“It’s A Whole New World” In California
The Union Tribune reports from California. “San Diego County housing prices slipped last month to their lowest levels since mid-2004, DataQuick Information reported Wednesday. The median home price was $472,000, down 5.6 percent from January 2006’s $500,000, and the lowest since the $470,000 median price reported for July 2004.”
“The latest figure also was $23,000 or 4.6 percent lower than December’s median of $495,000, and represented the biggest December-January percentage drop in four years.”
“The new-housing category went from $460,000 to $395,000. This might reflect a burst in higher-priced home sales recorded in December as a result of builders seeking to book sales before Dec. 31.”
“The median home price in Ventura County plunged 6.5 percent to $565,000. Home prices in Ventura County have been down year-over-year since September.”
The Orange County Register. “Orange County’s median home price in January was $600,000, flat vs. revised statistics from a year ago, market tracker DataQuick reports today. Buyers grabbed 16.3 percent fewer O.C. homes last month that a year ago. It’s the 16th consecutive month that sales failed to meet year-ago levels. January’s median prices is down 4.8 percent from December.”
The LA Times. “Southern California home sales posted their weakest January in nine years, data released today showed. Only 18,128 homes were sold in the six-county region in January, said DataQuick. That was down 25.1% from a revised 24,209 in December, and down 17.2% from a revised 21,895 for January last year.”
“January is typically one of the slowest months of the year for buying and selling homes, but last month was the most sluggish since 1998, DataQuick said.”
“Some analysts expect Southern California home prices to continue to edge lower, eventually losing value and showing negative year-over-year growth. San Diego in particular is viewed as a housing trend-setter, because it was the first Southern California county to experience double-digit price appreciation at the start of the housing boom. As prices soften there, many expect the rest of the region to follow.”
“‘We will see a price peak and we will see prices come off that peak,’ said John Karevoll, DataQuick’s chief analyst. ‘It just hasn’t done that yet.’”
“Homes in the Inland Empire logged price gains as well but at a much slower pace. The median price in Riverside County rose 1.2% to $415,000, while sales plunged 34.2%. San Bernardino County’s median rose 4.2% to $370,000, and sales dropped 28.5%.”
The North County Times. “An alleged pyramid scheme focused on Murrieta real estate drew in large numbers of investors from Arizona and northern California and a scattering of others from as far away as Minnesota and Puerto Rico, according to documents filed in conjunction with a growing set of lawsuits.”
“The documents, drawn from a spreadsheet, appear to show a bewildering web of participants, including the four men and 423 ‘core clients’ and ‘golden clients.’ About 20 of those clients have signed on to the original lawsuit.”
“According to the original lawsuit, the plaintiffs borrowed as much as $3 million each in mortgage loans and credit card advances. They spent the majority of that on single-family homes in and around Murrieta. Many of the houses are now going into foreclosure.”
“The document identifies more than 100 of the clients as living in the Tucson, Ariz., area. It identifies other large clusters in the San Francisco Bay Area; Tacoma, Wash.; and northern Texas; and smaller clusters in eight other states and Puerto Rico.”
The Contra Costa Times. “The housing sector’s ailments have begun to sap the vitality of the job market in several East Bay industries. Loan officers, mortgage agents, real estate employees, development executives and construction workers are among the array of people who have lost jobs in the East Bay or are wondering when the ax might fall.”
“A slowdown has arrived and relief has yet to arrive on the horizon. ‘It’s a whole new world,’ said Guy Schwartz, a branch manager with San Ramon-based CMG Financial Services, whose products include home loans. ‘We’re hunkered down for a cold winter. We’re not sure when spring will arrive.’”
“CMG has been forced to respond to the slowdown by cutting its overhead. ‘We have cut staff,’ Schwartz said. ‘Loan agent assistants, loan processors, branch support people. We are down to the core and are trying to keep it lean.’”
“CMG is far from alone. Ownit Mortgage Solutions filed for bankruptcy. Mortgage Lenders USA Inc. has ceased operations. Countrywide Financial Corp. has retrenched and chopped jobs. EquiBanc Mortgage ceased operations in January. Mandalay Mortgage exited the wholesale mortgage business.”
“A number of Bay Area residents who have worked for a long time in the financial side of the housing market are concerned about the severity of the slowdown.”
“‘This is worse than I’ve seen it before,’ said Judi Ott, a San Ramon resident who has worked for a number of years in the design studio of an East Bay home builder. She was laid off in June. Ott said, ‘I didn’t really get any interviews. Everyone I talked to said they were laying off. Nobody was hiring.’”
“Ott found a job with a mortgage company. ‘It’s not hard to get a job with a mortgage company because they put you on straight commission,’ Ott said. ‘It’s just hard to make any money. It’s a bad time of year to get into it. It’s a bad time with the real estate economy. It’s just a bad time for this business.’”
“That’s an assessment shared by Akiko Davis, a Dublin resident and loan processor who has been laid off and is looking for work. ‘It’s very difficult,’ Davis said. ‘The companies are getting very picky. It is getting harder and harder to find jobs.’”
“‘It has slowed down tremendously,’ said Indira Winesberry, a San Francisco resident and senior loan processor. ‘During the busy times, I could get a job in two days. I haven’t even had a call in three weeks. I’m working as a real estate broker right now, but I haven’t even received any calls for that.’”
‘Most noteworthy in this month’s DataQuick report is the fact that the market tracker has revamped its home-sales math, resulting in a totally revised O.C. housing recordbook. (It’s a statewide revision.)’
‘The price of unimproved land has stabilized in the Arnold and Big Trees areas, as speculation building has virtually come to a halt. Interestingly enough, the best properties did not significantly drop in price. Challenged properties lingered on the market, and then followed the market down as prices dropped. Properties now are at around 2004 prices. There was no giant bubble that burst; just a little air was let out.’
‘I believe, for those buyers who will be holding their property for at least 5 years, or people looking for a ‘fixer,’ now is a great time to invest in real estate.’
From Rich Toscano
‘I’ve been doing a lot of yapping about the importance of must-sell inventory (as a catalyst for home price declines) and of mortgage defaults (as an indicator of must-sell inventory). I now offer the inevitable graph. The blue line indicates the monthly number of ‘notices of default.’ The red line indicates the number of ‘trustee’s deeds.’ Both data series give a decent read on the amount of must-sell inventory out there.’
‘Monthly defaults are now occurring at a pace not seen since the darkest days of the last housing downturn. Foreclosures appear to be close behind. Both sets of numbers have risen far more abruptly than they ever did during the 1990s bust.’
‘Moreover, there’s little reason to believe that these numbers will improve anytime soon. The exotic mortgages that are due to reset in 2007 will be backed by less equity than those that reset last year, for the simple reason that they were originated later in the appreciation cycle. Now that prices have been falling for over a year, many such mortgages will be backed by no equity at all.’
‘Here are the results from 590 votes cast in what’s an unscientific sample of public sentiment: 34.2 percent: Far too upbeat. 21.2 percent: Bit too upbeat. 22.0 percent: Balanced. 8.6 percent: Bit too downcast. 13.9 percent: Far too downcast.’
‘READER COMMENTS ‘Oh, please … the media, in particular this newspaper was a huge cheerleader for this industry the last five years. I hold the media responsible, in particular the business media, for not doing a better job in reporting the history of asset bubbles while this ponzi scheme was roaring on.’
‘I’ve been doing a lot of yapping about the importance of must-sell inventory (as a catalyst for home price declines) and of mortgage defaults (as an indicator of must-sell inventory). I now offer the inevitable graph. The blue line indicates the monthly number of ‘notices of default.’ The red line indicates the number of ‘trustee’s deeds.’ Both data series give a decent read on the amount of must-sell inventory out there.’
Good Lord! Those graphs are truly mind-boggling. And to think it’s only going to get worse from here on out…
The trend line is nearly vertical. Amazing! By the summer that graph will be blowing away all previous records. Look out below…
It’s worse than that. His graph doesn’t have the Jan ‘07 number: 457 notices of default, the last data is Dec ’06’s 322!
Vertical indeed!
When the foreclosure volume peaks is when the best foreclosure bargains are available. By that I mean banks will accept offers well below what they have in the property because they have to unload so many others. I think the peak is just about here, as nothing can go vertical for very long. The peak is also when you have the best selection.
But buy that house to live in it. Don’t expect prices to start going up again anytime soon.
I hear what you are saying, but I don’t necessarily agree. The peak is when prices will be dropping the fastest, but it does not generally signal the bottom. Last time, here in California, there was a slow but steady rise in foreclosures until 1996. The market bottomed in 1997 almost a year after foreclosures began dropping.
Based on what you said, one might believe it is prudent to buy in 2007. Personally, I couldn’t see buying before 2010 with 2012 being more likely.
I’m with you IrvineRenter. This thing hasn’t even gotten started yet. The loan resets haven’t even begun in ernest. Much as I tire of renting, I figure give it 3 years here in SoCali.
I’m guessing 2012 will be the bottom- a 7 year period from peak to trough is common for real estate cycles.
“2012 will be the bottom-”
Thanks for the forecast, Herr Doktor Schumpeter.
Please note:
12/21/2012 will be the end.
