“A Period Of Stagnation That Many Predicted”: California
The Sacramento Bee reports from California. “How does the capital region’s housing market look so far this year? Not unlike last year, but with a bit more hope that the free-fall in prices and sales may be ending. The new year opened last month with the fewest escrow closings for a January since 1998, according to DataQuick. The firm reported similar slides to 1990s levels in the Bay Area and Southern California.”
“‘Here we are on the back side of the boom in a period of stagnation that many people predicted,’ said DataQuick analyst Andrew LePage. ‘It’s anybody’s guess when we start to pull out.’”
The Contra Costa Times. “Bay Area home prices slipped last month and home sales fell for the 24th month in a row, a real estate service reported. The Bay Area’s 6,168 sales of houses and condos last month were down 26.3 percent from December and marked the lowest total for any January since 1996, when 5,504 homes were sold.”
“‘We are scraping along the bottom of the market,’ said economist Christopher Thornberg. ‘Prices are going to languish in the nether zone for some time. I don’t see any substantial recovery on the activity side until 2010 or 2011,” he said.”
“LePage agreed, although he emphasized that DataQuick does not make market predictions. ‘The market almost never turns fast,’ he said. ‘There’s hope in some areas of the industry that we’re about to stabilize and coming up on hitting bottom, but I’m not convinced of that looking at the data.’”
The Press Democrat. “Sonoma County’s sagging housing market showed no signs of stabilizing in January as sales remained at a 10-year low and the median price fell 12 percent to $545,000.”
“Resale prices for single-family homes have fallen seven consecutive months when compared with a year earlier, the longest decline since 1993, the previous downturn in the county’s housing market.”
“‘I don’t feel the bottom of the market has occurred. I think it’s going to be a little while,’ said Nick Dunlop, an appraiser who has pegged home prices in the county for 15 years.”
“Since the market’s peak in summer 2005, Dunlop has consistently appraised homes at lower values based on the most recent sales of comparable homes. His latest appraisals were down about 10 percent from the record high. ‘It really was an eye-opener for me,’ he said.”
“Listings and sales in escrow now are mostly at prices less than those for comparable properties sold two to three months earlier. Many appraisers are lowering prices about 1 percent each month, Dunlop said. More agents are turning down listings if sellers want unrealistic prices. They don’t want to spend time marketing a home that likely won’t sell without significant price reductions, broker Timothy Hedges said.”
“‘Kind of the joke on these listings is you want to be the second or third agent because by that time the seller understands what it’s going to take to get it sold,’ he said.”
The Tribune. “San Luis Obispo County home sales and median home price declined last month. ‘January was the fourth consecutive month going negative year over year,’ said Andrew LePage, a DataQuick spokesman.”
“Sean Fitzpatrick, co-owner of CornerStone Real Estate in San Luis Obispo, said the January declines are not surprising. ‘It’s a combination of values coming down, more of the lower-end homes being put on the market and the general decline in the market overall,’ said Fitzpatrick, noting that sellers are being more realistic about their prices.”
The Ventura County Star. “Despite a decline in population growth, economists describe Ventura County’s economy as exceptionally vigorous and wealthy. But economists predict a less than rosy year for the agriculture sector and Calabasas-based Countrywide Financial Corp., one of the top employers in Ventura County.”
“‘Whenever I talk to Realtors, they always talk about the collapse of housing and the fall-off in sales volume,’ said Bill Watkins, executive director of the Economic Forecast Project. ‘It’s really hurt that industry.’”
The Daily Bulletin. “American dream or American nightmare? That’s the problem many would-be home buyers are facing in California these days. With the median price of a single-family home in the state somewhere in the vicinity of half a million dollars, getting into that dream house is anything but easy.”
“But it doesn’t have to be impossible, says Patti Davenport of SMD Mortgage Corp. in Highland. ‘For most of the last 10 years, it has been a sellers’ market, but now with the market down and with lots of properties in foreclosure, it’s possible to find some bargains,’ Davenport said.”
“Davenport points out that there are plenty of interlocking programs that can get people into homes with so-called ’silent second’ mortgages as down payments. ‘There are plenty of ways for people to really leverage their money to make it work for them,’ she said.”
The North County Times. “After 28 years of service, Pat Russell’s career at Hanson Realty ended in one meeting Thursday.”
“Tom Crowley, a real estate broker and spokesman for the new owner, said the action was a direct result of the downturn in the real estate market. ‘By my opinion we’re in a (real estate) recession,’ he said. ‘It was just a practical business decision.’”
“‘Nobody knew anything about it,’ said former Hanson agent Lynn Genovese. ‘They came in and said, ‘Bye, bye.’”
The Modesto Bee. “Record numbers of homes are sitting vacant awaiting buyers in the United States. An estimated 2.1 million empty houses were listed for sale during October, November and December. That’s about 62 percent more than usual, according to U.S. Census Bureau statistics.”
“The glut of vacant houses is readily apparent throughout the Northern San Joaquin Valley, as bank foreclosures and former rental homes flood the for-sale market.”
“For 10 months, Harold and Donna Suender have tried to sell their empty Salida house. When they put the 2,305-square-foot home on the market in April, they priced it at $515,000. But the slumping real estate market has forced them to repeatedly lower their price. This week, they dropped it again to $399,996.”
“‘I’ve never seen anything like this,’ said Harold Suender, who bought a new home in Riverbank before the market turned. ‘That (near 20 percent price reduction) is a lot of money, but we have to get it sold. We can’t cover two house payments forever.’”
“Their renter moved out shortly after the home went up for sale. So no money is coming in. ‘Probably the smartest thing to do is try to rent it again, at least until the market comes back up,’ Suender said. ‘But I don’t know how the rental market is now.’”
“The answer to that is: Not good. ‘The rental market is very soft and very tough right now … and it’s deteriorating,’ said Paula Leffler Zagaris, who handles about 1,500 rental homes in the Northern San Joaquin Valley. Zagaris estimated that a home in Salida such as Suender’s now would rent for about $1,250 a month… because so many homes that have lingered on the sales market have started flooding the rental market.”
“Since the oversupply of rental property has pushed down rents, many former rental-home owners are trying to sell instead. ‘I get at least five or six calls a week from investors who want to know how much their rental home is worth. Then, when I give them the price, they get really quiet,’ said Mary Prieto, an agent who sold 80 homes in Stanislaus County last year.”
