, by-pass operations, nursing home care when they reach 100 years old because of medical advances, are totally ga-ga and wearing diapers which cash strapped medicare and social security has NO CHANCE of paying for in the next 40 years.
Noticed how many reverse mortgage ads are appearing on tv lately? In the next ten to twenty years, several of those ads every hour on tv will seem as normal as those “healthy” fat and sugar laden cereal ads the unwashed become brain washed and accept reverse mortgages as inevitable.
Yes, I know the Fed is a private bank and not controlled/manipulated by government and I have a bridge in New York I can sell you (lol).
Which bridge? I like the Brooklyn Bridge. It’s close to home so the upkeep would be easier. Give me a price!
I’ll go for the 59th Street Bridge–with all the traffic, I gotta figure it’s a money maker.
“Noticed how many reverse mortgage ads are appearing on tv lately?”
Mike, don’t get so upset, those are just a device to separate people from their money, one of many I might add.
Yes, but the government is already telling you to use your house equity for things like home care or medical procedures even though it’s in very early stages.
My son has a neighbor (he lives in Granada Hills, Ca.) who is 84. He now needs heavy duty care and his health is going downhill fast. Early Altzheimers has set in and bad arthritis in both his hips means they will need replacing in the next year or so. However, his daughter said, his doctor told her his heart is as strong as a 45 year old and there are no signs of cancer. The 2 big killers of old people. That means he could live another 10 to 15 years.
The daughter is not in a position (she works full time) to take care of him so they looked into a nursing home. Forget it. The cheapest was nasty and around $3,500 a month (the decent ones were $5,000 to $6,000) unless you want your parents to live in a place which is simply a warehouse for the dying. Of course, you could ship the old folks off from California or New York to a sh*thole like Alabama or maybe India or Thailand where it might only cost $1,000 to $2,000 a month. Hey, with Vonage you wouldn’t have to spend too much on phone calls either…that is if your parent was capable of talking into a phone and was still only partly ga-ga and knew who he was talking to. On the other hand, if your ailing parent owns a home with lots of equity……those reasonably decent $3,500 a month homes look pretty inviting.
Anyway, the man’s family figured he had paid taxes all his life, was a WW2 vet AND a Korean vet with a Purple Heart, been responsible, worked hard, raised his children well, never claimed unemployment or welfare, etc, so they figured the state might have the answer. Yes! The State did have the answer. Sell his house (value around $600,000) or get a reverse mortgage.
Of course, in celebrity brain washed America, when you see reverse mortgage ads with smiling “elderly good guy” celebrities like James Garner or, lately, Robert Wagner, telling you, “How you can make life a lot easier by un-locking the equity in your home by means of a reverse mortgage and to show you how, we will send you this cd and a brochure which fully explains, yada-yada…”
Of course, the people at the moment with a LOT of equity (remember we are talking the majority here and not the spend-thrift seniors) in their houses are…guess who? Those who bought 20, 30 or 40 or even 50 years ago. Those getting to the point where they might need big bucks for those very expensive medical procedures which medicare will not pay for for much longer.
Those who bought in the last 5 years will probably end up with NO equity or very little equity for a while (if they bought in 2000/2001 and later) as prices collapse but most will stay in their over-valued sh*tbox homes because they are financially trapped. Not a big problem for the 90% majority who will probably struggle for 5 or 10 years or even 15 years, waiting for prices to catch up. Which I guarantee they will. They always do and this time it isn’t different…it just means it will take longer. Then their property will start gaining equity for 20 or so years. When they retire and need expensive drugs or expensive medical procedures and that 30 year mortgage is paid off…..guess where they will find the money? By then it will be Sean Penn or Brittany Spears in those ads: “Hi, I’m Sean Penn and I’d like to tell you about a friend of mine who needed a heart transplant. Of course, medicare stopped paying for transplants a long time ago but my friend wasn’t worried. Y’see, he owned his own house free and clear and he called those helpful people at “Bendover for a Reverse Mortgage Corporation,”…..
One has to look at the big picture here. Do people really think the government is going to let the children of boomers collect hundreds of thousands (if not millions) of dollars, retire at 35, pay no taxes cause they stop working because, when mom and dad die, they can sell their parents financially un-encumbered house. After all they don’t need 2 houses. They are already half way thru buying heir own and there’s a nice chunk of equity built up by then…..and so the circle is complete and starts again. Money in - money out.
Btw, forget Universal Health Care in America. The USA is waaaaay too corrupt to carry the cost of free medical care. If you think the USA has a national debt now, wait for a few years after a National Health Service starts. The Fed will have to double the number of printing machines to keep up with the fraud and scams.
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I agree with what you said, Mike.
But don’t delude yourself that our manipulators will be able to manipulate for decades more. They are pretty close to the end of the line. They have f-ed up big time and stupid population let them. So much for our wonderful election system of protecting “freedoms.”
It was turned into a giant Con Game. Its collapse would be sudden and shocking to most.
Jas
Mike, have you noticed that gold has about doubled in the last five years? I guess not. A few others have, though.
Only a tiny percentage of our population has ever owned wealth in it’s penultimate form, Gold.
It costs around 10 Cents to print a $100.00 Banknote, the added $99.90 value is entirely faith based and accepted as such…
For now.