“It’s worse than that.”
Also note that the data we have seen thus far does not reflect the strike of the axe blade on three further chairlegs that propped up bubble pricing: subprime lending, ever-appreciating real estate prices and a strong labor market. Now that Chrysler and other employers are announcing job cuts in the tens-of-thousands, San Diego new housing prices have fallen by an amount roughly in line with the median San Diego household income and one or more subprime lenders are folding shop each week, what will keep prices from falling further?
Didn’t Al Gore use that very same graph for his o2 predictions in Inconvient truth?
co2 predictions
Marc Authier, the vast majority of your posting are just thinly veiled glee at the hope the America will suffer economically, and on the international front, politically. Don’t worry, if the US gets indigestion, Canada is gonna have a full blown case of Diarrhea.
Hey Marc! I hate Cramer but check out what he said today about Canada. Got a nice laugh. He said Canada should liquidate, divest its assets
Canada has the oil sands, uranium, wheat belt is moving from Iowa to Calgary because of global warming..it’s another thousand mile from the Mexican open border, cheap health insurance…Heck!! I’ll move up there.
“Anna Richter, one of two Rialto women suing in federal court, said Tuesday that a friend from her church brought her into the group.”
Apparently, the sin “greed” doesn’t apply to that church. Man, those people who wave the flag of religious are usually the worst! Remember the evangelical pastor who likes to bite the bed sheets, while doing meth? Well, after intensive therapy, he’s heterosexual again *wink* *wink*. Bunch of hypocrites!
lol
the eleventh commandment: thou shall not flip real estate.
You don’t need an 11. 7, 8, and 10 already cover that situation just fine.
Sorry. Memory fault. Make that 8, 9, and 10.
Specifically:
#8 - Thou shalt not steal.
#9 - Thou shalt not bear false witness against thy neighbour.
#10 - Thou shalt not covet thy neighbour’s house, thou shalt not covet thy neighbour’s wife, nor his manservant, nor his maidservant, nor his ox, nor his ass, nor any thing that is thy neighbour’s.
That historic stone was turned into a granite countertop by a realtor during the dark ages.
LOL
Man, those people who wave the flag of religious are usually the worst!
Dude, we all fall short of the glory of God and are capable of sin. Let me know the day you can walk a straight line without ever one impure thought or temptation. It takes more disipline than you or I can even muster. Few get close but there was only one perfect human being that ever walked this earth and he has been gone now for almost 2000 years.
I think you may have just proved his point.
Poor Alfred E Newman what you worry YES!
posted ” only one perfect human being that ever walked this earth and he has been gone now for almost 2000 years. ”
I think you are right. That is something, which thoes who spread the word need to remember every day.
Oh it’s OK to remember that but to live it, well, that’s a whole other ball game. Think about it for a second. If all believers of the word were completly without sin, never lost a loved one to a sickness or tragedy, never had a wandering eye, never needed more money than they had then I’m fairly sure there would be no sinners. If you know scripture then you know that the only way to the kingdom of heaven is to accept that Christ died on that cross for our sins. So you tell me after the sacrafice that God made for us that he is going to make that easy, that all we need to do is be Christians?? The answer is NO! We will spend our days here earning our place next to him by walking a very narrow path, a path so narrow as one slightly misplaced footstep can get you off in the wrong direction very quickly. This is how we earn our place in heaven. I’m sure I will be creating a lot of disdain here with my posts but I do not care. You can take from it what you want but I can truly say that my walk with Christ has removed a tremendous amount of sin from my life that I could have never accomplished in any other way. Before my rebirth I had tried and tried for years to clean up aspects of my life that were burdening and failed each and every time. Am I perfect now? Nope, never will be and don’t expect to ever get there. So when you say I should remember before I spread the word you better believe I remember what Christ did for me.
three words come to mind to reference what just occurred for the last 4 - 5 years: Sodom and Gammorrah…it’s natural to sin, of course, but for look at the way everyone jumped on the bandwagon…freakin’ avaricious to all get out…totally unsat, and unexcusable PERIOD
Oh my GOD… I hope their is one, but common sense says NOT. Buildings with planes flying in them, poverty and famine, wars, idiots walking thru malls shooting people, if their is a God and I somehow make it I am going to punch him in the face for all the suffering he/she allows down here in purgatory. And no things like those do not happen for a reason.
Changed my mind, god gave me the wisdom to sell my townhouse July 06. 2 same model TH’s in the same complex sold in Jan 07 for 8% less. Thats down 8% in 6 months in the bag, or my bank account I should say. (11% down from the guy that sold 1 month after me). I didn’t sell for the gain(although I appreciate it), sold because the neighborhood went to pot.
“your pal” obviously being the Rev. Haggard…
What do you mean? I saw Donald Trump on TV just the other day.
Yes, but I will bet that Strat3go does not go around talking about how pious he is.
I walk on water every time it rains. Next?
HMWJP?
How much would Jesus pay?
WWBBD?
What Would Brian Boitano Do?
Not missing it: He’s talking about religious hypocrites. I don’t think he was bashing the religious. I agree with his point. If you wear it out on your sleeve, it just looks like you’re hiding something.
What did Jesus say about the scibes and pharisees who made a big show of praying in public? I believe his comments were less than flatering. Keep it to yourself.
Now hold on there! I think you are talking about the esteemed Rev. Haggard. It took him a whole three weeks of intensive therapy and prayer. It was indeed just another miracle..LOL
he is indeed heterosexual again. until he sinned again. hey, we are all just human and weak and sinful. lol.
“This is how we earn our place in heaven.”
Don’t want to argue but I wanted to tell you that you do not earn your way to heaven. It is simply through Grace. Jesus picked you and you want to be with Jesus. Through his Grace you will be able to meet him in heaven. We all sin that is a fact. We try not to but it is impossible to live a sinless life. I fall short everyday. But because I believe in Jesus, really truly believe that Jesus walk this earth and was God in the form of a man — I think I’m going to heaven. So will I earn my way to heaven? No. Do I want to learn who Jesus “is” and what he wants me to do? Yes
Thank God I’m an atheist!
I don’t know what I am…..just glad my brain is not filled with stories or thoughts like that one.
Thank god, I am not a christian and an agnostic.
And no I am not moslem either.
Cool.
Cow_tipping.
Ahhh, some sanity.
“We will see a price peak and we will see prices come off that peak,’ said John Karevoll, DataQuick’s chief analyst. ‘It just hasn’t done that yet.”
YET! We have YET to see the impact of the coming flood REOs. That’s what WILL get the market moving in real time instead of in super-slow-mo. Everything is falling into place. End of Q3 beginning Q4 and ‘08 we will see month over month declines in the double digits.
And another thing, about the median and how it is unreliable and how it may be hiding true declines… With the volumes plummeting only a few MUST SELL closings will shift the median in hurry against the backdrop of small overall population of samples. Gonaa be a nice game catchup that will shock the NO-BUBBLE-HERE crowd.
Personally, I think the median will also decline a great deal. The median is a poor measure of house prices because of move-ups, but it is a great measure of the amount people are putting toward housing. As the credit drys up and lenders become unwilling to loan 10 times earnings, the median will crater. Since statistics show equity at an all time low, when the amounts lenders are willing to loan declines, the median has no place to go but down.
Yet flat or even rising medians could limp along for a while. With the sub-p and 80/20’s dying, the number of first-timers will plummet, further reducing the sales…but in particular reducing the lowest valued house sales. if any thing, medians will increase over the next few months, adding but one more head-fake to this mess.
The tightening will drive already slow sales into the deep freeze. It’s gonna be a tug-o-war over the median briefly, but REOs will flood the market and win.
this is a good observation. i think the volume will continue to decline with paradoxical increase in median due to high end, rich buyers. the first time buyers market will disappear.
Enough w/California Ben! Just kidding. We had that article yesterday and now another. This one might break 500 and set the new gold standard for comments.
On a related note, I have been tracking homes in the RSM, MV, and Laguna Hills region here in South OC and it seems that prices are moving down, albeit slowly. I am not bragging that the OC is better or that “It’s different here.” Just pointing out that things are beginning to move. The real test will be this summer when people really have to get out because of divorce, job, relocation, etc. I saw all the inventory early this fall and then it disappeared as fast as a 100% land from Fremont General. This summer will get brutal and couple that with the tighter lending policies and you have the perfect storm brewing. I agree that ‘08 is the time to really look. However, this summer a good deal might be had if you can pick off the right seller(s) and a very desperate time.
land=loan
This summer when more REO’s hit the market, things should get very interesting.
Imagine your a buyer this summer (difficult to imagine, I know, but try). You negotiate a deal, and when the appraiser goes out to verify value, all these REO’s destroy the comps so your lender won’t fund. After going through that a few times, even the most persistent buyer will take notice of the falling prices and simply decide to wait. What happens to the market then?
I have been looking in detail at the market (91104, 91001,91011)for over one year, and I will make my move after 07’s summer. Mostly because I have kept telling my poor wife “next year”, for a few years now.
But my move will be quite careful, lowballing big time without concessions. The argument will be: “I’m extrapolating the price for a couple of years down the road, take it or leave it”. I have been waiting for some time now and I can keep waiting longer, specially since prices are going down and it appears that it will be more difficult for people with no money to get a mortgage.