“Prieto said nine of her current 28 listings are vacant homes. Some are former rentals, but most are houses owned by people who bought elsewhere and since have been unable to sell.”
“Another reason behind the surge in empty homes, Prieto said, is the region’s rapidly increasing foreclosure rate. ‘I would say more than half the vacant homes on the market are owned by banks that have repossessed them,’ Prieto said.”
“Anne and Jorge Acuna benefited from a price reduction on the new Waterford home they bought last summer. ‘We decided to move in first, then put our Modesto house on the market because it was easier for us,’ Anne Acuna said. Their vacant Modesto home, currently priced at $379,900, has been for sale since August with little action.”
“Acuna remains optimistic, and she pointed out that previous real estate investments have gone well for her family. ‘I don’t think people should sit in a house they’re not happy with,’ Acuna said. Covering the cost of two houses ‘is not easy, but we’re tough people. It’s nothing we can’t handle.’”
“On the downside, Prieto said, buyers are reluctant to spend as much for empty homes: ‘The minute they see a vacant house, no matter what the price is, they offer 10 percent less.’”
“Not unlike last year, but with a bit more hope that the free-fall in prices and sales may be ending. The new year opened last month with the fewest escrow closings for a January since 1998, according to DataQuick. The firm reported similar slides to 1990s levels in the Bay Area and Southern California.”
Sounds like a hope founded on a wish. 1990 was the beginning of a six-year slide in California prices, not the end of one.
the words on the street is that in southern california coastal housing areas sellers are accepting offers up to $200 k off of list price, amounting to around 12% off list price. i personally know of one construction guy who has ten homes; he priced them at 1.6 mil but are selling for 1.4, 1.3 mil. he just wanted to get out before he is swarmed with losses.
I can attest to this. Markdowns galore in SD, OC, and Ventura… all over the place, and the discounts are greater the closer you get to the ocean.
It seems that those who there were not subjected to the permanent price appreciation train wreck that the inland people are on. They just cut bait and go. Meanwhile, inland properties are sitting 6 months to 13 months.
I hear a lot about housing bust in Northern California cities such as Sacramental, Modesto, etc., and some S. CA ones like San Diego and Ventura. When do you think it will hit these cities: Alhambra, San Gabriel, West Covina, etc. These seem to hold out well thus far. Do you know what might be the factors that are keeping the housing in these area afloat? I might have to do with the rich Asians immigrants.
dl: Do you know what might be the factors that are keeping the housing in these area afloat? I might have to do with the rich Asians immigrants.
I doubt it’s so much wealth as the fact that they’re big savers. They’ll buy splashy big ticket items, but not get four cups of coffee at Starbucks every day. Asians are also religiously attached to the idea that real estate only goes up. I expect them to suffer the most during this real estate downturn. The drawn-out real estate downturns in Hong Kong (60% down) and Japan (90% down) had hundreds of jumpers (not all at once, of course) splattering themselves all over sidewalks.
The one thing those San Gabriel Valley cities have in common is that they are mostly comprised of lower class illegals and then a few upper middle class Hispanics and Asians. There are also a few Caucasians still around. But I predict that anything that is over half a mil will implode as the economy slows and the illegals have no jobs. I wouldn’t touch anything in the SGV including Pasadena until I waited a few years to see how things pan out.
I used to live in Azusa/Covina for a few years (late 80’s early 90’s). I left when two times (within a few months period) people were killed taking money out of the atm at the local Wells Fargo Bank (now closed) on Azusa Avenue. That’s when the demographics started changing for the worse. Most of the Caucasians I know have left for the IE or elsewhere in the USA.
And that is the rub with greater L.A. County, mostly lower class people with a smitten of upper middle class and upper class (on the L.A. Westside). But once things get really ugly, there will be no more implicit agreement between the classes, and people will just try to survive any way they can. Do you really want to be in a mil+ home anywhere in L.A. County when that happens. During the last riots, they got pretty close to Hancock Park and Mid-Wilshire, next time they will keep going…
I’m Black and I don’t venture much past USC, and I have cousins down there in the hood. I don’t care how liberal you are, if you are Caucasian or Asian and living in any beach area of L.A. County, you are out of your friggin mind.
Anyhow, that is just my two cents, for what its worth.
This is exactly the trend that was reported elsewhere in southern california going back to the 80’s. I don’t have the link, but basically they found that at the beginning of a real estate downturn, prices started dropping in the coastal and affluent areas first, and in the less affluent inland areas later.
If you think about it, it makes sense. Those who are truly affluent who need to sell their house, for whatever reason, aren’t going to bat an eyelash at taking $100,000 or $200,000 less on a $2M house to get it sold.
Those in less affluent areas are going to hang onto those comps and their asking price as long as they possibly can because any loss in equity is a big deal to them.
I’m glad to hear it’s finally starting in the coastal areas. It’s like a plague…it’ll start spreading inland soon.
I was living in downtown LA during the riots (loft while in grad school). The police were turning anyone not caucasin back if they tried to cross under the freeway in west LA. I still have pictures of palm trees burning and my RAL trading cards that someone was passing out at the begining of parker center. I keep wondering if we’re going to see something like that again. What a wild 3-4 days that was.
Chris,
IN Florida it is almost all caucasian people who live in the beach areas. Who lives in the beach areas of LA? Thanks. I’ve never been to LA before.
Captain Jack,
L.A. beach is the same (mostly Caucasian). I am not saying there aren’t tons of beautiful homes in L.A. Westside and beaches, but what I am saying is that at some point, demographics takes over - with or without a housing implosion. Further, the MECHA crowd really wants the Southwest back, and they are gaining ground daily…
Overall, I would say that LA county is not a good investment. neither is The OC, but I still think the people there won’t go down without a fight. The problem is the older OC crowd tends to be faithful to the Repubs who have basically sold them out for the last 6 or so years, and haven’t done much about the illegals. So The OC is toast eventually for the same demographics reasons, the housing bust is just speeding along the process.
As others have stated, this country will basically become very stratified with the upper class and upper middle class living behind gates and the rest struggling to stay above water.
it’s interesting to look at the demographics of coastal la,oc areas. the beach areas are mostly populated by well off white people; whereas the inner areas are made up of mixed ethnicities. the whites in the inner areas pretty much made off for inland empire, riverside, and even onto utah, arizona etc. i don’t know what to make of that. throw in your penny worth of comment.