If gold is wealth in its penultimate (once removed from the end) form, what do you consider wealth’s ultimate form?
Your health and well being is the ultimate form of wealth…
Yes, it might have doubled but it’s nothing more than mo-mo speculators using the “collapse of the currency” hype to buy and sell. Look at the history PRIOR to the last few years. A disaster.
Yes, it’s had a rather checkered history the past several thousand years…
NOT
I ain’t gonna live that long.
Collapsing currency is hype? So the dollar hasn’t really lost over 90% of its value in about the last 30 years? I was worried there for a minute.
If you bought gold in 1975, when the price was allowed to float vs the dollar, that gold would be worth now about what it was worth then in inflation adjusted dollars. On the other hand, if you had bought it in 1980, you would have lost your shirt. On the other hand, if you’d bought a Dow index fund in 1975, you would have tripled your money in inflation adjusted dollars. That’s real wealth.
Gold is no longer wealth. Get your mind around that. It’s just a commodity like steel or oil. Stockpiling gold makes no more sense than stockpiling aluminum ingots or copper bars. In fact, had you bought copper bars in 1975, instead of gold, you would have made a better return.
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“This free money period has been planned. ”
All central planning systems, American or Soviet, invariably fail.
You have too much faith in our manipulators’ ability to manipulate the economy, Mike, and I Don’t. I notice that this disease is very common.
Expect the unexpected over the next five years.
Jas
..also, When we were a soveriegn nation we could make the rules, we are losing that quickly. We are increasingly dependant on foreign cash flow which is quickly going away…Russia, China all have stated they are winding out of the US$ ….
“You have too much faith in our manipulators’ ability to manipulate the economy, Mike, and I Don’t. I notice that this disease is very common.
Expect the unexpected over the next five years.”
Jas, I am not a pollyanna in thinking that the people that run our government are saints by any stretch. However, I do believe that can make things the way they want them to ensure that they maintain their control over the system, or manipulate as you put it. What do you see happening where their manipulation will fail. Common sense of the financial system cannot apply, cause these guys change the financial system for their benefit.
They can change the system but they can’t change reality. You can provide as much currency as desired, but the market, not policymakers, sets the value. Ask Argentina, or Russia. Some signs to watch for; currency controls (already in place and increasing) growing black market, inflation (10% a year according to Shadowstats), weakening USD (massive head and shoulders top). Expect draconian measures and reassurances that all is well.
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Mike: “Jas, I am not a pollyanna in thinking that the people that run our government are saints by any stretch. However, I do believe that can make things the way they want them to ensure that they maintain their control over the system, or manipulate as you put it. ”
Last try — for how long can continue? Their primary device has been Debt and it has been taken to the limits, IMO. I think that we would not be able to avoid Debt Deflation despite all the talk of “printing Money.”
Jas
“Burn that image of 10 cents on the dollar for property out of your brain and stop reading crap like Financial Sense and use your own common sense.”
Whoa! Inserting a bit of common sense around here is a risky proposition.
“Burn that image of 10 cents on the dollar for property out of your brain”
Hmmm, 50 cents on the dollar is what I’ve been imagining. As for 10 cents on the dollar, myabe that’s a stretch, but AFAIK, 30 cents on the dollar was seen for some distressed properties in Southern Cali during the last downturn. Are you saying that the money masters are better at preventing something like that now?
“7% default - 93% stable.”
Yeah, great, 93% stable, with a good number of them stretched by exotic mortgages and HELOCs. So what happens when these “stable homeowners” cut back on consumer so that they can still feed the alligator. Are you saying that the powers that be are looking to tank consumer spending? What kind of lizard/gray alien kind of thinking is that?
Are you saying that the money masters are better at preventing something like that now?
I think us bubble sitters didn’t get the memo: risk has been completely ‘innovated’ out of the financial markets. Please check the VIX chart for proof.
In other news, I have a plan to live forever, and it’s working out perfectly well for several decades. Therefore I am I am unlikely to ever die.
“Banks should issue a cow-bell with each mortgage.”
Someone please add this to the book of bubble quotes. I’ve been laughing over this image for minutes straight. Too funny!
As for the reverse mortgages, I can’t help but think that Americans will revert to life before 1980s as far as taking care of their elderly: Grandma will be living in the room down the hallway and you’ll see lots of wheelchair ramps being the latest add-on to the McMansions.
“I still think that a book of quotes on US housing would be a best seller.”
********
Here’s one of my favorites (it has a certain Abby Joseph Cohen feel to it):
“I just don’t think we have what it takes to prick the bubble… I don’t think prices are going to fall, and I don’t think they’re even going to be flat.”
Diane C. Swonk, chief economist at Mesirow Financial in Chicago, New York Times, Trading Places: Real Estate Instead of Dot-Coms, 3/25/05
2nd try
Mad London House Prices? We’ve Seen Nothing Yet
the nar should fire lereah and hire this guy. unbelivable…..
plus a fleckenstein summary
http://immobilienblasen.blogspot.com/
Abolish the ‘fed’
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Auntie,
The Fed will OLNY be “abolished” after the collapse of the current US econo-political system as we know it. The economic elite that control the current system also control the Fed and Fed serves their interests at the expense of the rest.
