“See-Through Homes” A “Consequence Of Speculation”
A housing report from the California realtors. “Affordability concerns continued to impact the residential real estate market in California, with the share of first-time buyers declining to their second lowest level from 30.5 percent in 2005 to 27.1 percent in 2006, according to CAR.”
“The CAR survey also found that the share of buyers who used a second mortgage climbed from 38 percent in 2005 to 43 percent in 2006, more than triple the percentage since 2001 and the highest percentage since 1982. The use of alternative loan products also registered a sharp increase.”
“‘Home buyers with zero-down payments increased significantly from 4.5 percent in 2000 to 21.1 percent in 2006,’ said CAR Chief Economist Leslie Appleton-Young. ‘Two out of five first-time buyers made a zero-down payment on their home purchase.’”
The Press Enterprise. “In the fourth quarter of 2006, 1.9 percent of for-sale homes in Riverside and San Bernardino counties were unoccupied, up from 1.3 percent in the same period of 2005.”
“Inland Empire economist John Husing said he believes the figures reflect the burgeoning supply of homes built toward the end of last year but still unsold and the difficulty facing speculators whose hopes to ‘flip’ homes were dashed by a slowing market.”
“‘We are going into this season with more finished vacant inventory than we have had in the last decade in the Inland Empire,’ said Steve Johnson, director of MetroStudy.”
“Johnson said at the start of this year, construction was finished on 7,542 homes that were still unsold, more than double the 3,655 homes that builders held in standing inventory a year earlier.”
“Vacant homes on the resale market also have become more common. The Multi-Regional MLS, which tracks resale homes in western Riverside and San Bernardino counties and eastern Los Angeles County, reports that about 30 percent of the homes listed last year were vacant, up from an average of 25 percent in 2005.”
“Broker Lance Martin in Moreno Valley, said demand for his company’s property-management services has grown significantly. Martin said investors and other home sellers have given up in frustration because competition is making sales take longer and making it impossible for them to get the prices they expected.”
“As of Jan. 31, 30,080 homes were listed, compared with 19,288 a year earlier. ‘You also have a certain number of people trying to rent the houses out, and they can’t get the rent they want,’ Martin said. ‘Most people have very substantial mortgage payments on their homes, and the rents aren’t coming close,’ he said.”
“Borre Winckel, director of the Riverside chapter of the Building Industry Association, said although investors are no longer buying new homes, ‘the consequences of their speculation in a shrinking market is now coming out in that we see an uptick in these see-through homes.’”
“Winckel said investors will be discounting their homes as sharply as possible, especially if they made purchases with very low interest rates that will be adjusting upward.”
The Hollister Free Lance. “Local home prices held steady in January, but prices remain far below where they were a year ago. Twenty-nine San Benito County homes were sold last month, with a median price of $589,000, according to REInfoLink, a real estate database that tracks home sales.”
‘In January 2006, when 31 homes sold, the median price was $669,000. Home prices fell throughout most of 2006, reaching a monthly low of $539,000 in November. Prices have increased since then, but local real estate agents said there hasn’t been a significant upswing in the market.”
“‘I don’t think things have changed at all in the last two or three months,’ said broker Dee Brown.”
“Broker associate Jack Markle estimated that most homes are now selling for between 10 and 20 percent less than their value last year.”
From Reuters. “(In) California, exurban housing markets have softened more than those close to urban centers. Riverside and San Bernardino counties, which are on the eastern edge of Los Angeles’ suburban frontier, saw sales volume plummeted 40.6 percent. High Desert, about 80 miles from downtown Los Angeles, sawa 39 percent drop in the number of sales.”
“Some observers blame the sales stall in the Los Angeles area on home builders who for years gobbled up available land in exurban tracts and overbuilt. Areas closer to the city are already built out and have not faced a big injection of new homes, said Leslie Appleton, an economist with the California Association of Realtors.”
“Now, real estate agents in the exurbs trying to sell a glut of new homes, along with the inventory of previously owned houses. ‘There is intense competition in the inland areas of the state between the existing stock and new homes,’ said Appleton. ‘The absorption of this new product is going to take some time.’”
“And while new buyers are needed to sop up the housing stock, many investor-owners are losing their properties through bankruptcy, said Jesse Ramirez, a real estate agent in Riverside.”
“‘There were some investors thinking that the market was going to continue going up,’ said Ramirez, who has noticed a spike in the number of bank repossessions. ‘When things go up, they creep. When they go down, they go down fast.’”
The Orange County Register. “Realtor-economist Gary Watts believes prices will rise slightly in 2007. Although his 2006 forecast was overly optimistic, Watts remains confident that local house prices this year will increase 7 percent and that condo prices will go up about 4 percent.”
“‘This will be, I think, a pivotal year,’ Watts said in a telephone interview. ‘If the housing correction is behind us, we’ll be in pretty good shape.’”
“He said he was surprised by a huge increase in the number of homes being offered for sale last year, which held prices in check. Many sellers last year were expecting the same types of double-digit gains seen in recent years.”
“If the inventory of homes listed for sale balloons again this spring and summer, Watts warned, the market won’t appreciate as expected. ‘We’ll just have to see and hold our breath for the inventory numbers next spring and summer and see if that explodes again,’ he said.”
From Bakersfield
‘Let’s say there’s one police officer assigned to your neighborhood, but rising graffiti and gang violence seem to warrant at least another. Will another be coming? Not likely, according to a new city budget forecast. The spending plan for the next fiscal year, which begins July 1, will challenge department heads used to flush budgets in recent years, City Manager Alan Tandy is telling them.’
‘Residential building permits are down 54 percent compared to the same time last year, meaning less revenue in the myriad fees associated with the planning process such as park development and traffic impact fees.’
‘Ventura County already has a shortfall of housing that is expected to increase in the coming years as building restrictions come up against increased demand. Even if developers are building more homes, they may not be building more of what is actually needed. They typically want to build homes that will demand higher prices, Smith said.’
‘It might seem like a strange time for a report on housing needs when homes are sitting on the market increasingly longer and builders are slowing down development to keep from outpacing demand. One reason why the Building Industry Association’s Greater Los Angeles/Ventura County chapter wanted to do the study was because of the slowing market, Schroeder said. ‘Many people think the housing crisis is over,’ she said. ‘It’s not.’
WTF did they do with 4 years of building permit fees? I know waste it buying up “friends” properties and using them as city buildings - like the recent purchase of a prominent lawyers 4 story office building…
The Orange County Register. “Realtor-economist Gary Watts believes prices will rise slightly in 2007. Although his 2006 forecast was overly optimistic, Watts remains confident that local house prices this year will increase 7 percent and that condo prices will go up about 4 percent.”
here we go with this idiot again. i am betting against him. there will be no appreciation in 2007 for the orange county ca market. common sense tells me that if there is any further appreciation, only the top 10% of income can afford the median house. what a joke. is this guy on drug? why does the orange county times publish this rubbish?
If Gary’s smoking something good, can we HBB-ers have a puff? Just one?
He must of got ahold of that hashish that’s been floating around.I think a 7% decrease in prices is in the bag.
“I think a 7% decrease in prices is in the bag….”
Full sentence should read, “I think a 7% decrease in prices is in the bag by July 1st.” I’m glad I could help you finish that, arizonadude.
posted Watts remains confident that local house prices this year will increase 7 percent
What is the nut bag only half full or half empty this year? More like Watts head empty.
“‘This will be, I think, a pivotal year,’ Watts said in a telephone interview.
From the mouths of babes and fools…
Actually, in L.A. County right now, only 2% can truly “afford” the median (i.e., conventional mortgage).
‘If the housing correction is behind us, we’ll be in pretty good shape.’”
!!!
That’s some real forcasting for ya!
“A new report from the Los Angeles Economic Development Corp. looked at population growth and housing in Los Angeles and Ventura counties, finding both lacking. The report was commissioned by the Building Industry Association’s Greater Los Angeles/Ventura County chapter.”