Lots of white flight to Ventura County back when Intergration started in the public schools of LA.
nick:
Simple really…
You bought your bit o’ stucco pride for $100 to $200k, somewhere in the burbs of el lay, sometime in the past 25 years, it’s paid off or nearly so, or you heloced the hell out of it, either way, those that headed for the tall timber, outside of California, more than likely saw the writing on the wall and this one time gift, was just like so much low hanging fruit, all you had to do, was go to a more reasonably priced state.
Many did. Throw in completely tax free capital gains of up to $500k, just to sweeten the pot even more.
Why 1/2 of el lay didn’t up and move?, startles me~
A pot of gold was waiting.
Newport, don’t be so certain the coastal areas don’t have a lot of highly levereged FBs on ARMs int-only or neg-am. Those resets from 1% are gonna get noticed - in a hurry - and without appreciation they will fold overnight. Those with a bunch of equity dropping the comps gets the ball rolling downhill and foreclosures seal the deal. Imagine the lender taking a $500K hit on a single property. It’s ground ZERO for the wealth destruction domino set.
We aren’t afraid of the mexicans or blacks in the south bay.
God protect us from the Armenians though
Most of those guys in the hood aren’t that mobile and will not make much a dent in us if they try some kind of assault. Attack is much tougher than defense.
Anyhow, I’m stocked up on ammo and have a few high power rifles with nice scopes (all legal). If I have to defend my area it will be real disturbing for whomever gets within six blocks sees his buddies head get blown off.
I’ve been hunting and shooting since I was 8 and can pick off moving targets at 250yrds. No, I’m not all that worried.
Take your threats elsewhere.
There are many, many dimensions to this. Just to pick one:
Several high profile architects in LA serve clients that prefer security over style. Basic techniques like keeping facades minimal and windows small can make a building obviously difficult to damage or access. There are examples of structures designed for security being left alone while wedding cake mansions next door were looted and burned.
” hear a lot about housing bust in Northern California cities such as Sacramental, Modesto, etc., and some S. CA ones like San Diego and Ventura. When do you think it will hit these cities: Alhambra, San Gabriel, West Covina”
Lets take each SG Valley city one by one starting with Alhambra and panning east. Alhambra is mostly lower working class Hispanic/Asian immmigrant. Not much affuence there. It will suffer in the RE downturn. City of San Gabriel has a few middle class enclaves but overall is at the edge. Rosemead/temple city/El Monte are trending toward heavy immigrant intrusions. Baldwin park/Irwindale are becoming real immigrant impacted barrios. Ditto for Azuza. West covina still mostly middle class with well-kept up areas, though its twin sister Covina declining into an ilegal immigrant impact zone.
The upper tier of So-called San Gabriel foothill communities from west to east: Sierra Madre- tiny Upscale community but a bit frayed: Arcadia-still relatively kept up middle-to-affluent in most areas.
Monrovia-mixed picture: Duarte-mixed bag, maybe going sour: Azusa-depressing and going down: Glendora- fraying a bit: San Dima-okay, solidly middle class, still kept up pretty well for most part: La Verne-definitely sliding down.
There are definitely heavy immigrant intrusions and pockets throughout the SG Valley, with the largest concentration in Baldwin park.
BTW: Alahmbra has to have the worse air quality in all LA county, due to local LA micro climate peculiarities. The air is this yellowish-brown nasty haze which adds to the depressing urban chaotic mess which is Alhambra.
What really make alhambra such a nasty mess is that it is the cmmmunity you have to go thru to get to Pasadena, thanks to the 710 fwy extension to pasadena being stalled forever.
“Do you really want to be in a mil+ home anywhere in L.A. County when that happens. During the last riots, they got pretty close to Hancock Park and Mid-Wilshire, next time they will keep going…”
Pico Blvd/venice blvd east of La cienega is the street which separates the Hood from Mid-wilshire/fairfax district(zips 90019, 90035,90034). From La cienega west to the 405 fwy the 10 fwy separates Palms district(an increasingly ghettoized apt slum area)from the affluent cheviot hills/rancho park/century city areas of West LA(zip 90064). There is a small ghetto pocket just off La Cienega and south of 18th streets right next to affluence beverlywood district(zip 90034).
To the east the megamillion dollar estate castles of Hancock park, windsor square, and Country club park district are even closer to the hooded slumzones south of Pico blvd(less than a mile).
Westsiders,take note. Your neighborhoods are not safe in case of another urban riot. The LAPD is understaffed and the only sure protection is a gated electric razer wire fence, doberman’s, and a 12 gauge shotgun.
How would MECHA feel if the government opened the immigration floodgates and let 500 million Asians into California? That would pretty much squash the wet dreams of those MECHA brownshirts.
Rolling my eyes. There will be no riots due to the housing downturn.
That would take something really serious, like a loss by the Lakers at the playoffs or world series or whatever you call that, like, important game.
” hear a lot about housing bust in Northern California cities such as Sacramental, Modesto, etc., and some S. CA ones like San Diego and Ventura. When do you think it will hit these cities: Alhambra, San Gabriel, West Covina”
To answer the original inquiry about how badly the SAn gabriel communities will be hit by the inevitable SCal RE bubble collapse,and when it will happen, I think the entire SG valley will decline step by lock step with the San Fernando valley. Both are almost exactly alike in population and geographic/topographic/economic patterns. Large pockets of Emerging, growing fast-expanding low-income immigrant communities checkered by dwindling smaller middle class pockets inceasingly isolated and confined to a narrow foothill fringe of mainly white affluent aging homeowners clinging onto their overappraised 1 mil+ homes, whether it’s Encino,Sherman oaks, or woodland hills in the SF valley, or Sierra Madre, Upper Arcadia. or Upper Duarte in the SGvalley .
The Low-working class income valley floors in such communities as Baldwin park. Alhambra,Covina,ElMonte,ect will see stagnation and slow but inevitable declines from average $500,000 to under $300,000 over next 3-5 yrs. The upper affuent communities started at prices of $700-1 million+ and will fall farther %-wise(40% or more) down to average $400,000-$600,000 over next 4-7 yrs.
Both valleys will go down slowly over time taken as a whole, though there will be REO’s/foreclosure deals in 2007-2011 for under $200,000 in some third-world bombed-out hovel sections in both valleys, of which there are plenty.