FEDERAL RESERVE HAS BECOME AN INTERGRAL PART OF THE CURRENT SYSTEM. IT CANNOT BE SEPARATELY ABOLISHED.
Jas
The federal reserve will never be abolished.
But it will be irrelevant. The euro is now the most circulated currency in the world. Personally, I think the ruble is a screaming buy.
“Never” is a very long time. Every prior attempt to repeal the laws of economics has failed, and it sure looks like this one is on its last legs.
Yen Falls as Government Report Shows Flagging Consumer Spending
By Stanley White and Ron Harui
Jan. 29 (Bloomberg) — The yen declined to the lowest against the dollar in more than four years after a Japanese government report today showed a drop in retail sales.
The yen fell versus all of the 16 most-active currencies on concern waning spending, which accounts for more than half of the economy, will encourage the Bank of Japan to delay raising interest rates. Barclays Capital, Standard Chartered Bank Plc and RBC Capital Markets dropped forecasts for a 2007 yen gain after policy makers kept borrowing costs at 0.25 percent on Jan. 18.
http://tinyurl.com/289paq
“Jan. 29 (Bloomberg) — The yen declined to the lowest against the dollar in more than four years after a Japanese government report today showed a drop in retail sales.”
Yen falling? No problemo — time to print some more…
One of the reasons the Yen is falling (also look at the Aussie) is that the carry trade has come unglued. (dollars to Yen to Aussie’s are now unwinding).
“(dollars to Yen to Aussie’s are now unwinding)”
Disequilibrium status quos have a tendency to self-destruct.
http://sfbay.craigslist.org/eby/for/268903389.html
I’m a bit worried about what might be on the hard-drives of those HP computers.
Here’s a pretty good one from Minyanville of a recent dialogue between DR Horton management and several analysts. Apologies if previously posted.
http://tinyurl.com/37wke4
Tiny Url doesn’t seem to be working. Try this:
http://www.minyanville.com/articles/index.php?a=12000
a when and why
the Community Reinvestment Act, which requires banks to provide loans and other services to poorer and underserved areas.
tinyurl’s do not appear to be working.
Laura
tinyurl’s do not appear to be working.
Here’s a new realtor tactic. Called on a rental listing several days ago. The price was unbelievable! Previously the home had been for sale as well as rent. When I called the realtor said the home had already been rented. Then gave the hard press to help me find a rental. She said the home should be taken off the mls. It’s been several days and still listed. The home is no longer listed for sale though. I wonder if this is a tactic to get business. List a house for rent real low and then try and get the potential renters business. I am finding it hard to even be nice to these realtors!
Here’s what they are trying to do here in Florida; it happened to me last fall when I was trying to get a rental.
You show up at a condo development to see a rental advertised in the paper. Go to the sales office and they immediately cast the bait and do the switch. The switch being an explanation as to how stupid renting is and then they steer you over to show some units for sale…..No Money down…….Builder finance……Adjustable Rate….sign here…and here…and here….
I got entrapped in a sales pitch with some 25-year old goattee-stylin college dropout with tatoos. Had a hard time gettin’ away from him and his boss.
They are desperate and predatory down here in Central Florida.
You would be stupid to buy right now.
This is among the last tactics utilized by unethical, desperate, blood-sucking realtors before they realize that they have no marketable skill set and revert to pimping their ass down in the red-light district (no offense to the true professionals in that line of business). Pretty soon most of these a$$hats will only be a problem for the bums and derelicts in those areas (no offense to those guys either).
That’s pretty funny.
25 year old, tatooed, goatee stylin, college dropout, saleshole, who has never, ever, experienced anything like the boom/bust cycle we’re all strapped in for now.
List a house for rent real low and then try and get the potential renters business. I am finding it hard to even be nice to these realtors!
Car dealers have been doing this for years - list one car at real low price and get the buyers in the door at the dealership. Bait & switch to higher priced units because the cheap one ‘went fast’. Expect more of this nonsense from realtors. And please don’t mention the words “realtor” amd “respect” in the same sentence again. Try “I hate realtor scum.”
Bait & switch. Standard tactic of scum salesdrones.
From the NYPost:
FORECLOSURES SOARING
“January 28, 2007 — The number of New Yorkers forced into foreclosure is skyrocketing, especially in Nassau County, where foreclosures have jumped a stunning 82 percent in the past year.
“According to foreclosure tracking firm RealtyTrac, the number of city foreclosures went up 15 percent in 2006 from the year before, while Long Island jumped 55 percent. The national rate surged by 42 percent.
“People in general are living outside of their means,” said wealth manager J.J. Burns. “This generation wants everything now. People are not saving for the rainy day.”
“In the city, Staten Island led the pack with a 47 percent rise in foreclosures, usually initiated by banks when homeowners can’t pay their mortgages.
“Foreclosures in Brooklyn and The Bronx rose about 25 percent each and Manhattan saw a 4 percent increase.
“Queens was the only borough that saw a drop, with an 8 percent decrease in foreclosures.
“Foreclosure increases are higher in the suburbs - Westchester jumped 44 percent, Suffolk County shot up 32 percent and Nassau County rose a shocking 82 percent.”