“Los Angeles Economic Development Corp.” This is who did the report. The Jack Kayser Krew. Same bunch who, until very recently, keep the touting the LA Downtown Lofts with the keep building and they will come. Creditability ZERO IMO.
Hey but these builders can now take it to heart and build away in the Ventura County. Bring it one, guys! RiverPark II anyone? Drown in inventory!
Ben,
maybe you should put quotes from Gary Watts in a separate post in the future since he seems to generate so many comments on his own. The guy is a human punching bag for this audience.
He’s the punching bag that punches itself.
I was sick last year, but if I don’t get sicker and die, I’ll be in good shape.
I really took a beating at the sportsbook. I lost all of my money. If I don’t lose anymore, I’ll be doing great.
The only thing behind him is his ass and he is talking out of it.
Californians had better buckle up. It’s going to be a bumpy ride. The price to income ration is 11.4 to 1. The potential for a horror story would make Stephen King wet himself with fear. “Sit Cujo, sit.”
Correction: The price to income ratio is 11.4 to 1 in Los Angeles.
Bumby like an earthquake…
ROFLMAO!!! Please, NYCityBoy, not while I’m eating granola!!
I think the little slip was “if”… legal weasle room
Sure, we lose a penny on every one, but we make it up in volume.
I want to add we will be in even better shape is Global Warming is over.
IF the stock market doesn’t decline it will be even to up for the year.
If all my dead friends come back to life and all my ex-lovers come begging forgiveness and all my past income taxes are reimbursed to me by Uncle Sam, this will be an excellent year for RE.
Nick you are way off base, it is a lot less than 10%.
According to NAHB the top 3.8% of earners in OC can afford the median priced home.
Said another way the top 3.8% of earners can afford the bottom 50% of homes. That is sustainable!
sarcasm off
Fake multiple bids! As long as these realtor-whores are able to trick buyers into overbiding with fake unconfirmable multiple offers, above asking, they will get their way and we may see 4% gains. There is plenty of dumb gulible (sheeple) out there who fall frey to the vultures. Doesnt matter if your rich or poor, cash or financed.
You know what Im talking about. Last month my coworker put in a bid on a home listed for 3 months on the market. Week later he was told there were other bidders. Yet the local market sales has declined nearly 50% YoY and increase in inventory of 75% YoY . He found himself putting 5% above asking. Dont kid yourself … realtors will pull a fast one. It just takes fewer fools in this market to make increase of 5% possible.
Im pretty sure Gary Watts and his crony buddies at the NAR all know about this. Total market price manipulation with no transparency with the public!
REO prices will be tough to manipulate as the lenders reach the end of their ropes trying desperately to find a willing buyer.
Don’t despair. Just look at the coming torrent. Dominos need to fall in order. The new comps are on the way…
The realtors don’t use REO or auctioned real estate numbers in their stats. They only use the numbers generated from their MLS. If a realtor doesn’t get paid it doesn’t count =).
Same shit happend in the 90’s. The banks were selling homes for $30-40k and the realtors had stuff sitting for years listed at $60k. They would only use the handful of $60k sales for their stats, while in fact the comps set by the banks were much much lower.
Why don’t we give them fake multiple lowball bids when we are ready to buy distressed properties? Each will be lower than the previous, sending the seller into a deeper state of panic and depression.
GREAT IDEA! CAN’T WAIT!!
Right on! That’ll drive ‘em up their bare primer coated walls!
Personally, I would withdraw my bid and resubmit a bid 1% lower. Tell the realtor you were just trying to get out of the other buyers way.
Don’t worry. I’ve witnessed a buyer withdraw from the “multiple” bids, only to be called back a few weeks later — with the inevitable “fell through” call. But buyer still wants you to raise your offer a reasonable compromise between your bid and the “other” one.
That’s precisely what I plan on doing. I may also pursue the seller’s realtor to ensure that a bid exists, as fake bidding to raise the price is illegal. If anybody knows a friend who fell for it, I wonder if it’s too late to request proof of the other offer. That would be a tasty lawsuit and would send a sharp message.
Personally, I would like to see buyers submit “decaying” bids.
Start with a lowball bid. If it’s not accepted within 24 hrs, the offered price is automatically reduced by 1%, and the new reduced offer holds for the next 24 hrs, and so on. The single original offer would state the decay terms.
To do even better, progressively increase the rate of decay - 1st decay of 1%, next decay of 2% and so on.
Let the sellers sweat it out.
Take it now or take less later. Nice thought.
I pity the poor sellers when this crowd goes out to buy.
I believe this is similar in theory to the Dutch auctions that GetStucco would like to see.
And, yes, IrvineRenter, some sellers are going to be in for a very rude shock when they encounter some of this crowd as buyers in a few years. Of course, by then, a lot of inventory will be REO, so we will have even more reason to be rude to those lenders/sellers that helped create this mess.
I think you’ve hit on something, but I would also throw in other stipulations like seller pays all closing costs, mello roos, hoa, etc, and then it goes down 1-3 percent daily…
crush-ed
Exactly, I was looking at condos in 1999 - didn’t buy because I refused to get in a bidding war which
i thought was manufactured. I put in two bids which were countered for over asking, when I walked away miraculously the “other bidder” ’s offer “fell” through and they asked me to put in a new bid - which I did - but at the same price as before. I think they kept doing this little scam until they got a greater fool.
It’s kinda like starting a fire. You just keep striking a match and one finally gets the fire going.
Bidding wars. F%& that.
“Fake multiple bids!”
I may never again use a buyer’s realtor to buy a house. If I do, I will be certain to include a clause in the contract allowing me to terminate the contract without cause. If he/she comes back to me with “there’s another bid”, I’ll fire that person on the spot.
Not “drug”, “drugs”
all my mistakes, lot of drugs and only millionaires can buy in the oc. the rest of us will have to share rooms with illegal aliens. lol.
I think a lot of overpriced real estate will be abducted by illegal aliens.
Foreclosure Encounters of the Third Kind.
The run-up was driven by frauds. Everyone knew and just looked
the other way. Here’s a 1.2B fraud :
http://bubbletracking.blogspot.com/2007/01/isnt-12-billion-fraud-case-big-enough.html
Thanks ocrenter.
Foreclosure Encounters of the Third World Kind.
Keep in mind the slow destruction of the middle-class in this country is going to do just that…allow only the top 10% of people in that area to afford things comfortably.
People need to understand that the forces at work don’t care whatsoever that the average joe can’t afford a home anymore. If indeed that were not true, home prices in the LA/SF area would have dropped drastically by now…instead, we see hardly any changes at all in these specific areas.
I don’t like the San Fernando area or LA area at all…but you’d have to cut my balls off before I would even consider living in shitholes like San Bernandino, Apple Valley, etc…what dumps…large homes or not.
I don’t know….it’s hard to really gauge what’s going on. On one hand, logic states that the pricing will be lower and must be lower, but looking at the numbers, prices are still creeping up in some places???? I mean seriously…as many have stated before, who the hell is this stupid to buy these things at these prices in this market?
As long as people like you refuse to vote with your feet, those areas will remain overpriced. I would love to live in Manhattan or OC or Tokyo or Hong Kong or London, but I will not pay more than 60% of my gross income just so I can live in the cool places.
Lived one hour drive from Tokyo until 2004. My TWO bedroom apartment (large by Japan standards - about average for San Diego) cost 60,000 yen a month. It was brand-spanking new and very well built. At today’s exchange rate, that’s 500 bucks a month! That’s what nearly two decades of flat/falling prices will do to ya.
My ONE bedroom in Rancho Bernardo? $1195.
In the cool places, at least the ones I’m familiar with (SF, LA, and OC), it’s impossibly expensive to buy at this point, but renting remains fairly reasonable, even in the “desirable” districts. My rent has barely changed during the past few years while purchase prices doubled or worse.