This is NOT the case in Coastal LA/South Bay. Not yet, anyway. Sellers have dug in their heels, and GF’s keep blinking!!
jjinla,
You may be right, but that’s for the listed inventory. Look at what’s selling, and you’ll see it’s those taking big price reductions. Those who don’t are just “priced to sit”. See an example from my listing today where it’s “value range” priced with the high-end priced over 200K over a comparable listing a couple doors down. Who do you think is going to sell first, and who will still be sitting on the market? We have something like 18 months of inventory over $1MM in OC.
House next door is on the market for 520. Purchased in 05 for 620. This is in Ventura.
In the city itself? Got some nice weather there
Yet the high prices still hold up the median. $ per square foot might be a better indicator for what is currently selling.
1995 saw the high point of notices of default and 1996 saw the high point of trustee sales (foreclosures for those of you in Rio Linda).So, we are over due for a ‘correction’. Hold onto your hat.
”Here we are on the back side of the boom in a period of stagnation that many people predicted,’ said DataQuick analyst Andrew LePage. ‘It’s anybody’s guess when we start to pull out.’”
Yes, many people on this blog predicted this at a time when we were being ridiculed for it. It sure as well wasn’t anyone in the MSM predicting this a year ago when I really started getting into this subject.
“‘Here we are on the back side………‘It’s anybody’s guess when we start to pull out………
Ouch!….. Cue Auger-Inn
Thanks for soda on keyboard moment.
Like someone said on an earlier post, “wider, deeper, and continuous…”
JWM in SD:
you are absolutely right. No one in the REIC including dataquick publicly predicted this.
The dumba$$ reporter didn’t even call him on it.
that many people
predicted,are predicting retrospectively…Yep, everyone’s gonna say “I knew it” when this is all over with.
If I only had a dollar for all of the people that said any of the following:
A.) There is no housing bubble
B.) There’s only localized areas of froth.
C.) Nationwide house prices have never dropped since the GD.
D.) RE only goes up. (the classic)
And new to the list,
E.) Everybody saw this RE slowdown coming.
An article that Jim Jubak wrote a while back still sticks in my mind. He said that there couldn’t be a housing bubble/bust if everybody was watching for it. Not! This is similar to LePage’s sentiment about many people predicting a housing bust. It seems like these guys want to either talk down the bust so it’s not so dangerous in their minds or maybe they really believe that everybody saw it coming and was talking about it(?!) We know that nobody was talking about this in 2005 (I know, I was here.) And few even in the early part of 2006, and these were mostly dismissed as nut cases.
Now, all of a sudden we’re called the “housing bear-o-sphere” as if everybody in the US is so bearish on RE that the contrarian position is to be bullish!?! What a load of crap. Besides, all of these pundits don’t undertstand the contrarian thought process. All contrarian philosophy says is that the herd is usually wrong at key inflection points, not that the herd is always wrong. In fact, the biggest moves (up or down) always have the herd as the main market mover. Think mass euphoria or mass panic. The key inflection point was late 2005 and I can honestly say that the herd was dead wrong about RE at that time. We haven’t approached mass panic by a long shot, although we are headed there soon enough.
Sadly the localized area was: Planet Earth
“He said that there couldn’t be a housing bubble/bust if everybody was watching for it.”
This is really funny. Because most people would not notice a bubble if it resulted in mass insanity, like “everyone” saying “real estate is the best investment.” One of the ways I know the bubble has popped is that I have not seen a single news story that claims that “real estate is best” in over a year.
DT: We haven’t approached mass panic by a long shot, although we are headed there soon enough.
I think we’ve had a buying panic over the past four or five years. Thanks to easy credit, this panic hasn’t felt all that bad. It’s the period of calm after the buying panic, as people realize their homes aren’t worth anywhere close to what they paid for them, that will really start to hurt.
‘’Here we are on the back side of the boom in a period of stagnation that many people predicted,’ said DataQuick analyst Andrew LePage. ‘It’s anybody’s guess when we start to pull out.’”
This thing is just getting started. This so-called “stagnation” is just a warm-up to the unholy levels of “depreciation” which are right around the corner. The freight train named correction, screaming down the “back side” of the pass at incalculable speeds, is shaking violently as it threatens to leave the greased tracks it was never meant to travel. Best to leave the station prior to it’s very rude arrival.
What’s with this ’stagnation’ term? Prices aren’t stagnent; they’re going down.
They’ve been easing, slipping, inching down, appreciating negatively, sloping, retreating, dipping, dapping, catching their breath, hesitating, reversing prior to rereversing, and now…they are stagnating.
Taking the runaway train analogy and running with it…
The brakes are being applied and slowly turning the wheels and rails into liquid metal and then plasma and acting as a lubricant increasing the speed at which the train runs away.
Woohoo! California houses for everyone!
how about your county ?
fairfax va off 10% last year and maybe 5% this year
imo
how about yours?
I would have to say the line gets quiet as they hear that their overpriced crapbox can only rent for $1250. Assuming that our astute flipper has dropped his asking price to his acquisition price (around 400k), then assuming a 30 year mortgage (yeah, yeah I know) at 5.5 % (assuming financing obtained when rates were this low), we get $2,271.16. Add in taxes, insurance, and HOA fees and we’re dealing with a minimum of $2,600.00. Yes that’s a $1,350.00 loss every month.
Of course assuming an option ARM was used we have less of a loss initially, then a much bigger loss than $1350 after the ARM resets.
Yes, real estate is a fantastic investment.
There were tons of flipper properties in West Sac that hit the rental market at “wish” prices. I looked at a few and had the owners call me back with offers of reductions right after xmas. Now they are dissappearing off CL and the SacBee. My question is are they trying to sell again or have they given up and foreclosing.
SCDave, if you are out there - do you have a link to those 40 foreclosures from Coldwell Banker that got but up this morning?
It’s just my opinion, but I think that a lot of these flipper specials are disappearing from craigslist/mls and showing up as foreclosures. These bagholders cannot afford to drop the price any lower, so they just advertise on craigslist until the constable shows up at the door.
That was my hunch too but then I wonder if I’m just hoping to see the bad news. I did see some addresses on CL that appear to match some on forslosure.com but I don’t subscribe so I can’t be sure the FB’s are pulling a naughty.