If I send this to Bob Brinker what do you think he will say.
I’m going to do it, especially after his performance this weekend re: housing.
Think I’ll get a response?
Might as well ask him if now would be the time to take that $5/share loss on his 2000 QQQ call. After all, it’s been only seven years in the red.
txchick57, can you tell me what BB’s “bad call” was BTW? I ‘ve heard people they lost a lot of money on BB’s recommendations. I followed his recommendation to get back into the market on March of 2003 (I believe) and have done quite well with that call.
He made a call to buy QQQ(Q) sometime between 2000 and 2003…it wasn’t one of his “equity allocation timing moves” that are his main draw…it was a call for “play money that you didn’t mind speculating with”. Some did, and lost
However, his sell call in 2000, and his buy call in 2003 have worked out quite well.
Thanks, arroyogrande. I did well with his major market timing calls, and wondered what calls he had made that lost people money.
I guess as long as you stick with his good calls, you’ll make money
The kool-aid is strong here in Inland Empire (SoCal).
My wife and I was talking with my parents’ friends (husband is a dentist and the wife, his office manager) who owns a home in the Inland Empire and when we mentioned that we’re thinking of buying but are taking our time and they mentioned what the Realtors are saying:
I was polite and pretty much kept my mouth shut, of course…Sigh….
Of all the places IE is going to be hurting hard.
So, all of those look-alike houses, all with faux Italiian shutters in the i.e. will look a bit like i.e.d.’s in the not too distant future?
It’s different here, of course.
Side note: During the early 2006, very few of us have said that things might turn out to be like Japan with 16+ years of decline (and still counting) with drops of 40%, 60% (or even 80%) in price. I think today, Jan’07, more people are open to the possibility that the post bubble decline will take several years to hit bottom and prices will fall much more than mere 10 or 20% (there are already examples of 33% hair cuts — hmmm, I guess realestatehaircuts.blogspot.com disappeared)….
Put my vote down for big declines in ‘07 and ‘08. Probably a Nadir in ‘09 and be pretty flat for a few years.
“The kool-aid is strong here in Inland Empire (SoCal”
The IE total no of preforeclosures and foreclosures as of jan 2007 is over 8,000 and rapidly climbing. Riverside cty recorded 4,500 NOD’s/foreclosures during 4tht QT 2006, a 188% increase over 4q 2005.
Numbers do not really convey just how bad IE housing will suffer over next several years so i will put it in simple terms:
The IE will be the SCal region which will see the sharpest drastic declines in housing prices over next several years. period. Anyone who thinks that IE RE will stabilized this year and go up next year is an idiot, period. There will be a veritable flood oF bargain priced REO bank owned properties available at bargain basement prices all over the IE during the yrs 2007 thru 2010. Look on foreclosure.com or realtortrac in areas such as Menifee, L elsinore, Perris,Romoland,Sam Jacinto,Moreno valley,Hemet,banning,sun city,ect, all SW riverside county communities which are experiencing 20-30 foreclosures/300-500 NOD’s PER ZIP AREA. These areas are the epicenters for the coming IE RE Meltdown which will see brand-new, cheaply-bulit 4/2 cookie cutter mcS*tboxes sell at auction for under $200,000 by mid 2007.
Back in late 2002 and early 2003, when I saw that they were selling homes on Moreno Valley golf course for over $600,000; I knew then that the bubble was getting out of hand.
Expect a major implosion in the IE. Followed closely by all of North OC and the second-rate areas of South OC such as Las Flores, RSM, Aliso Veijo (where they couldn’t give condo’s away during last downturn and this time there wont be enough qualified buyers to get all the inventory) and Mission Viejo (home of the $700,000 2br 2ba attached PUD).
“Real estate prices will be stable this year and start to move up next year.”
Yup, that’s what “everyone” is saying, and is now part of the collective general wisdom. In other words, the REIC is doing well with its message. Only a rout of the spring Selling Season inventory numbers will make people pasue to think. After that, people will be little more worried, prices will fall a little more, then the hope for the NEXT spring will come back.
The only way you will see actual capitulation is for the housing market to get kicked in the gozongas several more times (increasing inventory, tightening loan standards, increasing costs of loans, skyrocketing NODs and foreclosures).
By 2009, most of this optimism will be beat out of people. The pages of foreclosure ads in the paper and/or (today) Internet will be sobering week after week without seeming end.
2010 on…look for a reconfiguration or redefinition of value of real estate…e.g., square footage will be out. long commutes out. cookie-cutter will be out. smaller and closer will be in. aesthetics will be in. mature neighborhoods will be in. energy efficiency will be in.
Been here done this in 1985-95 in Austin… it will be worse this time (for the “outs” above)… as the energy situation changes for the worse for the USA.
Has anyone noticed a concentrated effort on their respective cities’ Craigslist housing forum to scrub negative comments on the housing market? On the DC housing forum, was a hotbed of debate on the subject up until last week, when the volume of posts decreased substantially. Methinks that the bored realtors are censoring comments they don’t want the public to see.
They are softening the enemy lines to prepare for the spring bounce…anyone else seen this?
“They are softening the enemy lines to prepare for the spring bounce…anyone else seen this?”