Why We Rent is right, Japan is actually quite affordable. Last April a realty office in Kyoto had oodles and oodles of apartments posted and most were about 45k to 55k Yen. Of course that’s not Tokyo, but I would take Kyoto any day of the week over another dreary winter in Chicago.
“don’t like the San Fernando area or LA area at all…but you’d have to cut my balls off before I would even consider living in shitholes like San Bernandino, Apple Valley, etc…what dumps…large homes or not”
You don’t know how right you are! I just came back from a drive into Victorville, close by Apple Valley. Temp on a feb 6th mid-winter day 80%. By march it will climb to 100%+ and remain at 100% + all way to nov. Also, there are plenty of low-life section 8 compton types out in victorville. The entire city is nothing but housing tracts and endless malls and shopping centers, and lots of folks driving aimlessly around, most probably in hock up to their eyeballs. One main building which popped out was the SBern child welfare services bldg, off the 18 hwy.
Just noticing a sampling of the population going thru intersection of 15 fwy/palmdale hwy 18 I will bet
bottom dollar that Victorville has some of highest rates of crime, gangs,teen unemployment,meth use,welfare %,section 8 housing, ect in California for a community of its size.
Keep in mind the slow destruction of the middle-class in this country is going to do just that…allow only the top 10% of people in that area to afford things comfortably.
People need to understand that the forces at work don’t care whatsoever that the average joe can’t afford a home anymore. If indeed that were not true, home prices in the LA/SF area would have dropped drastically by now…instead, we see hardly any changes at all in these specific areas.
I don’t like the San Fernando area or LA area at all…but you’d have to cut my balls off before I would even consider living in shitholes like San Bernandino, Apple Valley, etc…what dumps…large homes or not.
I don’t know….it’s hard to really gauge what’s going on. On one hand, logic states that the pricing will be lower and must be lower, but looking at the numbers, prices are still creeping up in some places???? I mean seriously…as many have stated before, who the hell is this stupid to buy these things at these prices in this market?
“I mean seriously…as many have stated before, who the hell is this stupid to buy these things at these prices in this market? ”
It’s called FRAUD. Cashback loans and crooked appraisers in collusion with Mortgage Brokers….that’s how the prices have stayed where they are. Check out the fraud case in Temecula/Murrieta…$1.2B, yes that is a billion…in freaking Temecula.
Fraud is an everyday event in RE industry. Reading from the Appraisers petition and other articles it has magnified several times larger during this boom.
I agree with your statement that fraud is an everyday event in the RE industry. All the players want the deal to go through no matter what, with the highest compensation to themselves. This is on both sides of the deal, the seller and buyer. With the only house I have purchased (in early 99, before the bubble), I called the listing agent directly off the sign in the yard (I didn’t have my own buyer’s agent). The day I looked at the house, a buyers agent for someone else presented an offer (it was real because I was there when it happened) so I had to make a quick decision whether I wanted the house or not. I decided to go for it and the agent was quite excited, because if the seller (her client) took my offer instead of the other, she would double her commision by not having to split with the other buyer’s agent. We went to her office and she conveiniently left the other offer on her desk. I offered $500 more than the other offer and the realtwhore convinced her client to take my offer that same evening. All hell broke loose later that week when the other buyer’s agent told the owner that her clients would have upped their offer if the seller would have simply countered (I would have walked). Of course, the listing agent didn’t expain that to her own client, because she was making a double commision by getting the seller to accept my offer. So now I had a hostile seller and a scared realtor during my closing. A bit uncomfortable. An interesting side note…the other potential buyers ended up buying a different home about two blocks away and our sons ended up being great friends. Similary trickery (though maybe not illegal, but certainly unethical) occured with all the realtors when I sold. I plan to buy again later this summer and am coaching my wife on minimizing realtor invovement and on what info we will tell them about ourselves and financial situation.
One more sidenote to my story above…I was always amazed when everyone (even in my own neighborhood) kept repeating the familar chant, “Real Estate only goes up” over the last several years. Wait a minute…I would let them know that I paid 40K LESS for my house in 1999 than the original owner (the seller) did when it was new in 1992…not counting the numerous landscape upgrades she put in while she lived in it. Don’t tell me RE only goes up. Most people would just shrug off off my comments and keep up their “only goes up, only goes up, …” chant, with starry blank looks in their eyes.
Some forecast! He’s already innoculating himself for his anticipated failure.
“If the housing correction is behind us…”
“If the inventory of homes balloons…”
Yes Gary, prices will go up, unless of course they go down.
He mneans there will be a 7% increase in the decrease of prices this year, which is probably about right for Orange County
You may be a jackass if you look like this.
Keep drinking the Kool Aid big guy…..
How on earth can California house prices go up anymore, there are so little percentage people that can afford them now. What are realtors smoking??? The CA housing market is going down and flatten — there’s no other way about it. NO ONE can afford a house at these prices now. Greedy sellers are going to have to face the fact, prices are not going up and they will be faced with much lower offers — it’s a fact! It’s a buyer’s market now and buyers are smart enough to wait it out, there’s no hurry. This price correction is long overdue.
CA housing market will bomb until prices start falling and they will this spring and summer if sellers are really serious about selling. There are many people retiring and just fed up with CA and its expensive cost of living — just get up and moving out of state. That’s what I’m planning on doing next year, I’m out of here — and I’m a native Californian. I just can’t stand the direction the state is going and it’s future looks very bleak to me. I’ve already purchased a home out of state and I’m leaving my beloved birthplace — there is no CA dream for me and I know many of my friends doing the same.
If there is a way for the REIC to present any form of increasing housing numbers in CA they will find it and do it. It may take the form of increasing median prices arrived at because no more homes under 800k are being sold and the upper end homes sold for (Oh let’s just pick a number) 5 million in cash transactions to those folks who live on that other planet Earth where money spills effortlessly out of your anal cavity. This would give us a median of over 1 million and a number that the entire REIC would just be all a titter over despite the fact that sales volume is off by over 50% if not more. Why, I have no idea, but I am sure it is what they want and will do somehow, some way. As this farce continues each day it is harder and harder to hold my food in and keep my spirits up.
In my co fairfax/va- 8 cars showed for a dopped up naked chick- I asked how many if it was a naked guy and they said “they may have a weapon hidden “? !
Yeah government workers are so dumb. We get it.
Wow, what will happen to demand in CA if lenders require as little as a 5% down payment?
Demand? At 5% downpayments they’ll still have out of control foreclosures.
10%+ downpaymentswill be here soon.
Oh… demand, about 1/3rd peak.
Got popcorn?
Neil
No way. They, the crack/pimp lenders , still desire to push their dopee no down loans to anyone as they themselves have been hooked on this “easy market” for fast commissions. To hell what happens!
In LA, Starbucks would probably go out of business if they had to require 5% DOWN on credit card purchases of Java.
Houses? Shirley you jest. (no I don’t, and stop calling me Shirley!)
I guess I picked the wrong week to quit sniffing glue
one more huff, yeah, 7% in the bag..
wait wheres my bag?
i laugh so hard on this blog. you guys kill me. this is seriously funny stuff.
“Realtor-economist Gary Watts believes prices will rise slightly in 2007. Although his 2006 forecast was overly optimistic, Watts remains confident that local house prices this year will increase 7 percent and that condo prices will go up about 4 percent.”
Well, at least this time they subtly pointed out the inherent conflict of interest (”Realtor-economist”) and vaguely alluded to his previous “forecast” being wrong. Not good, but a tiny improvement over the usual presenting unqualified REIC hype as God’s Own Truth.
Hey, it’s already in the bag: 7 percent increase in house prices and 4 percent increase in condo prices. Because Gary sez so…
Of course……….this guy has to be an absolute wakka. During a depression he would still be forecasting increases.