Ahhh, doing some “carpet low-balling”.
LOL
look for soon to expire listings and save 5%
Speaking about Ben’s yesterday’ late in the day LATimes post… That was a shocking MSM move, and front page news. Borderline denial FBs must be in panic mode now. Any grumbling around the water coolers or lamenting overheard in cubicle farms to report?
Luv seeing that 15% decline in San Diego!
Some already have said OC got hit with 15-20% delines!
Sure like to see that in the Bay Area!
Oh the joy it would bring me!
“Sure like to see that in the Bay Area! Oh the joy it would bring me!”
You and me both, brother. I was reading the fraud case from Murietta and noticed that it mentioned a large number of bay area “investors.” I think that is another factor many in our region don’t consider. Not only are alot of these bay area clowns carrying huge mortgages here, but many have gone elsewhere to seek their RE fortunes. It is really going to suck to be them when their investment loan re-sets and they find themselves with two big liabilities and no one who wants to take them off their hands. Could help speed up the decline here if they lose both. My fingers and toes are crossed.
Make that three of us, if not more. So many of our fellow Bay Areans read these stats about SoCal and think “It’ll never happen here.” Yeah, right. Nobody factors in the collateral damage. Parts of Sacramento are already down 20% from the peak and still falling. Who owns all of those empty boxes in the desert? That’s right, Bay Area investors. But if it goes down like it went up, we may need to wait another year before we see meaningful declines here. Can’t wait.
SFer,
I disagree that the Sac market bust is going to ruin Bay Area housing and reset prices. Most of the bay area, western side - has good job and wage growth relative to the rest of the USA. We’re vurnerable to disruptions due to high debt and poor savings.
Those prices will have to “plunge” some more before they are found affordable by most folks. When teachers, firefighters and police can’t afford a house, it’s a pretty good indicator things are still seriously out of whack.
6.5% is a plunge…B.S. As the MSM throws out the word ‘plunge’ over and over fairly soon a whole bunch of dumb asses will be running around repeating it, and low and behold now is the best time to buy because prices have plunged! The problem now is where are the herd going to borrow the money? They damn sure have not saved it. Looks like the loose money D.C. crowd may be heading for a conundrum.
Remember that almost everybody expected prices to continue to climb 10% to 20% a year.
So, in a sense, prices have “plunged” and are 15% to 25% below what people expected them to be at this point.
Most people live in a mental state that is amazingly disconnected from reality. I recall the polls that showed 80% of homeowners expected house prices to climb 10% to 20% a year essentially forever.
Good point, Binko. In this speculative/huckster economy an unrealized gain is just as bad as an outright loss.
‘We’re hunkered down for a cold winter. We’re not sure when spring will arrive.’”
I think what you’re entering is called the Ice Age - sorry, no spring in sight.
LOL! I am sure global warming will will take care of that ice age and real estate will begin to take off again!
I don’t know what they are worried about. I read that commercial construction would more than make up for the residential RE job loses.
I was at the Chapman University professor’s presentation where he said that exact thing. Unfortunately, we are currently overbuilding commercial, and when this latest push is complete, construction will stop there as well. It probably buys these workers a year or two of time, nothing more.
“Unfortunately, we are currently overbuilding commercial, and when this latest push is complete, construction will stop there as well.”
I know for a fact that in Reno, there is quite a bit of vacant brand new commercial space for lease. I anticipate a drop in the price per square foot. Not only due to the overbuilding, but an overall shrinking of the local economy. Times were great over the course of the past five years. Unfortunately, the next five years will not produce the same results.
I think Irvine will be particularly hard hit. Right now there are about half a dozen mid-rise office buildings going up along with scores of 2-story tilt-ups. This will all come on-line simultaneously later this year. Further, we are the home for New Century Financial and other sub-prime mortgage lenders who are already rumored to be giving back space.
Whether it is smart, I don’t know, but LA County is going to have a lot of commercial, still. LA Live and the Grand Ave projects are huge. Century City has one major hi-rise under construction, two 47 floor towers approved but yet to break ground and another big hi-rise in the planning stages. There is the possible federal building site in westwood, as well.
I am really shocked at the stupidity of the downtown build ups. They are going to generate higher taxes from all the tax rebates, yet, people who can afford to live there (and would want to) are leaving LA and California, not coming. But 2 billion is going to get spent on the Grand Ave project alone.
The scumbag developers pretty much run Los Angeles these days. Somehow they’ve convinced the idiots on the city council and board of supervisors that we need a sixty-million dollar subsidy to build empty towers so that downtown LA looks like Philadelphia or something.
Bantering Bear- don’t forget than Reno has a transient workforce. When times get tough in Reno, people will just leave for better pastures. Less people, even more empty buildings and houses.
“developers pretty much run Los Angeles these days.”
They always have. That’s why everything gets torn down and rebuilt every 40 years. If they really wanted an interesting downtown alla San Francisco they should of never torn down Bunker Hill in the early 60’s. They should of revitalized it. It would be like “Old Town” Pasadena now, instead of a lifeless cement slab.
Yeah, I’ll bet those 5% cap rate commercial investments look a little questionable right now.
Truer words have never been spoken.
Where did you read that? The reason I ask is my local newspaper, Santa Barbara News-Press, ran a story today about how local commercial RE is “booming” and how that “boom” will offset residental RE. I’ve often wondered if newspapers send talking points back and forward to each other.
I am with IrvineRenter. Commercial is on its last legs. Way overbuilt. And as for the stupidly low cap rates, well good luck with that one. Why would anyone purchase at such ridiculous prices? 5% is way below the historical average, and this is the going rate even on crap buildings. I guess this is what happens when you expand the money supply by lord knows how much. Thank you Maestro Greenspam! You jack ass!
Ben, what blows my mind are all the articles I’ve read about how the commercial rents are gonna go up in Phoenix. Seems counterintuitive to everything else going on there.
not in those places within 10 ft of sea level!
I don’t think global warming is taken into account when dealing with RE. After all we are rebuilding New Orleans.
I can’t help it, everytime I listen to people talking about rebuilding NO I think of this:
“After the collapse of the Tacoma Bridge, the governor of the state of Washington made an emotional speech, in which he declared “We are going to build the exact same bridge, exactly as before.” Upon hearing this, the noted engineer Von Karman sent a telegram to the governor stating “If you build the exact same bridge exactly as before, it will fall into the exact same river exactly
as before.”
The movies of the oscillation of the Tacoma Narrows bridge is one of the gnarliest pieces of tape I have ever seen.
Yeah, I thought about it both times I’ve driven over the replacement bridge.
Yes, A K winter
“ice age, no spring in sight” - tonight Joe Kirschvink is giving a talk at Caltech about the Snowball Earth hypothesis. In this scenario, growing ice cap causes increasing reflectivity, decreasing absorption of solar radiation, and promoting further growth of the ice cap. The trend is reversed only when a major volcanic eruption coats everything in black. Previously, this theory has not been supported by any observation suggesting that the ice cover got all the way to the Equator. I gather Joe is going to present some evidence that it did. Okay, whatever the real-estate analogy is, that’s where we’re going!
The following is from a monthly newsletter I get from a local Real Estate office here in North San Diego County. They don’t see a probliem here and their numbers seem a bit wacky to me.
Feb, 12, 2007
In North County San Diego, the median price for all home sales – attached and detached – was $540,000 in January compared to $549,950 the previous month.
Detached homes in North County remained at $625,000 from December to January. Detached home sales OUTSIDE North County declined very slightly in the same period from $520,000 to $516,938, indicating that the North County housing market is showing stronger signs of continuing viability than elsewhere.
The $625,000 median price in January 2007 was identical to the median price 12 months earlier.
The housing market is remaining stable with signs of optimism as the market swings into spring and early summer – traditionally the best time of the year for the housing market.
The numbers indicate the housing market is picking up strength and prices are remaining stable.
Conditions may not last with early indications that the housing market outlook is improving. Prices are expected to rise modestly this year.
2006 was the third-best year on record, according to the National Association of Realtors.
House values rose 88 percent on a national average – higher in California – over the past decade. The number of U.S. households is expected to increase 15 percent over the next decade, creating a continued high demand for housing.
http://tinyurl.com/yqydm9
Maybe they’re quoting listing prices and not actually selling prices?
gag-a-rini.
Could someone explain to me what real skills a person needs to be a broken or loan officer? I’m assuming you dont need to go to college for that. Basically someone who was on the Geek Squad at Best Buy could be a loan officer?
“broken or loan officer”
Interesting slip of the keys. LOL.
If you’re asking me if they should have skills - then I say yes. Should they know the ins-and-outs of their loan programs? - absolutely. Should they understand RESPA, ECOA, and all the laws applicable to whatever State their in? - without question. Is this actually the case?- HELL NO! Most broker’s and the LO’s are the lamest MoFo’s to come down the pike. The only thing that they’re skilled in is the art of deception.
In your opinion, is there room for conscientious ones? I thought about it as a second, semi-retirement interesting profession. I have a manufacturing and general accounting background.