Irrelevant. There can be no spring bounce without some major help from the top, in the form of a change in the rules of the game. Can you foresee any change that would result in looser lending or higher home price inflation than we have seen so far (which was the loosest since the 1920s, by the way)?
I agree, it can’t get much losser can it?
Oh definitely - I have seen many posts flagged off for anything less than BUY BUY BUY mania.
Same is actually true on the rentals lists - if you post something negative about a complex or area (for example, downtown L.A., where they’re trying to rent apartments literally on skid row for $2.50+/sq. ft., and you will literally be finding bodies outside), the sales agents will generally flag them off very quickly, and some are even directly deleted by CL staff now.
The realtors do seem to be posting in droves on the craigslist forum. But really, nothing that is said on that forum will change the market. It’s just a place for people to vent.
Actually, I think that is one of the few places people who are considering buying will go that is not considered a den of fed conspiracy theorists and ammo-stocking, hard money quacks (like me) for initial advice on buying. The “thin edge of the wedge” if you will, of educating otherwise blind and unquestioning sheeple. So…while I agree that the effect is very limited, I do think that information on that site impacts the market on the margin by decreasing the pool of potential buyers.
Note that Ben’s blog has dedicated an entire topic daily to “craigslist finds”…I think that’s an indicator that CL is a high-traffic and very popular place for people to get their info.
All of which is appropos of nothing, except that the realtor shills are wise to target that outlet…
The longer it takes for the truth to get out, the longer and deeper will the eventual reckoning be.
“I was polite and pretty much kept my mouth shut”
Being that he’s a dentist, that might have been a wise move, given his intelligence on real estate.
Yakety Yak… from the “insiders” at Davos
http://today.reuters.com/news/articlenews.aspx?type=reutersEdge&storyID=2007-01-29T125938Z_01_L27824714_RTRUKOC_0_US-DAVOS-ECONOMY-CASH.xml&src=012907_0801_INVESTING_comment_n_analysis
Forgot the Title:
“Cheap money threatens to wash away global growth”
Novasold said:”If I send this to Bob Brinker what do you think he will say.
I’m going to do it, especially after his performance this weekend re: housing.
Think I’ll get a response”?
I havent listened to BB for quite some time. After he anounced houses in the bayarea were bought with “all cash” and continued to intrupt a caller who said it was more like 80% exotic loans/no down mortgages, I stopped listening to his show. He is the worse kind of sheeple-giving bad RE advise to millions of listeners.
I’m courious Novasold, what is Bob saying these days about RE?
Send him an email, but he probably wont reply since RE never goes down.
“I’m courious Novasold, what is Bob saying these days about RE?”
In my opinion, he is an idiot in regard to real estate. He says that the national median price is only down a little, which proves that housing is OK. Ummm, when was the last time that the NATIONAL median was EVER down?
Love that mortgage ad in the photo gallery:
Relationship Trust Mortgage
Your Mortgage Therapist
“are you cash pore”
“Fixed rate loans are out of fashion”
–
HOT OFF THE PRESS…
January 29, 2007
Housing Has Bottomed! Demand Increased by 1,044K and the Supply Increased by 2,142K Units for 2006.
And the number of Vacant Units, Year Round, “only” increased by 818K IN 2006, the largest ever increase in one year.
God help those who chant Housing Has Bottomed mantra.
Jas
Laura:
This weekend he was going on and on about the median price of houses not changing. He was very smug saying that there is no bubble and the “doom and gloom” people (I guess that would be us on this blog) are talking down the economy.
He must have some serious skin in this game b/c it’s hard for me to believe that he can be so blind.
My boss believes that what Brinker says is gospel. I’m going to bring up what txchick57 mentioned above to him. Brinker can be wrong and he is way, way off on this one.
His listeners are going to love the guy when he’s proven wrong about this one…..
“He must have some serious skin in this game b/c it’s hard for me to believe that he can be so blind.”
This was one of my thoughts too. Ever since he justified prices by their up moves in Florida and kept the mantra ‘they can’t make any more costal property’. Maybe his son took him in this direction but I do believe that both he and RL have their heads buried in the sand on this one. If BB did the math he’d realize the income to buy the properties just wasn’t there!
Arizona Slim checking in with the Tucson Weekend Report:
News Item #1: There’s a flip attempt up the street. A little over a month ago, its mailbox was knocked off the post. (Nothing like a grounded box to help make your property irresistible.) I noticed an additional vandal-touch over the weekend: The mailbox post had been pushed over. (Honey, stop the car!)
News Item #2: A neighbor, whom I met as he was purchasing a house around the corner in summer ‘05, did quite a bit of bragging to me re: how busy he was with condo conversions in the Foothills. (That’s up where the other half lives.) Why, he was just booked solid with them for years! And buyers were lining up for them!
That was summer ‘05. During a Sunday evening phone call, a nearby friend told me that he and his girlfriend just bought a Foothills condo for a song. They’re planning to fix it up. (And, I imagine, flip it. He’s that kind of guy.)
My friend remarked that the prices are just “so good” now that they just had to buy. My response: “I’m still seeing a lot of overprice real estate. I don’t think it’s a good time to buy or sell.”