I’m sure you meant “During the depression he will still be forecasting increases.”
Gary has a depression each morning when he has to look at his lying eyes in the morror.
But he does an If-Then forecast. If volume stays flat, then prices will go up. If volume balloons, prices will not. No s*%t, sherlock. I could have made forecasts like that. In fact, I can make a lot bolder forecast and would probably be more right than this idiot. You’ve lost your mojo, GDub, that’s what happens when you align yourself with realtors.
What are his forcasting tools, dice ?
No, LOADED dice.
Ouiji Board works better than those damn statistics.
Gary Watts is “in the bag”.
“‘This will be, I think, a pivotal year,’ Watts said in a telephone interview. ‘If the housing correction is behind us, we’ll be in pretty good shape.’”
Thanks Gary…and if my grandmother had wheels, she’d be a bicycle. Sadly, I’m pretty sure further steep declines are “in the bag.”
As AE Newman once said.
“No Gary, it’s a Housing “ERECTION”, and yes, it is behind you…”
LOL
roflow
watts has a new bag
he Orange County Register. “Realtor-economist Gary Watts believes prices will rise slightly in 2007. Although his 2006 forecast was overly optimistic, Watts remains confident that local house prices this year will increase 7 percent and that condo prices will go up about 4 percent.”
5 out of 5 stars
“if my grandmother had wheels, she’d be a bicycle.”
LOL! Wishing someone would just slap the crap out of this douche bag Gary Watts.
Or as the blind man says:
“If my Grandma had “bunny rabbits” she’d be an Elephant”
LOL!
“if my grandmother had wheels, she’d be a bicycle.” Frickin’ awesome……I’m sitting in the library and when I read that I practically got myself thrown out.
Gary is a jag*ff. Don’t know how else to describe this schill.
And what does Gary think about the growing property tax delinquencies in OC? Oh, I’m sure that he ignores that in his “analysis” since it doesn’t help him shill real estate.
Here’s the article from Lansner on tax delinquencies (John actually expresses some opinons in this one - and they’re more bearish than bullish - rather than just letting the “experts” spew. Kind of refreshing.
http://www.ocregister.com/ocregister/money/article_1564034.php
(Sorry for the long url, but tinyurl doesn’t seem to working at the moment)
A look at the chart on this article shows that delinquencies are rising for the last two years, and we’re right about where we were in 1990 (on the way up) and 1996 (on the way down) as far as the percentage of missed payments (5.32%).
Realtor-economist Gary Watts
REALTOR-ECONOMIST? Isn’t that a contradiction in terms? Subjective-objective? Anyone that listens to a realtor-economist should have his/her head examined.
There’s a serious question as to whether he is actually an economist. He did receive his bachelors in economics, but that’s about it. As far as I can tell, he never held a job as an economist, been recognized by any official organization as one, and has no credentials otherwise to qualify as one. Realtor, he is.
Nope Watts got a Psychology degree from Sacramento State.
That being said no better degree for a con-man.
If people invest because of his “Economic” background and knowledge. Isn’t he responsible for the statements said? Accountability anyone?
Why? Would you ask for your money back from a carnival barker because the bearded lady shaved?
“Why? Would you ask for your money back from a carnival barker because the bearded lady shaved?”
Uh, yes I would. Just as the monkey girl needs hair on her face, so does the bearded lady.
realtor-economist
Can you say “shill looking for credibility?”
LOL! Right on with that one.
Bubble-gram:
Realtor-Economist =
“Elite, moron actors.”
“Moron toilet races.”
“Stool ram erection.”
You’re not figuring those out yourself, are you?
Rainman18:
That was very funny, I have missed your posts. Please post more often.
‘We’ll just have to see and hold our breath for the inventory numbers next spring and summer and see if that explodes again,’ he said.”
Great, now I’m crossing my fingers AND holding my breath. What next, are we going to be rubbing our tummies while patting our heads??
Wish in one hand and ???? in the other? Party is over folks.Time to go back to work and actually work for your money.You have to be liveing in a cave to not no prices are off big time here in az.
If Watts would just hold his breath until prices start going really up again, he would die and we wouldn’t have to hear from him any more.
“We’ll just have to see and hold our breath…”
———————————————————————
More great economic analysis from Gary!! I’m surprised he’s calling for any appreciation for 2007 since everyone I’m talking to here in the OC is already experiencing price declines….and Spring ain’t even here yet!
Maybe he is counting on the median statistic flaw, that hid the likely OC decline in 2006.
But wasn’t his “15% is in the bag” prediction WAY OFF??
So we add the Gary Watts adjustment and we expect a -10% decline this year. Sorta like my gf’s stock picks… whatever she recommends, short.
Watts…”Many sellers last year were expecting the same types of double-digit gains seen in recent years”
No kidding. And one of them was YOU, dolt. Remember, you are on record, in the bag. And people were paying you for this advice so they could be referred to in some oblique way as “many people”.
Watts, discredited. It’s in-the- “douche”-BAG
Gary Watts needs more a lightning bolt to increase the wattage in his dead brain cells. Here’s my prediction: If the housing correction is behind us, then there will be no housing correction in front of us.”
Realtor-economist-tarot card reader
Gary Watts needs more a lightning bolt to increase the wattage in his dead brain cells. Here’s my prediction: If the housing correction is behind us, then there will be no housing correction in front of us.”
Realtor-economist-tarot care reader
“He said he was surprised by a huge increase in the number of homes being offered for sale last year, which held prices in check. Many sellers last year were expecting the same types of double-digit gains seen in recent years.”
Gee, I wonder where they got that idea!? Maybe proclamations of “15% is in the bag” had something to do with their expectation of double-digit gains, ya think Gary?
Yes, wishful sellers were delusional, and Gary can only blame himself for making them delusional with his prediction of 15-18% appreciation for 2006, and then even trying to say that 2006 would be an “inverted year” and the appreciation would come in the last half of the year (after it didn’t materialize in the first half).
And, I guess his ploy to try to get realtors to pull signs in an attempt to make it look like fewer homes were for sale was unsuccessful. Inventory will surge again this year, even higher than last year (more ARMs resetting), and I think he knows it. He doesn’t want it to happen, but I think his “If the housing correction is behind us” and conditioning of appreciation on there not being another surge in inventory is his subtle admission that prices are going down. Note, he has not (as far as I can tell) actually stated that the “correction” is over - he seems far more wishy washy in his predictions this year.
What I can’t figure out, though, is why he won’t just come out and predict a crash. He did it before, and he has been living well off of that correct call for the past 15+ years. If he calls another one right, then he can live off that call for the next 15+ years.
Too much money at stake right now, is my guess. They dont want to cause a stampede yet. Once everybody believes that R.E. is a bad investment, then the game is over.
I read his report today. The impression I got is that Gary Watts is pretty thick. I suspect he just got lucky before and rode the wave up. His report, if you want to call it that, lacked any coherent analysis of the factors influencing the prices of real estate; however, it did contain many of the BS platitudes we have come to expect from real estate shills. If I had commissioned a consultant to give me a market study, and he produced the rag Gary Watts put out, I would not pay him. In fact, I would not pay him, and I would tell everyone in my industry not to use him. Surprisingly enough, I don’t think he is a fraud, I think he is just stupid: a bit like Bush really, an idiot who is over his head.
“If the inventory of homes listed for sale balloons again this spring and summer, Watts warned, the market won’t appreciate as expected. ‘We’ll just have to see and hold our breath for the inventory numbers next spring and summer and see if that explodes again,’ he said.”
I hope he is very fit, as he will be holding his breath for a long time.
SKB
All I need is for him to hold his breath for 15 minutes.
The world record is 13 and change, last I heard.
One less realtar’d.
I’ve noticed in 93552 that the median asking price for the homes has varied only slightly over the last 12 months between 413-417K. I’m not suprised that sellers are still wishing for a dream price, but I’m somewhat astonished by how tight the variation has been.