Probably going forward, once the 95% of the current crop gets kicked out on their *sses. And underwriting gets honest again, say in the next three or so years.
I’d wait. Let this biz get the enema it gravely needs and then we’ll see. To tell you the truth, I’m about done. 14 years of the BS has worn me raw. I used to have fun and enjoy it, but the things I’ve seen over the last few years has left me cynical, and I surely no longer believe in the “system” we call the lending industry. Some huge changes will have to take place for this to be a vocation that will not only will fill your pockets, but allow you to go home at night feeling good about yourself and what you do. Right now you’d have to push crap you just don’t belive in to make a buck. We had a thread yesterday where industry insiders were saying this very thing. Sorry, I can’t do it, and my bottom line has suffered over the last 18 months because of it. Fortunately, my wife and i live simply and save like it’ll all go away tomorrow, and made some good decisions on RE at the top of the market. I’ll do OK if i just quietly walk away.
Probably a good time to make that change should you want to. Go out at the top rather than getting KO’d!
We just put our home on the market. The first and third calls we received were from LOs wanting to sell us our next home loan.
nnvmtgbrkr: Did you hear about Silver State Mortgage? Closed up shop today (looking for new partnership). It is listed on their website:
http://www.ssmwholesale.com/
Were these guys a major player in your neck of the woods?
Sure you have to be highly trained!
At what? I have no idea……….
Back to School??
Broken or Loon officer! Freudian slip.
I have a few young friends who became loan officers at one of the top 5 lenders during the boom. From what I heard, most were in their early 20s, very few had any education past high school, and all of them were making money and spending it like it was going out of style. Ahhh how times changed.
Actors?
Everything I need to know to do the amortization tables, I learned in high school. Everything I need to know to decide on the likelihood of being repaid, I learned in my 20’s. Everything I need to know to record the Trust Deeds and so forth, I learned in my 50’s. Everything I need to know that I don’t know about yet, I will learn in my 60’s. Everything I learned in my PhD program is completely irrelevant to lending money. Everything I would need to know to get a straight job as a loan originator is stuff I will never learn (schmoozing, over-dressing, lying a lot worse than I am accustomed to).
i spent 1600 hours learning the art of hairdressing. thats almost two years of tests and practical ops. i don’t do hair these days. real estate license test takes two days. how long to become a loan broker/agent?
“hairdressing”
Roquefort, or Thousand Islands?
At least a Geek can fix a computer.
Good point, let’s all become web developers and make a mint launching stupid web sites!
Oops sorry, wrong bubble.
has anyone else noticed how many of these schemes mention the use of credit card cash advances to buy real estate? This is the third scam I’ve read about this week, in which the participants were encouraged to take out CC cash advances to invest in the scheme.
I cannot help but wonder how widespread this problem is, and how much it will affect CC issuers as the schemes unravel.
I was reading the FatWallet.com forums the other day, and there’s no shortage of morons who are asking for…and receiving… $30-100k+ unsecured credit lines on their CC’s. Many of them discuss “investing” that money.
Scary.
I think the credit card companies are going to be severely hurt by the coming crash. FB’s learned they could consistently overspend and take out a HELOC to pay off the credit cards each year. Just because the HELOC ATM was turned off didn’t mean these people suddenly discovered personal responsibility. They continued spending.
Further, as the pressure mounts to make mortgage payments, where will these people turn first? You guessed it, their credit cards. When these FB’s finally exhaust all forms of available credit, they will give up, lose their houses in foreclosure and declare bankruptcy. The credit card issuers will be hosed along with everyone else, perhaps more so.
BTW, the bankruptcy reform they passed two years ago will not get the credit card companies much of their money back, and with all the FB’s declaring, their will likely be upcoming legislation (reform of the reform) making it easier on them. The credit card companies are not the Democrat’s constituent base, so, IMO, they will have no problem helping the FB’s in this area.
My guess is that many money renters (=”homeowners”) will choose bankruptcy over foreclosure and tighten their belts to keep their house. At least, that was the reaction in the Great Depression: service secured debt to keep what you bought, but stop spending on non-essentials. This might contribute to a credit crunch.
“My guess is that many money renters (=”homeowners”) will choose bankruptcy over foreclosure and tighten their belts to keep their house.”
I don’t think a lot of them have that choice. Since they purchased a house which they could only afford with an interest only ARM, once it adjusts, they are forced to sell, or lose it. They simply don’t earn enough to keep going. The money just isn’t there.
I agree. It is not like they can afford their house payments. If they could, and if it was the credit card debt creating the problem, I would agree with Peter T, but their mortgage payments are the problem. The credit cards are their interim solution.
Exactly. Also, they have rolled far too much credit card debt into the mortgage to continue on holding onto the home. So they’ll lose the home and have to deal with the unbearable credit card debt.
Credit cards will take the hit in but a few months.
Got popcorn?
Neil
I just blogged a WSJ article on the “Mortgage hot potatoe.” Yikes! Meltdown!
http://recomments.blogspot.com/
Got popcorn?
Neil
Umm, you must be a Vice Presidential Candidate..”Potatoe”
A few years back when I knew almost nothing about real estate, I paid $40 one late night for some real estate course on TV (I know… stupid, but at least my stupidity only cost me $40). The info was generic crap and I thought nothing of it until I got a call from the same program from someone who wanted to be my “mentor”. I asked how many homes he had purchased himself using the principles in the program? Two. Not including your primary residences? Zero. So what gave him the credentials to be my mentor? After a long pause, I let him off the hook and let him continue just for curiousity. That’s when he breaks it to me that they want me to pay $8,000 for the priviledge of letting this moron be my mentor. Oh but don’t worry! They’ll show me how to get a 0% credit card for up to six months which should be plenty of time for me to make my riches in real estate. After he repeated that several times, I told him that if it was such a great deal, I would be happy to take a 0% credit card in his name and personal info and pay for it that way. I’d even pay him the first $10k of whatever money I made with his program. Click.
The Reno Gazette Journal finally ran a quite bearish article today on housing, unfortunately hidden in the Sparks Today section. The article is titled 10 Things Your Realtor Won’t Tell You: http://news.rgj.com/apps/pbcs.dll/article?AID=/20070213/SPARKS01/702130306/1021/SPARKS
My favorite has to be #9, which is basically that the Californians are in the same boat we are in and AREN’T going to save us: “While the situation is exacerbated here in Northern Nevada by the sheer magnitude of our price run-up, the housing market is soft nationwide. We are especially dependent on the market in Northern California to provide buyers, so until markets improve in general, our local market will be very, very soft.”
Well done. You’re right, it sucks that it was buried, but it’s a start. I got interviewed over year ago and my thoughts never hit paper.
If you add the following in brackets, then the paradox the current market faces is perfectly summed up in my opinion:
“However, they are only qualified buyers if they can sell their existing homes [AT EXISTING PRICES]. And, there is no one to buy those [AT EXISTING PRICES].”
I’ve seen that list before. Here are a few more:
10 Things Your Mortgage Lender Won’t Tell You
http://www.foxnews.com/story/0,2933,167776,00.html?sPage=fnc.business/realestate
10 Things Your Real Estate Broker Won’t Tell You
http://loan.yahoo.com/m/primer10.html
http://www.thebuyersbroker.com/homebuyers/html/ten_things.html
BayQT~
BayQT~
One more try (fun stuff!):
10 Things Your Real Estate Broker Won’t Tell You
http://tinyurl.com/78ea
10 Things Your Real Estate Agent Won’t Tell You
http://tinyurl.com/ys4r93
10 Things Your Mortgage Lender Won’t Tell You
http://tinyurl.com/2xtfwq
BayQT~
““An alleged pyramid scheme focused on Murrieta real estate ”
A Ponzi scheme within a Ponzi scheme?
That’s pretty funny.
I get amused by the “Prices haven’t dropped 50% yet so there’s no bubble” mindset. It’s even prevalent on this blog. Things don’t happen that fast and it’s unfortuante that the “bubble” analogy connotes the instantaneous drop in prices. Japan’s bubble took 18 years to completely deflate and our media and the REIC cheerleaders are saying we’ve hit bottom in 6 months. Wait until all the folks who had not business ‘buying’ a house find out they can’t afford them…UGLY doesn’t do the coming mess justice. Neil better stock up on popcorn, it’s a loooong double feature this time down.
It’s OK if it takes a while - we have popcorn and have just put our feet on the seat as the previews are winding down and the real movie is about to start!
Something to keep in mind - for any year with negative or even flat appreciation, it’s much better to rent than to own. Owners are spending much more than us per month AND they’re not getting any appreciation either!
Let’s not be in too much of a hurry for this thing to bottom out - because until it does, it’s the OWNERS who are throwing money away, and we’re the smart ones. And when this thing does finally bottom, which could easily be 5-7 years from now, we will quite likely have the best buying opportunity of our lifetimes!
Also, as the lights went down and the opening credits started, I farted in the direction of the homedebtor next to me.
Dude, you are sick and twisted.
LMAO.
“I farted in the direction of the homedebtor next to me.”
Jbunniii is Obviously an “extremely rude frenchman”
LOL!
ROTFL
Sick and twisted.
I throw my buttered popcorn into the hair of the homedebtors.