There was a silence on the other end of the phone line.
As for the house he was buying in summer ‘05, well he decided to move over to girlfriend’s house. This is after he spent a great deal of time and money on fixing it up. Now it’s going to be rented out, and I just can’t help seeing rent-below-mortgage…
And that’s the Tucson Weekend Report.
Thx! Over here in Portland’s western suburbs the For Sale signs have started mushrooming fast, even though the weather has been a bit chilly. This year will be to Portland what 2006 was to SD, FL & AZ. I’m looking forward to taking a few good pics for the HBB gallery.
test test
Saw an ad for this landmark DC apartment building now being turned into a condo conversion — http://www.chastletondupont.com/
I remember when it was heavily renovated 20 years ago. Pretty good area, handsome building. I’ll have to go give it a look, and I’ll be interested to see how it performs.
and before you start the “don’t do it” posts — I mean “give it a look” for educational/amusement purposes only — not interested in buying a DC area condo, I promise!
It’s a good location. There’s a two bedroom one bath resell in there now for $359K It’s been sitting for weeks. Have seen efficiencies in the for as low as $169K DC prices are dropping pretty fast. The fee in this buidling seems higher than usual. Esp. for a big building where there should be some economy of scale. Some condo conversions other side of the street sold as high as the $600Ks & $700Ks in 05 for 2B/2B - nothing spectacular. What a beating those buyers will take if they need to sell anytime within next 10 - 15 years.
Ok boys and girls…
Greed is still the mantra here in WeHo.
The house at the South end of my street (Westmount Dr.) in the 90048, sold for $850,000 last February. It was a 2/1 fixer on a 4500 sq. ft. lot, lodged between a duplex and a parking lot with a noisy car wash right behind it (immediately on La Cienega Blvd.) I know about this house so well, because I considered buying it (at a lower price).
Two months ago, a crew ripped it down to the studs and re-framed it in it’s entirety, adding a taller roof and a bathroom which hangs over the driveway. What little backyard it had has been covered up by another addition in the back. The janky-a$$ garage with 4 layers of rotting shingles still stands at the moment.
Today, when I was coming back from my run, I decided to walk by and check on the house. There was two trash bins filled to the brim out front and, lo and behold, a for sale by owner sign in the front yard.
I thought, well, they must be throwing in the towel. Fat chance. I called the number and got a happy LA realtor who said, “Are you a broker or looking for a home”. I said, “looking for a home”. He immidiately perked up and inscreased the speed of his speech. “Weeellll, let me tell you the story of the house. I am a broker, my father is an investor, and my brother is a contractor. We bought the house as a family project. (The truth is, it was their grandmother’s house - but he didn’t know that I knew that). It was a 2/1, but we added a bedroom and a bath. It is now 1800 sq. ft. It is currently scheduled to be done in 60 days. We are not sure what it will be listed at, but we are currrently thinking 1.7 million.
I busted out laughing - purely naturally reaction. I said “Are you kidding?”
We said, “Whaaat … that’s what the comps say it’s worth (sheepishly) … I mean, it will be fully furnished … flat screen tvs throughout … and a jacuzzi.
I said “Good luck with that”, and hung up to his silence.
1.7 ??? !!!
btw :
The property is 432 Westmount Dr. and the broker’s number is 818.497.6676 if you care to give him a call yourself and ask some questions.
It zillows for $752k :
http://www.zillow.com/search/Search.htm?addrstrthood=432%20westmount%20dr.&citystatezip=90048
Forgot to add. After “are you kidding?”, I said :
“What about the lot - what are you going to do about the car wash?”
He replied, “Well … we can’t move it…”
exactly.
LMAO
Keep us posted on that one. and a picture would be great for Ben’s photo album.
I will walk down and take a picture today. They framed the house without cutting out any windows (yet), so it looks boarded up. The trash bins out front complete the look. The carpenters working on it are total drunks. Beer bottles are laying all over the inside. The head carpenter’s girlfriend, just sits in a lawn chair stoned while her wt boyfriend works on the house. It’s priceless.
I’m sure that I can snap a photo worth $1.7M.
Just for laughs, you might want to report them to the authorities for having an unsafe jobsite. (Beer and circular saws. Now there’s a combo for you.)
For starters, try OSHA, or whatever the CA equivalent is.
Ahhh, 90048… The Kool Aid is *very* strong here in my/our ‘hood. New listings at peak prices plus a few %. Some “major reductions!!!” (5-10%) I posted a while ago about acouple recent sales, my favorite being the “income” duplex sold in Dec for 1.64 mil. Hmmm, No tenants yet. Wonder why?
Oh well, as long as people keep buying, which (sadly for me) they are… It’s still very sticky.
Maybe we should tag all the for sale signs with the previous sales prices, because apparently people who are in the market at these prices aren’t doing their homework. Or they are morons.
Are you talking about the one on Norwood? I called about that one too - the realtor sounded desperate at the time.
Where do you live in 90048? I’ll give you a hint - I’m between Urth Cafe and the roundabout on the West side of the street. My house has a red door.
I rent one of the best houses in the neighborhood (6000 sq. ft. lot) for $3600 / mo. I share with 2 roomies. How does that pencil out to 1.7M asking price for a smaller lot?
btw, Nice to know that someone else in my neighborhood believe in this site. Very nice to know.