I’ve seen it postulated elsewhere that the duration of the high plateau will determine the sharp slope of the following drop, as the area under the curve is bounded somewhat.
Believers in this idea? Detractors?
Sounds good. Those long listers are being crowded by REO’s and the more motivated. This unwillingness to deal is no deal - the total inventory will simply sink all prices under its own weight. But I would also guess that while many are stubborn, just as many are trapped by a massive mortage/HELOC and the need to sell at a certain price point. All of this should shake out at the end of spring - the party will be rolling by then.
That’s interesting dude. I keep noticing the stubbornness in 93442 too. Why is the area bounded? (I hope you’re right.)
Late reply, hope you see it.
The rise and fall of asset bubbles follow a bell curve, modified by inflation, and anything that may or may not extend them.
We aren’t talking a zero sum game here, but one should see a similar area under the curve past the peak of the bubble and before the peak. Therefore any plateau extending the bubble will make the decline more drastic.
“”Watts, who is delivering his forecast in a series of speeches to Realtor groups this month, originally forecast that Orange County home prices would rise 15 percent to 18 percent in 2006, then revised that forecast down to an increase of 8 percent to 9 percent.
He said he was surprised by a huge increase in the number of homes being offered for sale last year, which held prices in check.”"
OK, Jeff Collins of the OC Register, if Gary Watts was so far off last year, why are we making a big deal of his predictions this year?
“”We’ll just have to see and hold our breath for the inventory numbers next spring and summer and see if that explodes again,” he said.”
Add holding your breath to the list of ways to predict the future of housing prices (along with ‘crossed your fingers and toes’).
C’mon, media reporters, why do you keep going back to these real estate *shills*?
Sorry, that should be “why are *you* making a big deal of his predictions this year?”, and “crossed fingers and toes”. Damn dislyxsliliyayaya.
Because it sells papers.
The MSM is not in the news business they are in the selling of eyeballs meet advertising business.
This is why I plan to never subscribe to another newspaper, except perhaps WSJ which has its own faults, but it is better than local rags. They are total and complete wastes of time, IMO.
From MarketWatch: Two economists think construction employment will plunge this year as many of the homes started last year are finished. It typically takes six months for a new home to go from the groundbreaking to the final steps of construction. The latest data show 1.26 million homes were still under construction in December.
“What it means is that we have a steeper cliff to fall off from,” wrote David Rosenberg, chief North American economist for Merrill Lynch, in a research note.
The drag from housing will diminish this year, wrote Steven Wieting, an economist for Citigroup, in a research note. But despite his general optimism, Wieting believes the worst is yet to come for jobs.
“We are doubtful, however, the gross job losses tied to the housing cycle are any more than one-third complete,” he wrote. He’s looking for losses to “easily exceed a half million.”
Rosenberg estimates that employment in residential construction will fall about 20% in 2007, or about 600,000 jobs. In essence, the number of jobs in home-building will return to 2002 levels as the pace of home building does.
In addition, of some 3 million manufacturing jobs tied directly to housing, about 10% will disappear, Rosenberg estimated.
All told, that’s about 900,000 jobs likely to be lost this year, and it doesn’t include a large number of threatened jobs in real estate, mortgage banking and other housing-related fields.
Lets see . . . Spec/empty Inventory over 2 million, another 1.26 million homes under construction in December. “Holy Shit! Hooollly Shit! HOOOOLLLY SHIT” John Blutarski - Animal House
let’s see now…who do I want to believe? the chief North American economist for Merrill Lynch or the chief economist for NAR?
Not that I am all that in love with the Wall St. folks, but if I have to choose, I guess I’ll take the guy from Merrill…
And then it sets off the chain reaction of higher government expenditure, less consumer spending, lower business profits followed by lower business spending, followed by further job cuts, followed by lower consumer spending….until magically we somehow get out of this crap.
These “economists” act like 900,000 people lose their jobs and end of story. They forget to follow the economic impacts that result from this.
Target is at $62 per share. Home Depot is rising straight up during the Goldilocks rally. Does this continue when their customers are losing their jobs?
This will be so mess. Neil, you can keep the popcorn. I’m loading up on Jack Daniels and Tombstone pizzas.
We all might need some strong medication when this is done. I agree, the economic impacts will be… significant.
Jack Daniels and…
Got popcorn?
Neil
That’s a scary article.
Bwhahahahaha
CNN photo of Gary Watson taken moments before his speech at a luncheon for OC realtors in Newport Beach.
http://jackthehack.com/pot.jpg
awfully funny
There is a rumor that Gary Watts attempted to the blow up the car of a bubble believer….fortunately he wasn’t successful. He did burn his lips on the exhaust pipe though.
Old bad joke I know…but this dude is smoking some seriously good sh*t. Wish I had the number of his connection, because if I did I’d be saying Hillary will be a great President!
Another example of the fact that (first time) buying with a down payment and a high credit score is crazy in this market. Nobody else has anything to lose playing with house money:
“‘Home buyers with zero-down payments increased significantly from 4.5 percent in 2000 to 21.1 percent in 2006,’ said CAR Chief Economist Leslie Appleton-Young. ‘Two out of five first-time buyers made a zero-down payment on their home purchase.’”
…and, these GFs were unfortunate enough to get into a zero-down loan at the absolute top of the market.
Therefore, they are paying the most expensive debt burden/monthly payment with zero of the equity benefits.
In the dot com days, this would be called a hot “burn rate”.
Interesting point. Good way to lose a good credit score rather quickly.
Read about Chart of the week.
The bubbly builder stocks started going back up just after the May 2006 swoon in emerging market and commodities stocks. What a curious coincidence…
‘Two out of five first-time buyers made a zero-down payment on their home purchase.’
Basically anyone that DID NOT have any equity to use from a prior sale.
That is a true statement for sure. The only people with money seem to be the ones that got instant equity from specualtion.How is anyone makeing 20-30k a year going to save any money w/ inflation at at least 7%. The middle class is going quick.
The other 3 out of 5 took out a HELOC and used it as a downpayment on a No-Doc stated income loan. I think the numbers are much higher than that for people who are over-leveraged.
“‘Home buyers with zero-down payments increased significantly from 4.5 percent in 2000 to 21.1 percent in 2006,’ said CAR Chief Economist Leslie Appleton-Young. ‘Two out of five first-time buyers made a zero-down payment on their home purchase.’”
2 out 5 = zero down (that’s like, wait let me get the HP, (Jeapardy music)…40%
Do you think those that make up that 40% are going to hang around making payments (assuming they can even afford them) on a house that is worth much less than they owe?
Maybe, putting zero down is the way to go…maybe we are the fools for thinking a large down payment is the way to go…hey, maybe PMI ain’t so bad…
now, where are my boots, I feel like walkin’ (queue up Nancy, please)
I don’t know, saying goodbye to $20 grand or spending 7+ years with a BK headache. Seems all the same to me.
Many will be forced to endure “both”.
Since you can get a credit card, a car loan, and sub-prime home loan the day after your bankruptcy is discharged, there really is no bankruptcy headache.
True but at what rate? How many Advil’s does it take to get rid of 22.99% migraine?
Secured credit card
Ugly duckling/DriveTime (10yr old car w/dents)
No home loan for at least 18 months unless you have at least 10% down (no who is going to have that after BK’g)
It’s not nearly as easy as it seems under the new BK laws. IMHO.
You don’t have to have 10% down for a homeloan after bankruptcy or foreclosure. The ARMs dealers are still doing 100% loans for those losers. I hear ads on the radio all the time touting cashback/refi/no down/liar’s loans for people just out of bankruptcy or foreclosure. I don’t know who is buying this manure. I guess if you mix it up with a good loans and sell it in an MBS, the person who eats that crap doesn’t notice the stench.