Reminds me of high school. Me and a group of friends went to a horror movie. Just as the monster was emerging I just couldn’t get into the movie… so I started to sing “happy birthday.” (Theater rolled in laughter.)
This is like that. The homedebtors are scared out of their wits. We’re making fun of the flick.
Got popcorn?
Got lots and lots of popcorn?
Its a double feature. You get 2007 and 2008 deflation for your price of entry.
Something to keep in mind - for any year with negative or even flat appreciation, it’s much better to rent than to own. Owners are spending much more than us per month AND they’re not getting any appreciation either!
jbunniii you have a good point. However, I would go one step further. For me, it takes an expected 4.5% home appreciation rate to break even after 5 years (assuming 3.5% YOY rent inflation).
We’re not seeing that rent inflation where I’m looking…
We’re not seeing that home appreciation where I’m looking. In fact, we’ve seen 7% deflation!
At 7% deflation, my rent/buy calculator says buy when properties drop to 25% of their current value. At that point the tax advantage is greater than the depreciation cost, for me.
Naaa… I’m not the analytical type…
Got popcorn?
Neil
Your mother was a hamster and your father smells of elderberries.
–Shannon
“Housing prices slip to three-year low, but pace picks up”
Nice headline spin from the UT. Gotta put some lipstick on this pig.
LA Times spins just as hard, but in opposite direction:
“January home sales weak, but prices go up”
“The operation was a success, but the patient is dead.”
“‘It has slowed down tremendously,’ said Indira Winesberry, a San Francisco resident and senior loan processor. ‘During the busy times, I could get a job in two days. I haven’t even had a call in three weeks. I’m working as a real estate broker right now, but I haven’t even received any calls for that.’”
Haven’t received any calls!!! Whaaaa! You mean I have to pick up the phone and call people? A LOT of people?? But it wasn’t that way 2 years ago!!!
She should try being in business sometime. You have to call people, leave messages saying that you’re going to call again. Rinse and repeat.
Never heard of cold calling??!! Jeez that’s the first thing they teach at any RE school. Indira Winesberry had better watch Glengarry Glenn-Ross 100 times as punishment. Get on the damm horn.
Cold Calling for sales is a job everyone should do once in a lifetime.
Not an easy way to earn a living but at least it is relatively honest.
From the Union Trib article:
“On a year-over-year basis, January was off only 4.3 percent from January 2006. That was the smallest decline for any January since 2000 and, interestingly, the smallest decline reported among the six-county Southern California markets, according to DataQuick’s count.”
Blatant BS? Am I reading that wrong?
No, that’s typical UT speak. They wont change that tone until it’s too late already.
Think this through. Brain beginning to stick. Since January 2000, there has been but a single YOY price decline - of 4.3% from ‘05/’06. So….by definition of it’s unitary nature, it is the smallest decline.
More O.C. homeowners missing payments
More homeowners in Orange County are skipping loan payments, data shows.
The Orange County Register
Banks sent out more tardy notices in January to Orange County borrowers who are behind on their mortgage payments, marking the sixth consecutive monthly increase in such notices.
They mailed 847 notices of default last month, up 23 percent from December and 121 percent from a year ago, DataQuick said today. It was the highest monthly total since March 1999, although below highs last seen in the early 1990s.
Defaults have been generally rising since late 2005, near the peak of the housing market. Banks typically issue such notices when a homeowner has missed three or more payments.
And more owners lost their home to the bank last month. Banks foreclosed on 153 homes in January, up 26 percent from December and 512 percent from a year ago.
Oh gee, but I thought everyone in “the OC” was rich and could afford $1M dollar tract homes…why on earth would they be missing payments?? Maybe all their personal assistants just forget to write checks.
Sarcasm Off
Everyone is rich on paper if you bought a house pre-2000 or even 2001 -2002…..All you have to do is re-fi or sell to collect your home lottery gains…..if you bought 2004-2006 you are screwed big time…either you are under water or your equity just vanished…..OUCH!
“All you have to do is re-fi or sell to collect your home lottery gains”
Of course, if you did that, you are just as screwed as the late buyers, you just got to have a little fun first.
Actually, you don’t even need to re-fi. If you’d taken advantage of those low, low rates in order to get into a shorter term, low rate mortgage your residence would likely be paid for posthaste. And nothing spells “financial security” like a 100% paid for home, IMHO.
It never ceases to amaze me how few people took advantage of the “Greenspan opportunity” to make themselves more financially secure, and instead decided to use somebody else’s money to upsize into something way too big and way too pricey, or HELOC away their homes to pay for crap from Best Buy and Hummer.
I agree totally with this. I know many people in OC, that had an opportunity to go 15 years, get fantastic fixed rates and pay their places off in short order.
But nooooooo. Decide to take $200K out, have some fun, live life a little and they rationalize that they have the same approximate payment as before, but its 30 more years to go. Of course, the market here only goes UP,UP,UP so no need to worry about such trivialities as paying the loan off.
At least the have nice pictures and videos to look at from the trips they took to Bora Bora that will help the years pass blissfully.
well, why not. you could die tomorrow and never enjoyed your savings. but wait, your wife’s next husband will have a grand time with your savings and insurance.
Watched a housing show tonight. Family house purchased 22 years ago from parents for $100,000. $250,000 added to it including a marble bathroom renovation of $160,000 plus $50,000 of kitchen work. The owners aren’t even interested in selling, they just want to know if the place can support another $70,000 HELOC so they can put that much more into another kitchen renovation.
22 years and no equity, in a house pumped far above the neighborhood. Well, the result was $500,000 of “market value” (must have been late 2005) so the couple was overjoyed.
I wonder if they are underwater this year. Since they aren’t selling the ancestral home, it’s not a critical problem I guess. But I bet it takes all the fun out of the “million dollar house” class marble bathroom.
They are all rich in the OC. Remember Gary Watts’ moronic comment about putting out for sale signs with “Rich People Only” on them? Sure hope he’s squirming now.
“Banks foreclosed on 153 homes in January, up 26 percent from December and 512 percent from a year ago”
Nice! 500%+ How much pain can lenders take until they say UNCLE. Wait, they did that this week by incrementally raising standards and choking off 100% financing. That’s just the first cut. More measures will be forthcoming. Problem - This kills the demand side for their products AND for the prices on the REOs they will be in desperation mode trying to unload. A few more months at 500% and pretty soon it’ll crush all previous records…
Oh, and from the guys that serve Ice Cream, DQ.
“Indicators of market distress are still at a moderate level. Financing with adjustable-rate mortgages is declining slightly. Foreclosure activity is rising but is still in the normal range. Down payment sizes are stable and flipping rates and non-owner occupied buying activity is down, DataQuick reported”
Still rising and in normal range. A little oblique and misleading since the only thing that matters at this point is a DEVASTATING TREND. SHILLS!!!
Let’s see, foreclosures are up 512% from a year ago in OC, while prices were reportedly flat for that period. An FB isn’t going to let a house go to foreclosure if there’s equity in it, so just a mere flattening of prices (together with resets) was enough to cause foreclosures to go vertical. What’s going to happen if prices dip even 5-10%, together with more resets than 2006 and tighter lending? Man, that chart is going to continue going vertical, and these REOs are going to start putting some downward pressure on prices. And when the little arrow on the OC Register’s site turns red and points down, lots of people here are going to be despondent.
“lots of people here are going to be despondent.”
That may be an understatement. People are going to soil themselves, lapse into depression, go postal on their realtors, etc.
To quote Ghost Busters:
Dr. Peter Venkman: This city is headed for a disaster of biblical proportions.
Mayor: What do you mean, “biblical”?
Dr Ray Stantz: What he means is Old Testament, Mr. Mayor, real wrath-of-God type stuff.
Dr. Peter Venkman: Exactly.
Dr Ray Stantz: Fire and brimstone coming down from the skies. Rivers and seas boiling.
Dr. Egon Spengler: Forty years of darkness. Earthquakes, volcanoes…
Winston Zeddemore: The dead rising from the grave.
Dr. Peter Venkman: Human sacrifice, dogs and cats living together - mass hysteria.
“…dogs and cats living together…”
So this is where that line came from.
In spite of these problems in the mortgage industry, there doesn’t seem to be any shortage of funny money in the BA. I still hear ads from the “It’s the biggest no-brainer in the in the history of mankind” guy. Now there is some LuxFunding who is hammering KCBS with adds for people who have bad credit, low score and need cash to buy a new car … sickening.
I can understand housing prices being sticky and all. But anyone knows why the credit bust is happening so slowly ? Remove the funny money and the Bay Area market will drop faster than Florida and Phoenix.
“But anyone knows why the credit bust is happening so slowly ? ”
I’m not sure what you were expecting. Personally, I am amazed at how quickly this is all happening. It will still take a while before it translates to lower prices.
It’s a bit like saving money. You put away a little at at time, and it seems like it is taking forever to accumulate, but once it becomes habit and you don’t pay attention as closely, the next thing you know, you have some real money saved up. This market is a bit like a “watched pot;” it is only going slowly if you watch it every day.
Resident of BA since 1971. The biggest difference between the life many years ago and today is the land sharks that occupy our cities. If you have money or generating income, your fair game for the sharks. Everything is so commercialized.