“I’m only happy when it rains”
I bet they are holding on by the skin of their teeth for the spring sting, I mean fling.
“…..and we’re dealing with a minimum of $2,600.00. Yes that’s a $1,350.00 loss every month…..”
Wait now, ….. $460/mo. is going to the “P” in PITI, and the tax advantage (lets say 30% tax bracket…..and by using your 18 year old child as the “Owner-Occupant’s” primary residence) is about $660/mo……leaves $1350-$1120 = $230/mo. negative.
Now, how long can I survive this financial storm? Unfortunately, just about forever.
This is the new selling formula….. and when that rebound occurs in “?” years, the negative is so miniscule this deal looks like a smart buy.
(well, unless the place gets trashed by the tenants, or it needs a new roof, or painting, or carpet, or landscape maintenance, or ……)
The reason not to buy is not this monthly “carry cost” negative, but the fact that the property should be dropping 10% a year over the next 3 years….. and it could get a lot worse, so what’s the hurry? Buy that place in 2010 when it should likely be 290k instead of 400k.
Got Cheez Puffs?
LeFantome
(sorry, I just really like these better….)
I called yesterday to inquire about a property that was on the market for NINE months in Ventura, a great property but overpriced and the seller refused to drop the price at all, on several occasions when I contacted the agent. I was wondering what happened, because it suddenly got taken off the market. When I called to ask if it finally sold, an agent in the office disclosed to me, basically, the seller is an FB who overpaid in 2005, and CANNOT reduce the price, or will lose $$ after paying commissions and other sales expenses, so he can’t sell the thing, and is now stuck with the property despite negative cash flow. I guess this is good news, that we’re starting to see properties taken off the market due to reaching the limits of buyers’ ability or willingness to pay, but apparently, at least in this case, the seller is in fact hanging on…Hopefully the latter will change for the worse, I mean better.
“I guess this is good news, that we’re starting to see properties taken off the market due to reaching the limits of buyers’ ability or willingness to pay….”
lainvestorgirl –
I think we are seeing properties taken off the market, due to the following: Seller’s unwillingness to price their homes at the current “demand value” set by the market. …. okay, ultimately the same thing.
But this is only good news for future buyers, and signals danger to purchasing now. Since the national price declines show little decrease since the peak (single digit decreases) you’re implication that buyers “overpaid” in 2005, and the fact that they are now an FB, would suggest that, in your opinion, the overpayment was substantial. I agree a case could be made for hanging on to a property currently owned, but I’m not so sure this would be in there best interest ….. I mean worst.
Hoping a surfer drowns because his awesome board will float ashore into my hands, is no way to look at investing!
That’s how money is made.
“After the sudden news, they could be seen crying, hugging and hauling boxes. Russell, an administrative assistant, said the company should have given them some warning. ‘I can’t believe this is the way that they would conduct their business,’ Russell said. ‘But I’ve heard this is the way corporations behave.’ Officials with McMillin Realty said they let the agents and employees go because of the cooling real estate market.”
How much more warning did you need? The real estate market has been crashing for 18 months.
Kind of sounds like what happened to the people at Enron.
They survived and these idiots will too.
Yeah, right. And how many GF’s did you take advantage of (the way corporations behave) over the 28 years you were working there…with little regard for thier financial future.
I was at Enron and partied the day after BK. It was a relief to just know it was over.
You have to be blind, deaf and dumb to miss the warning signs.
Was that McMillin in Visalia/Fresno/Bakersfield? Good to hear.
Reminds me of these lines from the movie Fletch:
Dr. Jellyfingers: “You know, it’s a shame about Ed.”
Fletch: “It was really a shame.. to go so suddenly like that.”
Dr. J: “He was dying for years.”
Fletch: “But the end was very sudden.”
Dr. J: “He was in intensive care for eight weeks.”
Fletch: “But the very end, when he actually died, that was extremely sudden.”
What wimps. The two small tech companies I rode down in the last 5 years still owe me a total of 7 weeks of pay. (These people probably even got severence pay?) In California, I hear they can even buy COBRA group health insurance benefits if the company ceases to exist. (Not in TX.)
“It’s got to get better, it can’t get any worse.”
Can it??
“Davenport points out that there are plenty of interlocking programs that can get people into homes with so-called ’silent second’ mortgages as down payments. ‘There are plenty of ways for people to really leverage their money to make it work for them,’ she said.”
Ah yes, plenty of ways to catch a falling knife.
We have this joker on the Sacramento Landing blog who hates the term “catching a falling knife”. I smile every time I see it now.
It’s not my favorite either. ; )
I can’t get enough of that or “helicopter drop”.
so what are this board’s prophesies *now* for the future? Anybody
care to venture, after some quiet thought, what they believe will
really fall out during the next three years — say, for the Bay Area
and Phoenix? Here’s my bet (by six month blocks):
1st half, 2007 — 10% drop
2nd half, 2007 — 5% drop
1st half, 2008 — 5% drop
2nd half, 2008 — neutral
1st half, 2009 — neutral
2nd half, 2009 — back to ‘normal’ (i.e., 3-5% yearly gains)
Re: Bay Area
Dreaming you are!
Barring outlier type events, 2012 is the earliest of any gains, and only in specific areas by then.
“gains” = I’m thinking more than 1% above inflation for more than a one year period
my guess… and only a guess :
the ppl. selling now at a very aggresive price, i.e 2004, early 2005 pricing, will look like heroes 1 yr from now!
So my prediction is that in the phoenix market, we’ll see about 20% reduction this year ,2007. then in 2008 another 10%, lots of good deals in 2009, but scattered, essentially a stagnated market, and nobody would want to touch real estate with a ten foot pole, slight recovery in 2010 i.e 0% decline. Then maybe if you bought a good deal in 2008 and improved it you might see a return on the investment.
i think its gonna be like the 2000 stock market crash, everybody would be in a daze for the next 6 years. just my 2 cents.
Instead of looking at price changes (which will be different for every market), I rather look for the return of traditional lending standards - how fast will they come back? After that, give them time to work the market, one or two years, and then houses should be adequately priced.
Instead of looking at price changes (which will be different for every market), I rather look for the return of traditional lending standards - how fast will they come back? After that, give them time to work the market, one or two years, and then houses should be adequately priced.