Did you know in 2001, the average price for our ‘hood was around $400k.
In 2004, when I visited an open house for a condo nearby, the realtor (very down to earth guy), was shaking his head at the $330k asking price. He’s like, “we’ll see what it sells for. I don’t know … what would this rent for, about $1500 ? ”
You don’t find many condos for under $400k in the neighborhood anymore.
This sh%$ is crazy!
No, this one’s on the corner of 4th and Sweetzer. I’m a few blocks south of it in a small 2BR. Rent? $1025. Crazy Sh%$ is right. I’ve been here for years (thus the “cheap” rent) so I know what thes places sold for not too long ago. Now, I don’t understand how anyone could look at a 1600 sq ft 3/1 on a 6000 sq ft lot and think… “1.3 (or more) million dollars? What a deal!! I’ll take it!” Boggles the mind…
And, for the record, I could “afford” to buy in this area. But to me, it would be like taking my savings, and 2/3 of my income, and flushing it down the crapper. No thanks.
A while ago, I had some bumper stickers made that say “friend don’t let friends buy houses”. I think it may be time to start using ‘em!
–
Local obs., Tehachapi, CA:
From a reliable source:
“Also KB homes [in Tehachapi, CA] are selling, but KB is selling houses for as little as 109 per square foot - a discount of about 40% from resale homes. I have a client friend who just bought a 3100 square foot home from KB for LESS than 340K!”
BTW, the homes were listed at around $100/sqft in 2003Q2. Then prices doubled over the next 21-24 months. Now, they are coming down again. In 2008, the prices should be at of below 2003Q2 levels.
Jas
Now I know why people paying such high prices for houses:
http://tinyurl.com/2jpacc
Frequent flyer miles w/each mortgage
The Census Bureau just released Q4 data on homeownership rates and vacancy rates. The key tidbit: A whopping 2.7% of all U.S. homes were vacant as of Q4. That’s up from 2.5% in Q3 2006 and 2% in Q4 2005. Moreover, it’s the highest vacancy rate in U.S. history (the data goes back to 1960).
More details and a chart at my blog…
http://interestrateroundup.blogspot.com
I wonder what the occupancy rate chart for “vans down by the river” looks like
“$1 trillion in adjustable rate mortgages (ARMs) will reset this year”
http://bakersfieldbubble.blogspot.com
That works out to 3.3 million homes, no bubble here, move along…
–
“Those homeowners would be better off heading west where realtors expect prices to continue to rise. “
http://www.forbes.com/home/realestate/2007/01/25/strongest-housing-markets-forbeslife-cx_mw_0125strongest.html
Yup, ask a realtor where the prices are going to go up and then move there and buy a home there. Aren’t we blessed in America?
Jas
Sorry if already posted and I missed it… (And good thing every bull on Wall Street has their eyes trained on M&A action, as a distraction from the subprime subsidence which is playing out in plain view.)
—————————————————————————————————-
Tremors at the Door
Jill Connelly for The New York Times
William D. Dallas, the chief executive of Ownit Mortgage Solutions, which filed for bankruptcy, acknowledged that Ownit, like other subprime lenders, saw a sharp increase in defaults from new borrowers in 2006.
By VIKAS BAJAJ and CHRISTINE HAUGHNEY
Published: January 26, 2007
Wall Street’s big bet on risky mortgages may be souring a lot faster than had been previously thought.
The once booming market for home loans to people with weak credit — known as subprime mortgages and made largely to minorities, the poor and first-time buyers stretching to afford a home — is coming under greater pressure. The evidence can be seen in rising default rates, increasingly strained finances at mortgage lenders and growing doubts among investors.
http://www.nytimes.com/2007/01/26/business/26mortgage.html?em&ex=1169960400&en=040019fa3e0366e6&ei=5087%0A
Another market report from the the central coast:
1. We were looking to pick up one of two fixers that are side-by-side, with some really nice views of the ocean and dunes. However, they were MAJOR fixers, as in the floorplans needed to be altered to make them anything other than FREAKY. Add to the fact that they needed a lot of just pure maintance work (rotting floors, mold, roofing, landscaping, termites), we couldn’t get get the numbers to work for us at a price that we could justify paying. However, recently both houses were bought (at the same time) by what appears to be flippers, and they’ve started to clear things out of the houses. It will be interesting to see what these guys end up with in this declining market. Maybe we’ll see two more rentals with nice ocean views pop up in 6-12 months (flippers here tend to take quite a while).
2. We popped into an open house yesterday…nice house, overpriced by our standards, but not above what others in the area are asking. However, it has been on the market for 4 months, and recently price reduced by about 11%. We asked the open house realtor about the local market. She said that prices were stable, and that she didn’t expect prices to go down, as this is a very nice area. She then proceeded to tell us that the house’s current price (with the 11% reduction) is not hard and firm, that the seller NEEDS to sell this place soon, and that we should consider making any reasonable offer. So in one breath she tells us that prices wont go down in the area, and in another breath she is telling me that this very nice house (with it’s recent $200,000 in upgrades(!!!)) has been priced reduced 11%, and that the owner is so desperate to sell it that he would take an offer of substantially less.