That Lux Funding ad is creeeeeepy: “Lux funding is like an emergency room, loans that nobody else will do.”
The line makes no sense and the woman has some kind of weird pseudo accent.
Posted in another comment, but more relevant here —
I thought Gary said it was in the bag
From 05 “Mr. Good ‘n’ Plenty” High hopes for Housing
Housing evangelist still crying out!
Real Estate Economist forcast july 06
Dissent on housing Descent One of Gary’s best quotes with the famous “Tail Wind” comment
Gary Watts, the Mission Viejo broker and economist, says “I would imagine that a ’soft landing’ would have home price appreciation equaling the inflation rate, but O.C. home prices won’t even be in the ‘approach pattern!’ We are and will continue to climb to an ‘altitude’ (with price gains) between 10 percent and 12 percent this year. And if we pick up a tail wind in the latter half of this year, we may climb to 15 percent. Next year’s appreciation should also keep O.C. home prices up in the air with no plans for landing anytime soon.”
Watts forecasts 7% gain in O.C. house prices in 07
Finally, finally, finally, something is happening. My agent in Ventura now tells me that he’s seeing a bunch of foreclosures and short sales, and that a lot of people who bought in the past couple years are getting into trouble and are motivated to sell. The kind of properties I’m looking for are definitely getting closer to my price range, and he wants me to start lowballing. However, if this is just starting, I hardly think now is the time to start making offers? Let the FBs twist in the wind a little longer, I say.
I think I said this last week lainvestwhatever.
It’s just starting and the pulse is picking up. Just look in the back of the V.C. Star.
I call it like I see it, I’m not about to go on the advice of some crank who’s never bought any RE and likely never will.
I like you LALAlandgirl. Even when you go down, you go down still swinging…
seriously, though I have about a mil burning a hole in my pcoket right now and with prices “stabilizing”, what overpriced POS on the westside of LA would you recommend as my first attempt at landlordism. I just read the Trump guide to wealth generation and I’m raring to go…
sarcasm off
There is nothing in west LA. Nothing. I don’t see any sign of a price bust here, this will probably the last territory to fall. But, personally, if I can pick something up in the IE or Ventura, and I realize there is a big difference in desirability between the two, I’m fine with that. This is a much better situation than 2005, where to find any reasonable investment I’d have to get on an airplane, buy something out of state and have to pay some clueless property manager. Being able to buy anything within driving distance of LA is a new development, and I’m totally satisfied with that, I don’t need Santa Monica in my portfolio, I’m happy enough to just live around here
Personally, when it comes to Real Estate, I don’t think you know what you are talking about. Just my opinion.
Her agent knows all.
posted ” I call it like I see it, I’m not about to go on the advice of some crank who’s never bought any RE and likely never will. ”
If you buy “soon” you will just be trading places with the poor soul on the gallows.
Excuse me? You don’t even know me, and you are calling me a crank..Yes I do own a house here in Ventura and you are very rude lainvestwhatever, go take so Zooloft.
Some Zoloft
Krills,
Does this mean you failed to buy re in West LA? How clever of you. It’s the sort of thing that drives losers who are doubling down nuts.
That was a good one.
stop!
Since, I do not know this Girl personally nor do I wish to, i will not make any derogatory comments towards her. I learned this back in High School. As an R.N., thick skin is necessary.
Too funny!
Just looking forward to when the market is sustainable again, so people with integrity can buy a home in this area.
“There’s a fine line between watching the market and waiting for an opportunity, versus being insanely jealous of anyone who’s already in.”
Come on everyone, ease up on the insane jealousy, show some respect. The lady is landed gentry. She owns property at the corner of melrose and normandie, right next to the used tire shop and less than a block from the 101 overpass.
Grrr, why couldn’t it be me?!!
Dude, I wouldn’t throw stones, exactly how many miles do you live from that slum?
posted ” The kind of properties I’m looking for are definitely getting closer to my price range, and he wants me to start lowballing. However, if this is just starting, I hardly think now is the time to start making offers? Let the FBs twist in the wind a little longer, I say.”
If what is starting to happen, is like the past….It will take YEARS to unwind.
The only thing that is different this time is the magnitude of the disconnect from fundamentals. As such, I expect that the collateral damage from this bust will be larger, and the resulting recession deeper, than the last time (1990s). This could mean that it will take longer to reach the bottom, and longer still before prices start rising again. This is of course good news for those of us who aren’t particularly keen to buy any time soon but want the option some years down the line.
I would wait it out and watch for more distressed sellers coming into the market. This is just the begining of the ARM resettings. There will be plenty more. Subprime lenders are going under and wont refinance. Major lenders will take over loans will reset at higher rates / Payments and blow up the market.
“Dont pull the trigger
until you see the whites
in their eyes!”
“Don’t pull the trigger until you see the whites of their eyes!”
Or the brown of their pants!
LOL
‘Finally, finally, finally, something is happening.’
The runup lasted from 1999-2005. The downturn will probably last 1.5 times that long. You are at the VERY beginning of the downturn. It will take YEARS to reach bottom. Santa Monica prices dropped 50% between 1989 and 1995 but it took SIX years. Would you please grow up already and stop posting weekly comments about how slowly this is happening?
If you want, I’ll post them daily.
“Orange County Register. “Orange County’s median home price in January was $600,000,…”
$7500.00 per year, just for property taxes. Is anyone thinking of the future when they sucker themselves into buying these overpriced money-pits.
I have over 30 years of real estate investing under my belt and never once advocated renting instead of owning….until 2003. That view has not changed yet.
Mr. Vincent,
I happen to agree with you. Until a few years ago, I too always advocated buying over renting.
It will be at least 18 months before I change position.
Got popcorn?
Neil
Love that commercial with the silly blonde on the beach…Look!…Dolphins…cute Dolphins….Over there FB’ers …
Cool…they jump in and we put on the JAWS music and munch popcorn while watching the Splashing…and Thrashing…and Gore
Only a matter of time before flippers in the OC give up. Once the realization that they overbought in 04-06′ and can’t recoop their investment the real fun will begin. Let’s face it, suckers..ah…i mean investors who bought tech stocks in the stock bubble of 2000 didn’t sell right away…it probably took years before selling….real estate will take just as long or longer…..this deflating will take 2-5 years before a bottom is hit…..Take the Japanese Real Estate market of the 80’s it is still not recovered from the peak…..I don’t think you will see the OC median at 600k for the next 20-30 years….as it will probably come back down to 480k-500k. The number of toxic loans fueling the OC home rise has just about run it’s course as sub-prime lenders and 80/20 loans get the kabosh….
“…as it will probably come back down to 480k-500k.”
Oh, it will go lower than that I assure you. I don’t even think the posters on this blog as a whole understand how bad this is going get for RE prices in SoCal.
Some of us do.
Some of us hope.
What I haven’t been able to figure out is how much of CA RE prices is do to “preserved equity” transfered in the “trade up” market? Due to MEW, that cushion is gone.
So is the 6X median income still the bottom? Or will it be 4X median income?
Sorry if I don’t believe it will be less. Big cities get premiums over rural land… that’s a fact we’ll all just have to live with.
But since its starting from 11.4X median income… Woa Nellie! Watch her drop. (Now, is that the home price multiplier or the median income…)
Got popcorn?
Neil
Neil,
I have been having this same discussion on a thread at Dr. Housing Bubble’s site. I keep asking the same question: why would it bottom any higher than the rental equivalent which is currently about 4 times median income? Why will buyers suddenly rush in to buy at 6 times income? IMO, once the idea of appreciation is dead, like it was in the mid-90’s (and this bubble deflation will kill it), prices will drift down to their rental values and the bottom will form. Buyers will buy there, not because they make money on appreciation, but because they save money versus a rent payment. Believe in appreciation must die before any bottom forms. Any buyer who thinks they will make money on home price appreciation is a knife-catcher. They will try to pick the bottom and buy too early.
“So is the 6X median income still the bottom? Or will it be 4X median income?”
When was 6x median household income the bottom in california?
dwr,
In So-Cal the last “bust” stopped at 6X median income. Its oscillated between 6X and 8X a few times… Let me go through my links and see if I can find out who blogged this first. But its been the floor for two cycles.
Got popcorn?
Neil
piggington.com has the chart you are looking for in the bubble primer.
bubblebuster.com also has a similar chart.
Will not go that low unless lots of people lose their jobs aka depression style. People in Cal have always and will continue to spend more than they make and the majority of Cali’s make enough to support their payments. So median drop past 400, not likely, but you may find a nice 400 underpriced in a REO. But that won’t kill the median under that amount because all the rich cali’s will continue to spend millions on a pimp my house.
“….Will not go that low unless lots of people lose their jobs aka depression style….
calex, your assumption may be faulty. The housing market may lead us into the recession, and then all bets are off. That is why I will not buy anything until I see actual signs of apprecation again (or after tax costs beat renting or building new costs less than buying used). The downside risk is far more enourmous than any upside to buying now. Remember, we have a housing bubble popping while ALL CONDITIONS FOR BUYING ARE FAVORABLE exept price (financing, rates, inmigration, jobs, liquidity). When one of more conditions start to deteriorate (financing), do you think the others will just hum along unchanged?