If you are young first time home buyer who bought at the peak, take a hit rebuild wealth slowly. I don’t think new BK laws will spare any FBs
The new bk laws- while a huge pain in the neck- are nowhere near as scary as rumor would have you believe.
Hint to anyone who knows any FB’s out there: The new law favors homewoners- so they should see a bk attorney while they still own the house.
Even if they merely break even, they still spent 2-3 times as much on carrying costs as they would have simply renting, not to mention all the administrative hassle involved when buying and selling.
Don’t fool yourself believing these people are paying PMI. They have 80/20 which avoids PMI.
Looks like the shoeshine boys are fully invested in this market…
Good point, C.D. I knew it was time to sell my house when an acquaintance who was already broke decided to get rich by buying a house.
I knew it was time to sell when the pastor of the community church was heading up a group of church members to speculate on pre-sell residential homes in Las Vegas (a few years ago). I kid you not.
“Even if developers are building more homes, they may not be building more of what is actually needed. They typically want to build homes that will demand higher prices, Smith said.’”
Well elevate my feet and cover me with a blanket, cuz I think I’m in shock.
Really, why bother to build Levittowns (which actually sound pretty pleasant at this point) when you can make oodles of profit on empty airboxes and attached product?
They won’t be so empty for long. It’s been touched on here many times before. These builders have built a lot of bedrooms and bathrooms in the past 5 years. All of those bedrooms and bathrooms mean many of these McMansions will turn into McHotels in the coming years. Cousins, brothers, uncles, nieces, sisters will all be living together.
A single family home is a 3/2 or a 2/1 + a half. It is not a 6/5 or 5/4. They haven’t been building SFHs. They have been building multi-generational boarding homes.
i was a realtor from 86 to 2000, and got out to remodel, one thing that was common even during the 91 downturn, was to predict rising prices of around the amount of a typical sales commission, so those selling in a year or two, could at least break even, seems that that same ploy is being used again, 4-7 percent appreciation, interesting that is is never something specific, like 3.74 percent to 6.12, i would think a true economist might be more specific and back up his forecasts with some hard facts, not just theory
It seems to me that once you double prices once (or twice)..that’s IT for a long time, unless prices drop…
I don’t think you can get a third doubling, absent some really anomally…I don’t think even a very low (1% - 2 %) interest rate would do it.
Think about it…
$300K becomes $600K and then becomes $1,200K…at that point even with 2% interest rate, most everyone is priced out or you get to point where no one can buy, because no one can sell
I realize this is out there, but I sort of think this is where we are at now…the pool of buyers at the bottom is empty, so the move-up buyer is stuck….even condos are out of the reach of most 1st time buyers..
just some fodder…
You are exactly right. In any Ponzi scheme / bubble mania, buyers frantically buy right to the very last person; then, when the last buyer has bought, volume drops dramatically and prices start to fall. That is where we are today.
The next stage is panic selling. That’s when the fun really begins.
IrvineRenter: I agree. It looks (at least from what I’ve seen in articles on this blog) like volume tanks (with inventory increasing) for about 12 months before you start to see the first signs of price reductions. Panic selling should begin in earnest in California by no later than June 2007, IMHO.
Gentlemen,
I have to disagree on your timeline.
We’re still in Denial.
Then is Fear.
Then Desperation (rapidly falling prices)
We’re not into Panic until the spring selling season of 2008 is missed.
Then its finally Capitualiation. Buying now isn’t stupid. Its not the absolute lowest, but inventory is great! This is fall/winter 2008 by my estimate.
Finally Despondency. At that point, you can get the best deals if you lowball.
At last Depression. Best deals are yesterday… but you can still get a home at a great price. This is the market in 2009 many have talked about.
Once we’re back to hope, prices are going up very slowly… but you missed the bottom. Not until 2010…
This is a very slow market.
Got popcorn?
Neil
Based on the length of prior cycles, I don’t expect a bottom until 2012.
Neil: While I think it’s hard to say when we move from one stage to another, I actually think we’re more in the fear mode than the denial mode. Even the NAR is talking about keeping their fingers and toes crossed - that sounds more like fear than denial to me, and that is from the biggest cheerleaders of them all.
I think that we are actually on about the same time line, though. I was trying to point out that what I have seen is a lag of 12 months from the time volume tanks to the time when the first sign of price pressures show up. Some markets are already there (look at some of the FL markets, for example), while others are quite a ways behind. The fall in prices will take time - probably 2-3 years is my guess. This is faster than what happened in SoCal last time, and I am not a fan of “It’s different this time.” So, I am hesitant to say that it will be faster, but I believe that the use of option ARMs, I/O, etc. with almost no down payments will speed up the process this time.
So, I figure I will be buying somewhere between fall 2008 to fall 2009, but I acknowledge that this is just a guess at this point. My prediction of panic selling beginning by June 2007 is based on my belief that the spring selling season will not happen, inventory will be skyhigh, and NODs and (more importantly) foreclosures will be rocketing up to near 1994-1995 levels by then. I think the panic selling will take awhile as people try to hold out if they can and buyers become spooked about catching a falling knife. But I think that we will see evidence of it (whether from FBs or REO I don’t know) by June.
Anyhow, just wanted to explain my opinion on this. I like your posts, and I’ve got my popcorn ready.
I think the Option ARMS and the new BK laws cancel each other out. In the last downturn it was easier to buy another house and jinglemail on your underwater house. So even though many may want to jinglemail their underwater house this time, the easy relief is not their, so they will hang on until the end.
Real estate market psychology changes slowly. IMO, people will hang on this year and remain in denial. By Spring of 2008 we should have real fear in the market. When the spring 2008 buying season fails to materialize, then we might see full-scale panic.
Right now, the belief in appreciation still dominates the market. Every FB thinks the market will come back and save them: thus we are still in denial. The belief in appreciation must die. FB’s must be convinced that prices will never come back no matter how long they hold out. Then, and only then, will you see true panic selling. IMO this will happen in 2008, maybe even 2009.
As long as you hear friends and co-workers talking about price appreciation coming back, we are not at the bottom. Does anyone remember how long it took people to realize the NASDAQ was not coming back? It was about 18-24 months after the April 2000 crash before the bull market mentality was truly dead; stock market psychology changes faster than real estate market psychology.
Pardon the rant, but we have a long way to go IMO.
WaitinginDC,
Thanks for your long answer. I happen to agree that we could be wrong on the timeline. Ok. I accept that. If in 2008 its obvious don’t buy. I can stretch out the timeline. The big thing is don’t buy in 2007 unless you have a desire to be run over during this train wreck.
Irvinerenter,
For if in 18 months I predicted that the impact of resetting ARMs etc. wasn’t sufficient to propel us towards the bottom… Ok, I’ll admit I was off in the timeline.
You are right, we are no where near the bottom. Shall we hold this discussion again in Fall of 2008 over coffee, fine wine, and popcorn?
Notice I didn’t say wrong.
Wrong is either catching the falling knife…
Or missing the buying window. But since that window will be open until 2011, its going to be hard to miss…
Partially I admit to be thinking “western US.” By mid 2008 I think most of the net relocations and layoffs will be done. That alone could be a long discussion…
Again, neat thing about waiting… if I’m too “optimistic” on the speed of the correction… I keep renting and waiting.
But I’ll throw popcorn at anyone who buys before fall 2008.
Got popcorn?
Neil
“Or missing the buying window. But since that window will be open until 2011, its going to be hard to miss…”
IMO, The window of opportunity will be longer than most people expect as well. Last time, we bounced around near the bottom from 1995-1999 with the exact bottom sometime in 2007. During that time, nobody wanted to touch real estate. Nobody thought prices would ever rise again. Rents finally caught up to payments, so a bottom formed and we started all over again, but there was a widespread belief that appreciation was dead. There was no real urgency to “time” the bottom.