100% (80/20) loans are still available. The problem is that without home price increases, they don’t work all that well for the lenders, who lose money in a foreclosure. Lenders are starting to get burned - HSBC (a huge UK bank - roughly 2/3 of Citibank’s assets) just wrote off 1/6 ($2B) of its subprime mortgage portfolio. And property prices haven’t even really budged. As property price declines escalate, the 100% mortgage will become extinct. Which will trigger yet another round of bloody (for real estate lenders and borrowers) price declines.
> 100% (80/20) loans are still available.
= Lending standards are still too loose.
> the 100% mortgage will become extinct.
= necessary step in reestablishing traditional lending standards
> Which will trigger yet another round of (…) price declines
Bring it on.
10% 1st H 2007
5% 2nd H 2007
5% 1st H 2008
5% 2nd H 2008
5% 1st H 2009
5% 2nd H 2009
3% 1st H 2010
1% 2nd H 2010
0% 1st H2011
1% 2nd H 2011
1% 1st H2012
…………………… !% for 5 years
Folsom SFH prices down 20% from Peak of 525K in September 2005. DataQuick Median shows Folsom SFH Median @ 420K in January. WOOHOOOOOOOOOOOOOOooooooooooo
30% more and we are probably aligned with reality
maybe worse in Phoenix
Dunno about the Bay Area - my prediction for LA and OC is a 40% nominal drop from today’s prices, bottom 2012, couple flat years after that, then a return to something like normal appreciation.
In short, my prediction assumes that what occurred in the 1990s will occur again more or less on the same scale and time line.
Prices are far more disconnected from fundamentals this time, but last time there were riots and the 1994 earthquake. I’m assuming these phenomena will have roughly the same effect, so this time will be no better or worse than last time.
“Prieto said nine of her current 28 listings are vacant homes. Some are former rentals, but most are houses owned by people who bought elsewhere and since have been unable to sell.”
And yet Joe and Jane Sixpack don’t yet realize the huge overhang of surplus bedrooms out there. 1/3rd of listings where the owner already has a new property?!?
I have to give credit to CR’s blog on showing the trend in construction employment.
I put up on my blog my simple prediction of where home inventory is going in 2007.
http://recomments.blogspot.com/
Heck, we’ll still have surplus inventory to spare in 2008.
Got popcorn?
Neil
“And yet Joe and Jane Sixpack”…please stop refering to them as ‘Joe and Jane.”
Please address them as ‘Mr and Mrs J Sixpack’.
Wouldn’t that be Mr. and Ms. J. Sixpack?
I believe that it is, “The Real Estate Genius previously known as….”
ROTFL
That one needs a coffee warning…
Got popcorn?
Neil
It could be Mr and Mr, or Ms and Ms……..
Thank you!
Some of us are gay even though I’m single (Ex wanted to buy a house. Sigh!)
Neil-
Check out the San Diego County numbers at sddt.com. Notices of default near the record high, likely to smash through with the Feb. numbers. Foreclosures rising rapidly. Second derivative of both metrics increasing rapidly.
Hope you have a couple McMansion’s full of popcorn …
San Diego, OC, Riverside, and Ventura counties are all pretty well toast at this point.
LA will join soon… and when the big daddy goes… hang on.
I still cannot believe that the mortgage brokers haven’t opening the layoff floodgate. Do we have a pool going yet on when that starts? I know a few people desperately trying to get out of them.
Got popcorn?
Because that’s the next bubble.
Neil
Anyone got any info/predictions as to when L.A. proper will “join”? Word on the street kinda stuff? mrincomestream? anyone? Outwardly no one seems to be too worried here. I need more than popcorn to sustain my patience, I need stories of fear and lothing!
Help! hehe
Oh, don’t worry. You’ll get your fear, in LA. I am certain that in the 3rd/4th year of the downturn/CRASH when we’re in despair mode, where the inner city slums take a fierce beating and all the $$$$ dries up, we’ll see the resurgence of widespread inner city strife. Any little disturbance will have the potential to turn into another full blown riot. Repeat of early ’90s. Be prepared.
There’s fear on the street I’m starting to notice subtle things. Unfortunately nothing I can share in a public forum at this time.
Damn! Mr. Incomestream’s sharing is still the single best post ever here.
I still remember the day he found housing bubble religon. That was a great post.
I am waiting for your next great post.
Don’t know why, just feel that the OC will drop 20% in the next 5 years in real-dollar terms (after adjustment for inflation.) Still plan to downsize somewhere in the interim, not to minimize the loss, but to maximize the income.
From Santa Monica - A buddy of mine was talking to a broker the other day - she only handles prime loans and said that her business has dropped to a mere trickle. IOW, there’s no one left who can afford 20% and a 30 year.
Yes there are. They just know better than to compete with the sub prime slobs drunk with purchasing power the idiotic lenders have supplied them. There is a lot of money sitting on the sidelines. I just moved 50% of my remaining stocks into 90 day T’s, after moving 50% about 6 months ago. So 75% in T’s, 25% in stocks. Probably move the last 25% in a few months. It is all getting close to unwinding now. I just want to know the opportunity money will be there when we get to the bottom in 2008/2009.
Lower prices and fewer sales have been common during recent months, said Christopher Thornberg, an economist with Beacon Economics.
“We are scraping along the bottom of the market,” he said. “Prices are going to languish in the nether zone for some time.”
“Thornberg predicted that prices would continue to decrease slowly the rest of the year before possibly beginning a recovery in 2008.”
That’s some train wreck Thornberg is predicting.
Perhaps a “deadcat” will be evident in 2008.
Thornberg’s soft peddling again - he is just trying not to scare the crap out of people.
He’s only slightly more bearish than David Lereah.
Bears don’t put any butter on Thornberg’s bread. The REIC doesn’t want bad news all in 1 dose, at least not publicly. He still needs to eat.
He may be trying to maintain working relationships with REIC constituents; it is also possible that he does not fully grasp the depth of the market’s problems yet.
I’m sure he is. I just like to point out how full of crap he is, since many people seem to think he did a 180 as soon as he left UCLA.
“We are scraping along the bottom of the market,” he said. “Prices are going to languish in the nether zone for some time.”
What the HELL is with these people?
We’ve just been through the largest run-up of RE prices in world history and after just a few short months of bad news everything should be okay from here on out?? Remarkable….
Oops, took it out of context. Didn’t see his comments about 2010/2011.
Still, he thinks prices will just stagnate?