Paladin,
Well said. EVERYTHING favors home price buying right now except for the asset price. We have financing taking the hit now.
CR shows how jobs will start dropping soon in home construction. With home construction goes lumber, manufacturing (e.g., the layoffs at Maytag, soon Viking, granite countertop makers, etc.). Need I mention Detroit with the 13,000 more layoffs at Crysler? How many at the parts vendors to Crysler?
We’re going to see 600,000 to 1,000,000 jobs lost before July.
Calex, Normally I’d agree that $400k for a median home in So-Cal would be a hard floor. Not this time. I’m with Paladin; I’m watching the indicators before I step back in. I’ve even calculated when its cheaper to buy than rent even if homes continue to depreciate (due to taxes).
I also know of companies struggling to justify staying in California due to depressed profits (due to high wage demand). Sustainable? Nope. We’ve seen this before. Exit stage right!
Updated article on WSJ blogging the mortgage mess:
http://recomments.blogspot.com/
Got popcorn?
Neil
Let’s talk comps. I bought my house for 110,000 in 1987. I have been very fortunate to have had it greatly appreciate in value in the ensuing years. I have also invested over $100,000 in improvements. Things like insulation, central air and heat, double-insulated windows, 200-amp electrical w/220v connection, moved the water heater outside, gut and remodel interior, earthquake retro, restored hardwood floors, all new appliances, all new doors, new ceilings and lighting, sprinkler system, new roof, etc. You get the picture.
While I know not all homeowners do it to this extent, I would surmise that a lot of the HELOC money (MEW) was used for such purposes. Ours was all out-of-pocket plus a lot of sweat equity, and obviously occured over a twenty-year period.
My point, or question to fellow bloggers, is to what extent has the median increased due to improvements. We are not always buying the same home as it was 10 or 20 years ago. Is there comparability? What is the standard expectation for a home? Floor furnace OK?
I realize it depends a lot on when the house was built (mine in 1918), but aren’t most houses for sale much improved (not counting granite and stainless or new carpet and a fresh coat of paint) than their previous purchase condition???
I don’t think you will see the OC median at 600k for the next 20-30 years
And if you adjust for inflation and quote the price in constant-value dollars, it might NEVER hit $600k again, and very likely not in our lifetimes.
posted “The Orange County Register. “Orange County’s median home price in January was $600,000, flat vs. revised statistics from a year ago, market tracker DataQuick reports today. Buyers grabbed 16.3 percent fewer O.C. homes last month that a year ago. It’s the 16th consecutive month that sales failed to meet year-ago levels. January’s median prices is down 4.8 percent from December.”
Garry Watts should get somebody to read him the local paper, or help him with the big words.
“golden clients”
Lots of that here in Bay Area but too stupid to know any better.
I fell outta my chair when I got the following email this morning from my local Zip Realtor. I had just finished reading the UT article and almost lost my coffee when I read it.
The names have been changed to protect the semi-innocent:
From: Agent X [mailto:xxx.xxx@customer.ziprealty.com]
Sent: Wednesday, February 14, 2007 7:35 AM
To: Operation
Subject: No one can predict how much houses will appreciate….
Hi Operation,
No one can predict how much houses will appreciate; therefore all we can do is see where they have been going. That said, houses continue to increase in value over time due to increased demand, limited supply and inflation.
I always think that now is a better time to buy a house, rather than waiting.
The number one reason is because inflation does not stop. So the same amount of money buys more now than it will in the future.
The second reason is that demand for housing, particularly in California, continues to rise as our population grows.
The first thing to do is to get pre-approved. I have a wonderful loan consultant at Eloan who will guarantee you the lowest cost mortgage. Would you like me to have her call you?
Thanks very much!
All the best,
XXX XXX
REALTOR (R)
ZipRealty, Inc.
Licensed in California
XXX.XXX@ziprealty.com
Toll Free: 1.800 CALL ZIP xXXXX
Cell: 619.XXX.XXX
Fax: 866.XXX.XXXX
My Profile: http://www.ziprealty.com/XXXX
I would send them a reply with a link to the NOD and Foreclosures graph at the Piggington site. See how they react to that.
Freudian slip?:
“I always think that now is a better time to buy a house”
It’s never been a better time to pay me a commission.
Holy… wow. This is so blatantly wrong it can’t even really be responded to.
The principle assertion is entirely true. For example, no one with any sense would have predicted the scale of the property boom so far. It follows that no one can predict how much houses will appreciate.
Somehow this total lack of assurance makes me feel even less like buying even if it would just be moving up or rightsizing or some such.
I just put my San Diego house on the market (in part because of this blog). I realize that I’m a little late to cash out, but the stability factor of owning our home (with no mortgage) was a big plus the past two years.
I ran the numbers last week, and if we sell now even at the lower prices, the interest we will earn on the cash is greater than the rent on a comparable property. Add to that the offset of not paying property taxes and HOAs and we’ll net about $1,200 a month by selling.
When I brought this idea to my wife, I thought she’d call me insane, but she’s all for it. Hopefully our place will sell soon, and hopefully the market will tumble faster while our savings grows.
Good luck. Post the numbers if you sell.
“Some analysts expect Southern California home prices to continue to edge lower, eventually losing value and showing negative year-over-year growth. San Diego in particular is viewed as a housing trend-setter, because it was the first Southern California county to experience double-digit price appreciation at the start of the housing boom. As prices soften there, many expect the rest of the region to follow.”
That may started to happen in 2001-2003 i agree, but the bubble started to inflate as early as 1999 in SF Bay Area. Homes that were 180K in 1997 inflated to over 500K by 2000. Now they are at 750K. Im measuring same home resale.
Much of that was from local employees selling their ‘Tech Bubble’ stock options at high valuations ($350/share of yahoo). No one should expect that to happen again in Silicon Valley in the near- long-term. Not to mention much of the home purchases since 2002 were via exotic loans. Much bigger bubble here than most would think.
posted ” “Some analysts expect Southern California home prices to continue to edge lower, eventually losing value and showing negative year-over-year growth.”
I guess that was not Gary Watts….LOL
Louie X 2
$500,000 in 2000 running up to $750,000 in 2006 is about 8% inflation. This suggest the appreciation rate was more muted than the rest of the CA market during the last 7 years. I am not saying there is no bubble, but the rate of the bubble inflating was not as great as other places.
In 1990-1995, Marin and the SF penninsula did not see the kind of deflation that happened in the Sacramento and San Jaquin valleys. There is just no place to easily build new housing, so supply and demand do not get so out of whack. You can not drive thru empty subdivisions of mcmansions in the bay area like you can in the valleys. I suggest you adjust your expectations a bit.
Not sure that is true. The deflation must have been close. For the most part property in the state took a 30% whack. The main issue with big losers like the Central Valley and also the Russian River was that these places has boomed up from such lows. At the start of these boom these low end areas had a large stock of houses with many under $200k. Inflation will have bumped things up from that a little by the time this ship hits bottom, but not by much. Time will tell.
The thing is though - that 50% gain wasn’t spread out over 6 years, but just 3 - from 2002 to 2005. So it’s more like about 15% a year, and not driven by any job or salary increases.
Spoke with my agent on the Peninsula today… her office’s two most recent listings had 7 and 9 offers. My saved Zip search has been steady at 35 listings, with typically 2 new ones and 2 going inactive every day. 21 of the 35 have been on the market less than 2 weeks. Things don’t seem to be slowing down here.
Not true. There is always up.
It may be that the overbuilding will have to continue here a few more years but this market is going down,too. When my hairdresser speculates in the market by buying a house in Hillsborough, that’s akin to the shoeshine boy giving stock tips.
‘Most noteworthy in this month’s DataQuick report is the fact that the market tracker has revamped its home-sales math, resulting in a totally revised O.C. housing recordbook. (It’s a statewide revision.)’
Is there an independent check on their data? They decide to change the formula now that the s### is hitting the fan? Sniff sniff, what’s that fishy smell? Someone trying to delay the inevitable a few more months?
Interest rates took a dive after Ben B. spoke this morning. A new generation of GF and ultimately FB’s will be formed when prices don’t immediately crash this spring.
Banks with REO NOD properties will continue to fund GF’s for those properties and keep their fingers crossed.
Anyone notice Inventory is not bouncing back after new year as fast as it did last year in San Diego. Is it possible that more flippers are upside down and cannot list at current prices? Is there a little more demand now? Any ideas?
I think that the only people listing are people who have to, or really, really want to, sell their home.
A lot of people who wanted to sell their home at 2005 or 2006 prices de-listed and are going to be stuck there for 20 years. They won’t sell at the market prices for the next 1-5 years or anywhere close.
The type of listing that we will see going forward will be the much more desperate type of listing. Foreclosed property; divorce properties; death properties; relocation to another town properties; people getting married properties; and so forth. Then the prices will plummet because people need to get what they can and will have to actually compete. The builders understood this so they’re slashing prices and doing whatever they can to unload their inventory before the bottom falls out.
Pull out the non-trad loans and CA demand drops by 40%. It really doesn’t matter if the number of for-sales re-inflate this spring - the buyers are gone anyway.