Right now, my observation is that most people still have this image in their mind of the market forming a “V” bottom where prices crash and then come thundering back. Anyone who sees the market this way will catch a falling knife. Every little market tick will cause them to think it is the bottom. Eventually, they will buy one and get hurt.
Personally, I will wait to buy until everyone in the market believes appreciation is dead before I even begin looking. I know I will have plenty of time.
Definitely still in denial mode (false optimism, YOY prices still barely above water in some places, trying to put a positive spin on ever worsening news/numbers, etc.).
Denial is when you say to yourself “there is no bear in the room with me” hoping that if you repeat it over and over you can literally wish the bear away.
Fear is when YOU KNOW there is a bear in the room with you and no amount of wishing and hoping can deny it.
I expect about 2011/2012 for a bottom at which time prices will be at 1997 prices + 3% appreciation/year + price of any improvements. However, if the market “overshoots” on the way down you could just flat out get to 1997 prices.
Regardless, it is gonna be brutal…
Curse of the autonomic nervous system: If Gary Watts just holds his breath, he’ll pass out and automatically start breathing.
I am certainly aware of that but maybe we could count on a good Samaritan to smother him while he was passed out.
“he’ll pass out and automatically start breathing.”
Not if you have a 600-pound woman sitting on his face. Make sure to feed her the Taco Bell nachos Bell Grande before she sits down.
“Not if you have a 600-pound woman sitting on his face. Make sure to feed her the Taco Bell nachos Bell Grande before she sits down.”
Either that, or you get Borat’s co-star. Images from that scene haunted me with laughter for weeks.
“Images from that scene haunted me with laughter for weeks.”
I simply went blind.
‘the consequences of their speculation in a shrinking market is now coming out in that we see an uptick in these see-through homes.’”
Anybody remember the see-through office buildings in Sacramento in the early 80’s?
early 90’s here
west of dc
How about circa 2007 in SOMA San Francisco?
Go by any weeknight near the ballpark when people should be home… and it appears to me that many of them are dark.
And these are not the kind of shoeboxes that would appeal to “Googler paper millionaries, mysterious foreigner buyers or baby boomers from the heartland”.
Still a lot of see-through buildings in Silicon Valley from the dot.com days. RE does not move like other financial instruments.
“said Ramirez, who has noticed a spike in the number of bank repossessions. ‘When things go up, they creep. When they go down, they go down fast.’”
“They creep?” Where has this dolt been the last 6 years?
20% a year is “creeping”. Sometimes I don’t think people remember past the previous weekend. At the statement in general is right. In the IE the prices will drop fast, since their rising was based on nothing but lies and bald faced speculation. The music has stopped. Dive for the chairs.
said Ramirez, “When things go up, they creep. When I make a margarita, I add tequila, triple sec, lime juice and my brain then pour it back into my skull.”
“Borre Winckel, director of the Riverside chapter of the Building Industry Association, said although investors are no longer buying new homes, ‘the consequences of their speculation in a shrinking market is now coming out in that we see an uptick in these see-through homes.’ Winckel said investors will be discounting their homes as sharply as possible, especially if they made purchases with very low interest rates that will be adjusting upward.”
Me confused. I thought all the investors were out of the market, but now he says they will be discounting their homes as sharply as possible. How do you discount when you are a see-through seller?
And while we are on the subject of the shifting sands of perception, I was wondering if anyone was still saying that real estate is the best possible investment? Because I can’t recall having read that in print for a while…
Ask Suze Orman about that…that’s what she was telling people until about a year ago.
No, Suze wasn’t. Point out some specific remark if you can, but there are none. People first, then money, then things. How does that come out condo first? Over the long term there are advantages to owning, as long as you don’t buy at bubble prices. And why are you so keen on what a TV star said, anyway? Just because someone gives out really basic advice on PBS does not mean they watch the housing market.
I’ve watched Suze Orman a lot, and I pretty much agree with JWM in SD. Not only was she telling people to own their own homes, she was also very often approving of their keeping one home (to rent out) while they bought a bigger one. This past weekend was the first time I heard her really harangue the sellers to bring down their prices.
“Martin said investors and other home sellers have given up in frustration because competition is making sales take longer and making it impossible for them to get the prices they expected. As of Jan. 31, 30,080 homes were listed, compared with 19,288 a year earlier.”
This is why Riverside and SanBern countys have record delinquency rates and foreclosures. This article did not mention the rocketing NOD’s/NOT’s in these two counties.
Lets put it in perspective. Riverside cty has as of feb 4th 1292 foreclosures and 6356 pre-foreclosures. Those numbers are ahead of Sacramento(1177/3848) and Maricopa County,phoenix metro area(1250/4993), and are approaching Clark county,Las vegas(1602/6820). San Bern cty numbers for preforeclosures-4989-are almost dead even with maricopa cty’s 4993.
In sum, the IE is in DEEP S*IT! CASE CLOSED!!
OT, but WOW !!!!!
The number of foreclosure filings in 2006 (Massachusetts) topped the mark set in 1991, when a real estate market crash led to 17,000 filings.
http://www.boston.com/business/ticker/2007/02/foreclosure_fil_1.html
I saw that..but it’s different this time, they can always sell…it is after the Superbowl, ya’ know…
just a little sarcasm..
If the Super Bowl selling thing doesn’t happen, then there is always the selling season that will start after the Easter Bunny comes.
With 19,487 foreclosures……..that’s a huge number of bunnys……Massachusetts maybe the largest “warren” on record.
Ah.. brings back memories of bunny ball in mud lake.
Maybe instead of freshly baked cookies they can have an Easter Egg hunt as you tour the property.
I read somewhere on here that cookies are only for condos……hehehe
Luvs_footie: That’s right. Cookies are for condos. Cupcakes are for homes.
Shapiro blamed subprime mortgages, which are tailored to borrowers with poor credit, and “exotic” mortgages, with low initial payments that allowed people to buy homes they may not have been able to afford, for the sharp rise.
“There’s no doubt we have a slumping housing market in Massachusetts right now,” Shapiro said. “If you can’t afford to pay your mortgage, putting your house” up for sale, he said, “isn’t a solution.”
There’s the rub. No out ’cause nobody is buying.
how about guvmnt buys it for agricultural restoration ergo the land can’t be made into anything smaller than a 100 acre farm.
“The number of foreclosure filings in 2006 topped the mark set in 1991, when a real estate market crash led to 17,000 filings.”
Can it be taken literally that the filings came after the crash in 1991?
Since, arguably, the crash hasn’t even happened yet this time, what does it mean that the record foreclosure filings are PRECEDING the crash this time?
I think the crash preceded 1991. After which, the jingle mail started, because of the high unemployment brought on by a severe recession (SHH! the “R” word). Then the foreclosures started, after that prices were stale for many, many years.
I remember the auction pages of the Boston Globe being many pages. Too bad I was too you to buy or lacked the foresight to buy.
Condos got KILLED! If I remember correctly, they took about a 75% haircut.
you = young
I’m not sure of the timing of the crash in MA, but in CA the crash was basically 1990-1996. Defaults peaked in 1996 in CA, so at least here the defaults peaked at the end of the crash.
I’m guessing that the same thing will happen again this time. If so, then record defaults now mean that the crash will be much bigger this time, as the defaults will continue to grow over the coming years as the crash occurs. So, that old record will get blown away by the new record about to be set over the coming years. This makes sense to me, as the crash should be bigger since the runup was bigger and more FBs took on much more leverage and interest rate risk than last time. It also corresponds to the fact in the article that foreclosure filings were accelerating through 2006, with over 6,000 foreclosure filings in the final quarter (i.e., an annual rate over 24,000 if they just held steady, but the trend shows these filings increasing by huge margins).
This will soon come to many more markets, especially in CA and FL.
Waiting in OC …So based on your 1990-1996 data ,it took 6 years to reach bottom and that run-up wasn’t as bad as the current one . So ,it would seem that it would take until at least after 2014 to even reach bottom, given there is a repeat of the prior downturn pace .