Insane you are, mmm hmm (in Yoda voice)
Yes, he does say activity will languish till 2010, but prices very well could rebound in 2008 after decreasing slowly for another year. So 5% down after the 120% run-up, and then back up again. Some bear he is.
French Quarter homes
Brad Pitt and Angelina Jolie recently bought real estate in New Orleans. Should you?
http://tinyurl.com/2sjy3j
Definitely. How much was it Mr. and Ms. Tennis-star made on their Bevely Hill mansion a couple of months ago? -60%?
Ah! The couple just wanted to show they support the little people. Their publicity agents ordered them to do that. Politically correct. Where’s my barf bag?
oh yeah, great investment. Buying a home in disgusting corrupt city that is under sea level in primo hurricane country.
We used to say regarding listings in the early 90’s
You want to be the first born
Second wife
Third realtor
“Christopher Thornberg. ‘Prices are going to languish in the nether zone for some time. I don’t see any substantial recovery on the activity side until 2010 or 2011,” he said.”
Prices in “The neither zone”… That is the most poetic description of prices heading for the dumper I think I’ve seen so far! I think his timing sounds right as well.
Chris himself has finally publicly crossed over into “the neither zone”
I knew he had it in him…..
I know what the neither zone is, neither the buyer nor the seller can agree on the price.
We are the knights that say “Ne, Ne, Ne, Neither!”
I think netherzone is next to the taint.
ha ha… taint my b….s and it a taint my az…o.
Given that “nether” means “low,” I must respectfully disagree with Mr. Thornberg. Prices may languish for a while in LA before turning down in earnest, but they are languishing in the nosebleed zone, not the nether zone.
“LePage agreed, although he emphasized that DataQuick does not make market predictions”
No? They make lame counter-intuative observations and misrepresent the obvious data and trends but never make predictions (UNLESS THEY’RE OPTIMISTIC ONES)… at least about obvious declines.
Can we make a list? Here’s one:
“You’ve got this enormous amount of inventory … and it will go down — it will go down by spring, significantly.”
~John Karevoll, analyst with La Jolla-based DataQuick Information Systems, Sacramento Bee, December 2006
They have bullish predictions every month. Their summary at the end of their release ignores all trends even when it’s obvious to a second grader that a chart has a clear trend. Leading indicator is NOD and they are ALARMING yet their keen observation is “no indcators of market distress”. How do they make this determination? After the market is at the very bottom? Who needs them?
“‘Here we are on the back side of the boom in a period of stagnation that many people predicted,’ said DataQuick analyst Andrew LePage. ‘It’s anybody’s guess when we start to pull out.’”
Why is it anyone’s guess? AS if it were some freegin’ mystery - we will start to pull out when prices are more in line with incomes and more and more people can afford to buy a SFH. The more people you price out of a market, the more difficult it is for those wanting to sell their house…it’s pure logic, no fancy econometrics or statistics, etc.. Let’s say your were a first time buyer 4 years ago, and now you want to move into a bigger house, you need to sell your smaller starter home (presumably smaller) to a new first time buyer, but if huge percentages of first-time buyers are priced out, you’re stuck unless you come down in price…it’s a chain reaction. The bottom will feed the top…I don’t care how low the rates are, or how exotic the loan, I still can’t afford a $350,000 + for a decent starter home (…and my husband and I make decent money. Now, I must add that my husband and I like to have savings at the end of the month, and therefore we live below our means…what a novel concept, eh?)
Anyone post this yet?
How Good ARE Zillow’s Home Estimates?
http://www.realestatejournal.com/buysell/tactics/20070215-hagerty.html
BayQT~
Zillow had the decimal point in the wrong place for my house. Only off by a factor of 10.
Mine zillowed (zesstimated) at over $1M. $600 to $650k at best true current value. Also lists it as 2 stories and 6Br. Actual 2 BR., 1 Ba. plus 1Br., 1Ba. granny flat.
Wow, a sane observation:
“‘We are scraping along the bottom of the market,’ said economist Christopher Thornberg. ‘Prices are going to languish in the nether zone for some time. I don’t see any substantial recovery on the activity side until 2010 or 2011,” he said.”
All you sellers and buyers, mark this.
Burn baby, burn!
I work in the construction industry in Sacramento, and the changes here are stunning. Several residential projects have been changed. Had a large home builder last year change a project from condos back to apartments, as their research indicated the condo money was gone. We were only doing residential for low income, and today one of those projects was placed on hold.
My in-laws tried to refi their house, were surprised to find out how much equity they already lost. Now our business here is getting a little slow, not surprised at all.
But from just quick drives, I was surprised to see the number of homes for rent. Even in downtown, where there were 4 houses for rent in 1 street.
All due respect to your in-laws but the equity that they thought they had was all smoke and mirrors anyway. Unless they REALLY needed to refi, (and they were going with the 30 yr fixed anyway) it’s a good thing they were too late to the game.
Not surprised about Sacto, though. The prices up there got WAY, WAY out of line.
BayQT~
Notices of Default are 1 month away from shattering the previous record in San Diego County(note the 2nd derivative increase):
link
NICE!! Not much further to go. Already crushed the early ’90s crash, but it’s different this time - GOING VERTICAL. Looking at the chart it’s a little tough to say that, “indicators of market distress are still in the normal range” as DQ the Ice Cream serving operation likes to say.
I thought they were DataQuick, the real estate “facts” and chocolate powder drink mix company?
Well, at least the words “market distress” are finally being uttered. Didn’t even hear that a year ago. IMO, there are great clues as to what they really think (”oh, sh!t”) in direct contradiction to what they’re saying (”nothing to see here, move along…”)
Not true. They always refer to market distress and they were saying “indicators of market distress are Absent”… then “largely absent”… now normal.
I suppose according to DQ in a normal market the defaults are supposed to be at an alltime high? The new normal, since it’s different this time and aggregated RE statistics are meaningless as they only apply in small localized markets.
Funny, when sample size is small the statistics dolts always contend that the sample size is too small and variations are too great month to month to draw any conclusions. What is it? Is it that their work is useless? I know their analysis is.
“NOD…Trails the performance of the San Diego County economy because it indicates borrowers cannot pay bills in a timely manner.”
Note to The Press…this time it IS different. It’s not the economy this time…it’s easy credit and affordability.
The economy will follow this time, not lead.