From James Howard Kunstler’s Clusterfuck Nation (www.kunstler.com)
Now the house market is both saturated and wildly mis-valued. Most of the new houses were built in places that will be logistically unfavorable as motoring becomes less affordable. Many of them are too large to heat as home heating becomes less affordable. The houses are overpriced. Those who must sell must drop their prices. Many such sellers will have to sell for less than the obligations still owed on their houses. The speculators have necessarily fallen by the wayside, because speculation is not possible in a falling market. Those who expected to sell old houses in older places for a half a million dollars or more to buy new houses in new places will have to stay put. As prices fall, the few potential buyers still left will step back in anticipation of further price drops. This “death spiral” will be self-reinforcing and take years to play out. As it occurs, many of the creatively-engineered contracts will be welshed on. Lenders will choke on “non-performing” mortgages. Mortgage-backed securities will lose their credibility and turn into junk or worse (worse-than-junk being certificates with no value whatsoever, not even pennies on the dollar). Bets, plays, leverages, positions, and hedges based on the idea that all these loans would continue performing will be wiped out.
The final result will be a dashed American Dream — of a safe life in a happy home. Poor Martha Stewart will be seen as the goddess who failed. Well, she already has, really, having gone to prison and afterward retreated into her omnimedia fortress of corporate refuge (basically joining the enemy). As the middle class chokes and gets crushed under the weight of its unpayable debts and falling standards of living, Martha may be lucky to avoid getting eaten, along with a long list of other celebrity porkchops that an angry and grievance-filled public will turn on.
Finally, the idea that people could live happily ever after in “homes” devoid of any larger community context, or reality-based economic context, will fail. Perhaps we will even stop calling houses “homes” — as we have been conditioned to do by the realtors hoping to manipulate all our subconscious desires for safety, familiarity, and order in this world of chaos and sorrow.
Finally, the idea that people could live happily ever after in “homes” devoid of any larger community context, or reality-based economic context, will fail.
That’s one of the best summaries I have read regarding this mess.
Wow. You just made my Monday brighter…NOT! I guess the truth sucks sometimes.
Not sure if this was already posted, but it strikes me as a pretty interesting and objective statistic. Of course, the cheerleading economist quoted at the end sees it as “good news” because rents will fall, causing core inflation to fall, causing the Fed to ease.
The graph that accompanies the story is pretty striking too…the vacancy rate went pretty much vertical in the last 12 months.
Number of vacant homes for sale surges 34%
Homeownership rate unchanged near 69%, Census Bureau says
By Rex Nutting, MarketWatch
Last Update: 3:10 PM ET Jan 29, 2007
WASHINGTON (MarketWatch) — The number of vacant homes waiting to be sold surged 34% to 2.1 million at the end of 2006 compared with the end of 2005, by far the fastest increase ever recorded, the Census Bureau reported Monday.
A year ago, 1.57 million homes were vacant and awaiting a sale.
The vacancy rate for owned units jumped to a record 2.7% from 2.0% a year earlier. From 1965 to 2005, the homeowner vacancy rate had never been above 2%. The long-term average is 1.4%.
“We have more than a million housing units of excess supply,” said James O’Sullivan, an economist for UBS. “If you are looking for evidence that the worst is over for housing, you’re not going to find it in this report. This argues that housing starts need to go down more.”
In the past 12 months, housing starts have slumped 18% to a seasonally adjusted annual rate of 1.64 million.
In 2006, the number of housing units in the United States rose by 2.14 million, or 1.7%, to 126.7 million. The number of units occupied, however, rose by less than half as much — 1.04 million.
Meanwhile, the homeownership rate (the percentage of homes occupied by their owners) was essentially steady at 68.9%, the government said, close to the all-time high of 69.3%.
With so many vacant homes for sale, owners will begin to offer them for rent, said Asha Bangalore, an economist for Northern Trust. If the supply of rentals rises, rental prices should begin to come down, helping to bring down core inflation. Read more on the rental market.
“That means a quicker change” in the federal funds overnight interest rate, Bangalore said.
Rents have a double impact on core inflation, because they are used to calculate owners’ equivalent rent, which accounts for nearly a fourth of the consumer price index. In 2006, owners’ equivalent rents rose 4.3%. Core inflation excluding owners’ equivalent rate decelerated to 1.9% in 2006, O’Sullivan said
More condo conversions throwing renters out on the street (LITERALLY). Huge homeless problem here because of greedhead condo converters…
http://www.honoluluadvertiser.com/apps/pbcs.dll/article?AID=/20070129/NEWS01/701290324/1001
Honolulu renters thrown out on the street (= live in the PARK) because of condo conversions…
http://www.honoluluadvertiser.com/apps/pbcs.dll/article?AID=/20070129/NEWS01/701290324/1001
My wife and I found a REO property and plan on making a low ball bid on it. does anyone have any advice on how to proceed?
I’d suggest using a realtor or attorney who is experienced in REOs. Other than that, have a fixed number you’re willing to pay, and don’t go higher. There will be plenty more where that one came from.
Sometimes, the best thing you can do is walk away. Really…you lose nothing.
Good luck!!