But like you , I just feel like this correction is going to be faster because of the foreclosures and excess supply ,not to mention that affordability has never been this low in most areas .During the 1990-1996 turn-down there wasn’t sub-prime lending to bolster the market however .
Wiz: Yeah, I think the correction will be faster than the last one because of the affordability, exotic mortgages, loose lending, and fraud. Foreclosures this time around will dwarf what we saw last time, IMO, because of the prevalence of low or no down payments combined with I/O and neg am loans that were not in play last time. And it will be the foreclosures that will lead the market down.
You’re right that there wasn’t sub-prime lending to bolster the last market; but we’ll have to see if the sub-prime is still here to bolster this market in the next couple of years. In only the last two months, many sub-primes have gone out of business (18 the last time I checked the Implode-o-meter), and many more are going to go out of business. Interest rates are rising, and will continue to rise for what remains of the subprime lending industry, as MBS investors are suddenly waking up to the fact that subprime actually carries some risk that needs to be compensated for by higher interest rates - this will make these loans essentially worthless to future buyers because they won’t be able to afford the payments with the high interest rates. Additionally, regulators are starting, in haphazard form, to crack down on some of the toxic loans, and this will continue. So, I don’t think that subprime will have as much of an effect on prices moving forward (it clearly had a huge impact during the boom) because of these reasons, so I still stick with my belief that the pace of the downturn will be swifter than last time.
I just told a Venice RE agent about how I thought the market was going to tank due to all the overstretched FBs, and she just laughed and then sort of lowered her voice, like she was telling me something top secret, then said I wouldn’t believe all the new loan products out there now that are designed to save those loans from going under. Has anyone heard anything about this — what loan product could possibly go farther into loose lending territory than what we’ve already seen?
Fannie Mae has instructed its lenders and servicers to avoid foreclosure whenever possible by offering borrowers who get behind in their mortgage payments various alternatives, including temporary forbearance, loan modification and preforeclosure sales.”
http://globaleconomicanalysis.blogspot.com/
I just received an email from an acquaintance that had the following in it:
“Recently, the opportunity presented itself to create a real estate advisory firm. My partners and I have direct access to the nation’s largest lenders (such as Countrywide, WaMu, and Bear Stearns.) These relationships will allow me to destroy any program or rate that anyone is quoted by another broker or lender.
We will also be offering our clients options that no one else can, such as:
A loan program that is fixed at ¼ point for 5 years. That’s right…a ¼ point fixed for 5 years. That works out to a payment of $108 for a $500K loan. This is a brand new program, and we are 1 of only 3 affiliates allowed to sell this product. ”
This is getting ugly…
I heard an ad on the radio this morning, advertising a fixed neg-am loan that costs $20 per month for every $100K borrowed, up to 3 MILLION DOLLARS!
And I quote, “That’s right, a 1 million dollar loan, costs you only $200 per month. And just because the loan won’t pay down your principle, doesn’t mean your house can’t still APPRECIATE!”
Qualifications: 40% equity and credit score of 660.
Amazing!
Big writeup on why builders will keep building:
http://www.financialsense.com/fsu/editorials/2007/0206.html
Nice summary of the “perfect storm” argument for a housing price crash.
Nice write-up, but he ends with “I wish we could spot a bubble before it bursts.” Pooh. We DID spot this bubble before it burst.
“‘Home buyers with zero-down payments increased significantly from 4.5 percent in 2000 to 21.1 percent in 2006,’ said CAR Chief Economist Leslie Appleton-Young. ‘Two out of five first-time buyers made a zero-down payment on their home purchase.’”
Am I reading this right ? 21% had zero down. Isn’t 2 out of 5 about say 40% ? Where do they find economists that can’t do basic math ?
2 out of 5 FIRST TIME buyers had 0 down (40%)
21% of ALL buyers had 0 down
This is a terrifying stat
It means that even many “move up” buyers put 0 down (it shows the level of speculation that occured)
HIC
Good point HIC …..I thought most of the move up buyers were putting their equity into their move up house purchase in order to qualify .If the move up buyers were pocketing the appreciation and going on 0 down loans ,(and than maybe buying more property ),than like you said ,alot of speculation was going on . That would explain in part how the California Locust were getting the money to invest all over the place .
“I thought most of the move up buyers were putting their equity into their move up house purchase in order to qualify”
Yes, the instances that I have seen of “move-up buyers” putting nothing down still amaze me. Being the nosy lad that I am, I looked up the recorded loan docs for a cousin who both sold a house and bought a house in the first four months of 2005 in metro Phoenix. She had lived in the first house since 1982, and had cash-out refinanced way too often. Still, there were plenty of dollars left over to put something down.
I looked up the loan info on the newer house, and saw that it was 80% of the purchase price. Great! Wait, what is that other recorded doc? Oh, another loan for 20%. Bummer.
Yes amazing. The few folks that I used to know in San Diego that “moved up” took out a 2nd on the house they were in, rented it, and used the money from the 2nd to get into their new primary residence. Or they used the equity from selling their home to “purchase” several “investment” properties, instead of using it to pay down their new primary residence. The ones that just a little greedy and cashed out early probably made a bunch of money. The REALLY greedy ones that keep this up and are still holding multiple homes will get burned severly.
21% of all homebuyers; 40% of first-time homebuyers.
After the Super Bowl, you ask the winners: ” What are you going to do now?”. I believe Joe Montana said ( a few years ago), ” I’m going to Disneyland!!”. For Gary Watts and all the Southern Cal Realtors: ” If you wish upon a star…”
For Gary Watts and all the Southern Cal Realtors: ” If you wish upon a star…”
…it might just fall upon your car”
Ventura County has a shortage of homes. I remember Thousand Oaks sold a bunch of less than market value subsidized housing that went up so much that the owners wanted to sell and split the profit with the city. I think the city said yes? Its getting like Santa Barabra there. City workers can get the special RE deals so the Millionaires can have police ,fire, medical technicians and school teachers.
This is an excellent article:
http://www.dissidentvoice.org/Jan07/Whitney09.htm
Do see-through homes come with see-through bikinis?
Gary Watts is 100% “in the bag”.
More great housing bubble news:
http://news.yahoo.com/s/nm/20070206/bs_nm/usa_economy_housing_dc
This is an actual email I received from a broker today for a property I already saw and told her I didn’t like - “It might be a dog but if you could get it for $575,000-$590,000 that would be worth it as you could remodel using your family members so that would cut your costs and if you update it and live there 5 years you could double or triple the value. ” There is it folks the market will triple in 5 years so buy , buy , buy ……
“There were some investors thinking that the market was going to continue going up,” said Ramirez, who has noticed a spike in the number of bank repossessions. “When things go up, they creep. When they go down, they go down fast.”
Incredibly, anyone with a beginning economics course - who saw the statistics even in 2004 that incomes were growing 2% per year while house prices were growing over 25% per year - would have not ignored that reality and would have stayed on the sidelines. Stupidity must be punished by laissez-faire - that is, no bailouts.
“‘Home buyers with zero-down payments increased significantly from 4.5 percent in 2000 to 21.1 percent in 2006,’ said CAR Chief Economist Leslie Appleton-Young. ‘Two out of five first-time buyers made a zero-down payment on their home purchase.’”
All those zero-downers are underwater or treading water. By the time that desperation sets in, they won’t be able to sell for what they owe and have no cash to bring to the table, so the foreclosure rate is going to go ballistic. When it does, credit will tighten like Casey Serin’s sphincter in prison, sales will be as dead as Ken Lay, and prices will drop like a congressman on a page.
In other words: it’s going to take a few more months, but it’s going to get ugly; and once it gets started, it’s going to get real ugly real fast.
All humor aside, I think we’re headed for a banking crisis in 07/08. All these sub-prime lenders that have gone out of business are just canaries in the coalmine.