I was ready to paste that line when I saw your comment. This is highly indicative of the current mis-reads on the bubble - when so many of the older models simply cease predicting. The REIC has bet the farm on unemployment rates, interest rates and job creation, while none of these are at play. In the face of such a contradiction, you would think someone on the soapbox would simply announce ‘Folks, we may have a real problem here, one we just don’t understand’. But old, old, old habits of pump and dump die slow deaths, and until this thing gets real freakin serious no one is talking.
I think it’s serious now to the NAR as sales have declined so that their constituents will be deciding whether to eat or pay dues.
And more of the CAR members better start paying for their contracted health insurance or the “sick individuals” of CAR will lose their coverage.
“1 month away from shattering the previous record”
OK, click on the link and try this…set the start year to “1982″, and get ready to poop yer pants…
Yeah, it’s all a matter of perspective. The increase seems somewhat reasonable on the initial timescale (with 2004 as the start.) Start at 1982, though, and you get a little bit different impression.
Wow! And what’s neat is that the downturn has barely started! Imagine what that graph will look like a few years from now.
Anyone know of a similar site for LA, OC, or the Bay Area?
Holy Sh!t!
Talk about a freaking hockey stick!
Select the whole range and check out that trend.
I can hear the fan slicing into the fecal matter.
I just looked at it again and started hyper-ventilating.
That is incredible.
The REIC clowns that insist nothing to see here need to be outed, then hunted down and assaulted.
—————
“Sean Fitzpatrick, co-owner of CornerStone Real Estate in San Luis Obispo, said the January declines are not surprising. ‘It’s a combination of values coming down, more of the lower-end homes being put on the market and the general decline in the market overall,’ said Fitzpatrick, noting that sellers are being more realistic about their prices.”
————————
…huh…?!?
I took some L.A. Times reports and mapped them to the current data, i.e. matched the dates for the uptick in inventory from the bottom, and downtick in sales from the top, and related them to the same events in this cycle for the Bay Area… This crude and wild extrapolation indicated to me that the end of 2010 would roughly correspond to the end of the freefall (unless its different this time). Of course, in SoCal there were another 2 years of slow losses, but the Bay Area had the dotcom thing picked up about then. I think 2011 is the earliest that this thing will pick up again.
I predict a frantic search for straw buyers in the coming months, until some very public convictions discourage the process or the MBS power players force a total tightening of the credit market.
wow …… yes. totally agree.
“There are plenty of ways for people to really leverage their money to make it work for them”
Mortgage companies are NOT on your side! Neither are real estate agents, appraisers and lenders!
Yes, add to the list stockbrokers, car dealers, and time share companies. A few with deals with any of these guys will leave a person poorer.
Let’s just generalize and say that NO commissioned salesperson is on your side. No matter how “nice” he or she seems.
It’s not even their money! It’s all on paper, the buyer never had the money and never will. What a shell game….
For those who live in the Santa Clarita Valley… Take a look at March’s Inside SCV. There are so many articles touting the wonders of real estate it makes me want to barf!! You know the prices are only stabilizing and will start going up soon! I put this magazine in my bathroom! A fitting place!!
Patti Davenport belongs in jail.”shadow seconds” my ass,she’s talking fraud…but probably too ignorant to know it.’08 is an election year for a lot of politicians…and guess what the fattest targets are going to be for any DA up for reelection.i can’t tell you how many real estate brokers,loan officers and account reps casually discuss frauds they routinely commit.it is not as though they are “W” for god’s sake,he can get on tv and casually boast of violating his oath of office and committing thousands of felonies(remember FISA?) and no one said BOO! but these are small fry and they are going to get fried.
” ‘For most of the last 10 years, it has been a sellers’ market, but now with the market down and with lots of properties in foreclosure, it’s possible to find some bargains,’ Davenport said.”
Yup. And the MORE we buyers wait the more “possible” it’ll become to find REAL bargains.
Man, I hate the “this is as good as it’s gonna get, so buy now!” crap extolled by the Realtors & Associates Inc asswipes.Gimme a freakin’ break. When I go back now and read all the NAR and CAR market predictions from ‘03 - ‘06 I get totally riled by all the lies, twisted logic and outright misrepresentations they spewed. What the fook happened to “objective reporting”? in this country?
I always hated the saying, “if their lips are moving; they’re lying” because I thought that it applied only to politicians. Yet it fits realtwhores to a T. Apparently, there is NO-ONE that they would not screw for a buck.
Can we get some freakin’ Congressional Hearings on these people & trade, PLEASE ?
‘For most of the last 10 years, it has been a sellers’ market, but now with the market down and with lots of properties in foreclosure, it’s possible to find some bargains,’ Davenport said.”
Yup. And the MORE we buyers wait the more “possible” it’ll become to find REAL bargains.
Man, I hate the “this is as good as it’s gonna get, so buy now!” crap extolled by the Realtors & Associates Inc asswipes.Gimme a freakin’ break. When I go back now and read all the NAR and CAR market predictions from ‘03 - ‘06 I get totally riled by all the lies, twisted logic and outright misrepresentations they spewed. What the fook happened to “objective reporting”? in this country?
I always hated the saying, “if their lips are moving; they’re lying” because I thought that it applied only to politicians. Yet it fits realtwhores to a T. Apparently, there is NO-ONE that they would not screw for a buck.
Can we get some freakin’ Congressional Hearings on these people & trade, PLEASE ?
Every anecdote on the lead-in to this thread is incredible! Where do I begin?
How about the gal who says after a ten year boom there are bargains to be found? Homey don’t think so. Bargains? Yes, compared to prices in ‘06. Want a bargain compared to ‘05? Buy in ‘08. Want a bargain compared to ‘02? Buy in 2009. Want a bargain compared to ‘2000? Buy in 2010…
“A Period of Stagnation That Many Predicted”
Two lies in one title…
1) Period of Stagnation….how about CRASH
2) That Many Predicted….NOBODY in the RE industry predicted anything except wine and cheese parties…and in fact some of them (Watts) still are
Is someone keeping track of the unbelievable quotes because someday some standup comedian is gonna get rich with all this material….
Well, ……Billy Crystal and Robin Williams did a pretty good job on the last housing disaster, why not Ben Jones? Hurricane season is just around the corner, so we’re in need of a new celebrity…….now if we just knew who had access to all the unbelievable quotes and comedic material….hummm?