I think there is 1 main reason for this: Word is out that the market is crap and a lot of people are attempting to wait it out, possibly renting the place in the meantime.
And all the conversion specials are not listing every unit anymore so that is a loss in the inventory number. Plus the “oops” back to apartment condos that are not listed this year.
Slightly off topic, but why does the stock market keep going up? You would think that with all the subprimes failing and employment going down due to the lack of construction and home sales, that this would effect the market in some way.
The market is focused on two things - earnings and BB. Housing is way off the screen.
Hot money seems to flip between Stock market and RE market. After 87 market crash RE took off.
Interest rates headed south.
-JMO
The U.S. stock market in increasingly being run by foreign money. As long as we keep buying their stuff, they’re willing to lend us $2 billion per day. Heaven help us if we can’t buy their stuff anymore.
The “Foreclosure Bubble” (you heard the term here first) is building fast. Like the housing bubble, you won’t know it’s reached its peak until after the fact.
The fabled “soft landing” looks like its happening again. Stock market investors like that, and with home speculation down the money goes back to equities. Reits down today while the market was up, thats something to watch.
The U.S. stock market is increasingly being run by foreign money. As long as we keep buying their stuff, they’re willing to lend us $2 billion a day. Heaven help us if we can’t buy their stuff anymore.
From a MSNBC article.
“Zanker also struck out when he offered to donate $2 million to charity if Buffett would agree to speak for 30 minutes at one of the real-estate-and-wealth seminars his business, The Learning Annex, holds.”
Sorry Zanker, Buffet has class and doesn’t getting involved in schemes to rip people off. Maybe you should try Donald Di(k, eerr, I mean Trump. Oh but he already speaks for your crap at 1.5 million. What does Trump talk about for that 1.5 mil, more than likely how to navigatge BK and foreclosures. That is his expertise.
Wanker is trying to buy credibility. Sorry, that flew out the window with risk consideration. How does millions of disillusioned former homeowners sound? Sounds like a huge credibility problem for someone, or possibly something. Trump & Dump should be the name of this father/son dynamic duo of fraud (or Trump, Pump & Dump if you were to include his daughter.
“What does Trump talk about for that 1.5 mil, more than likely how to navigatge BK and foreclosures. That is his expertise.”
I thought Trump’s expertise lie in CAUSING bankruptcies and foreclosures.
Those things only happen to people without billionaire daddies so Trump can say that it hasn’t happened to him. A lot of his former partners know where his true talents lie.
Berkshire Hathaway up 24.5% YOY. Glad that Buffett takes such good care of one-fourth of my IRA.
Totally off topic but amusing, my coworker and I attended a “feng shui” seminar recently. There were 10 attendees including us, and 8 of them were real estate agents…. distressed real estate agents. Questions that were asked at the seminar - 1)are granite counter tops good or bad feng shui for the house? 2) how can i decorate the house to have potential buyers? will putting a jar of water in the southeast corner of the house help? At the end of the seminar, all of them gave business cards to the instructor (who was a real estate agent on the side herself) so that she could give them personal advice. Thought I’d share it with ya’ll. I’m in San Diego…. crash and burn baby!!!!!!!!!!!!
“feng shui” seminar ….Take it from this fung-shui expert…the out-house should not be downwind from the main dwelling.
BTW I gave a fung-shui presentation to First Team RE in Irvine a decade ago.
Finally,
The drop has begun.
Another consequence of the housing debacle.
http://www.ocregister.com/ocregister/homepage/abox/article_1579276.php
OT…..Has anyone posted this tidbit?
State Farms Says No New Policies in Mississippi
http://tinyurl.com/33aebv
In other words, along with Florida, Louisiana and probably other Gulf States, don’t even think about buying anything in that general vicinity unless you have a patent on a money tree. It’s just a suspension of new policies but definitely bad news for builders and peeps who dare to buy.
BayQT~
Talked to some old friends and ex co-workers back in Cali, they now agree that home prices are heading down and want to know when I will move back. Well this whole housing drop is going to take awhile I’m afraid so I would have to rent back in Cali just like I’m renting here in Phoenix. Without a recession though the price adjustment could take many years much of it coming from home prices not keeping up with inflation compared to say the stock market. Lets look back, stock market crashing in 2000 and money gets real cheap trying to save the stock market and housing goes up.
Now housing looks like it may crash so more money comes in from what Japan carry trade or something and stock market starts way up again with the hedge funds and private equity deals. bubbles to the left and bubbles to the right and when it stops nobody knows……
in N VA
off 12% in 06
6 % in 07
3% in 08
in nominal dollars
Actually this has just started to accelerate as far as price declines go - with the soft money getting harder to find the brown stuff is about to collide with the rotating assembly just as all those arm’s adjust.
‘06 was just the teaser…
‘07 and ‘08 will me MUCH MUCH worse.
Can I borrow your crystal ball when you’re done?
‘I believe, for those buyers who will be holding their property for at least 5 years, or people looking for a ‘fixer,’ now is a great time to invest in real estate.’
As was the year before, and the year before that, and the year before that, and the year before that…
“…looking for a ‘fixer,’ now is a great time to invest in real estate.’”
Umm, sorry pal. This is absolutely positively the WORST time to buy a fixer. Prices are dropping so rapidly, all of the money spent on the rehab has vanished into thin air by the time it is completed. NOT SMART.
Hey hey, hey …. now let’s not go overboard here……during the panic fleeing for the exits, nothing wrong with stepping on the mink stole as the old lady grapples for the lifeboat ropes……
Plenty of good deals to be made in the lower ranks of housing…. although this will probably be the toughest market due to it’s “future potential” and impending affordability…..
But the day will come when the debutantes are looking for grandma’s mink, and that’s where we swoop in…….
LOL. Funny stuff. But seriously, I haven’t seen any fixers that are even remotely profitable right now. If there were, I wouldn’t mind grabbing one just to occupy my time. I actually enjoy the work. But I’d have to be certifiably insane to venture there right now.
You did hit it on the head ….no deals now. I was just being flippant ….. not to be confused with flipping!
These deals will probably be more difficult to come by as the market winds down, since those like you and I who would enjoy the work for even a minimal return, will be outbid by those willing to do the work for their own gain. As it should be I guess. Maybe the flippin’ home shows from the last few years have at least shown the next generation of buyers a thing-or-two about doing the work themselves…. might be a silver lining in all that information spewed on the “Ponzi Network” (HGTV).
Towers project developer defaults on loan
I knew this was coming!
Developer John Saca Wednesday said he has defaulted on a $22 million loan he used to buy the downtown land where he broke ground last year for two 53-story condominium and hotel towers.
The default - the first step in a foreclosure - doesn’t necessarily mean the development is dead. Rather, it’s a public exposure of the months-long private struggle between Saca and his equity partner in the Towers, the giant California Public Employees’ Retirement System - CalPERS.
Construction on the prominent site at Third Street and Capitol Mall stopped in January, leaving a hole in the ground, studded with piles, a few blocks down from the state Capitol.
Nearly 400 buyers have paid deposits on condominiums in the Towers. That money is in a special escrow account and will be refunded if the development collapses.
Saca sent an e-mail Wednesday to all the buyers, assuring them he is “working diligently and doing everything possible to move this forward.”
“and his equity partner in the Towers, the giant California Public Employees’ Retirement System – CalPERS”.
John Saca : 22mil loan
Cal PERS: 225Bil portfolio……
Uh ….. I think the towers will ultimately be Okee Dokee without John…..
My point being, (okay, one of my points being …..) aside from being one of the largest investment portfolios, CalPERS investment committee had GOT to be in the top 1% on anyone’s list.
Reduced math perspective:
John Saca : $1 loan
Cal PERS: $10,000.00 portfolio
Channel 7 Eyewitness news just reported that prices were up since last month and things were looking good in So Cal….
‘Channel 7 Eyewitness news just reported that prices were up since last month and things were looking good in So Cal…. ‘
Is that the one with Caucasian Ken and Asian Barbi? They look so good together it must be true! And if you buy a house they feature on their fine program because it has been crashed into during a high speed chase, it’s just totally wayyy more valuable. I love TV News in LA. I get all my economic advice there.
This might be of interest to your bloggers…I live in Argentina…I have been watching TV publicity here (also Venezuela and Brazil) by RE sales people in Florida wanting to sell here. They are telling viewers that prices keep going up in Florida and that peaple should take advantage of this urgently. They also offer to obtain mortgages for such buyers. They tell viewers that it is time to start living better after all the sacrifices they have made over time. A lot of people here have no idea of what is going on in RE in America and I would not be surprised should many of them believe what they are told. They are being absolutely lied to!
This is what these lip flappers need to do …
Come out and talk the truth about the market. The fact that prices down, volume down, jobs gone over seas, severe speculator fired market, affordability out the window, real money needs to be used not funky financing and loose money, and how finally prices in line with fundamentals are what is the normal way life is. That will make the crash sharp and short. Volume will come back as people start trusting real estate again and buy it to live it in, not to wait and flip … and eventually you can all start working.
Has Jay Leno started making jokes about this yet ??? if so, the writing is truly on the wall.
Cool.
Cow_tipping.