“Buyers On The Sidelines Waiting For Further Corrections”
The LA Times reports from California. “Monica Wilson loves her vacation home, an ocean-view condo within walking distance of the beach in Carlsbad, Calif. She paid $620,000 for the place 13 months ago. But since then, the California vacation-home market has gone soft. ‘If I sold my second home right now, it wouldn’t do very well,’ the Pasadena-based real estate agent said.”
“Sales of second homes in California’s top vacation markets dropped 37% in 2006 from the year before, another consequence of the state’s overall housing slowdown, according to data released by DataQuick.”
“Second-home sales in California peaked in 2004, when 24,916 transactions were made. That also happened to be the peak year for all home sales in the state. Vacation-market sales started to slow in 2005.”
“Even popular, out-of-state markets are getting less interest from Californians. In 2006, Phoenix home sales to Californians fell 50%, and Las Vegas sales dropped 32%, DataQuick said.”
The Press Enterprise. “The state’s three major second-home markets all saw a similar drop-off: In the Palm Springs area, sales fell 38.4 percent; in the Lake Arrowhead and Big Bear region, they declined 37.3 percent; and in the Sierra mountains and foothill communities, sales plunged 34.7 percent, DataQuick said.”
“The slowdown means there are more homes on the market for buyers, said (realtor) Debby Williams in Palm Springs. ‘They are overwhelmed by the sheer volume of inventory on the market today, and it’s causing them to take longer to make decisions on what to buy,’ said Williams.”
“‘That has changed since 2004 and 2005, when it was almost like a knee-jerk reaction. You saw it, you bought it, because you knew it wouldn’t last long,’ she added.”
From KSBY 6. “The median home price on Santa Barbara County’s South Coast is more than $1.1 million. But the ‘for sale’ signs are staying up a bit longer than they used to. ‘We are seeing fewer sales and higher sales, but just a gradual price adjustment,’ says realtor Bruce Fisher.”
“Some sellers are dropping their asking price, but not dramatically. ‘It’s in recession,’ says economist Mark Schniepp. ‘There is not a lot of sales going on and buyers are on the sidelines waiting for further corrections. And sellers do not want to drop their prices. So, there’s a stalemate occurring.’”
The Sacramento Bee. “The dive in new-home construction around Lincoln has created a monster for a small school district, as developers’ fees slow to a trickle and the interest mounts daily on $189 million that the district borrowed to build new schools.”
“The result of the downturn is a ’staggering’ amount of debt for Western Placer Unified School District, and the day of reckoning has arrived, according to a report presented to the school board Tuesday night.”
“So far this year, only $370,000 in developers’ fees have materialized of the $2 million anticipated. ‘Something that popped out and hit me right between the eyes is the huge debt,’ said private consultant Curt Pollock, the report’s author.”
“At the heart of the crisis, Pollock said, is the district’s dependence on certificates of participation. With their adjustable interest rates, these 30-year certificates typically are used for short-term cash flow rather than long-term solutions.”
“They use the schools themselves as collateral. ‘I have to say that we issued more COP debt than we should have. We should have looked for other revenues or slowed down the growth. Of course, that’s easy to say in hindsight,’ said Carrie Carlson, the school district’s assistant superintendent for business services.”
“‘The projections were that we were going to continue with this nice growth, and our projections were wrong,’ said Former Superintendent Roger Yohe. ‘Had the housing market not dropped off so fast and so dramatically, I don’t think we’d be in the situation we’re in,’ Yohe said.”
The Modesto Bee. “Last year was tough for new home builders in the Northern San Joaquin Valley. New single-family home sales in 2006 declined 44.9 percent in Stanislaus County, 50.5 percent in Merced County and 27.4 percent in San Joaquin County compared with 2005.”
“‘For us, 2006 was the slowest year since at least 1995,’ said Mark Wilbur, co-owner of McRoy-Wilbur Communities Inc. in Modesto, which has been building homes since 1983. ‘It wasn’t a fun year.’”
“Sales swings are part of the cyclical nature of the new home market, said Bill Zoslocki, president of the Building Industry Association of Central California. After nearly six years of robust sales, the 2006 downturn was a predictable market correction, Zoslocki said.”
“Buyers are reluctant to purchase homes if they think prices are going to fall, Zoslocki said. ‘For those who are courageous, now is the time to buy because sellers are making deals,’ Zoslocki. said.”
“New home building permits dropped 49.2 percent in 2006 for Stanislaus compared with 2005. Permits dropped 41.2 percent in Merced, 42.5 percent in San Joaquin and 31.1 percent statewide. Because fewer homes are being built and fewer are proposed for development in the near future, construction jobs are declining.”
The Examiner. “Geoffrey Craighead has been a Realtor for 26 years, and was recently elected 2007 president of the San Mateo County Association of Realtors trade group.”
“One of the first challenges Craighead will face is the sheer number of real estate licensees in the Bay Area. In 2006, California Association of Realtors VP and chief economist Leslie Appleton-Young noted that all of the real estate work done in the previous year could have been done by 70,000 Realtors. There are 514,000 people who hold real estate licenses in the Bay Area.”
“Craighead expects to face a drop in membership. ‘We’ve got about 3,300 members now,’ he said, ‘but we’re anticipating about a 12 percent drop this year.’ Fifty percent of Samcar members haven’t sold a house in the past year; and the next 25 percent have sold four or fewer houses. To meet expenses, a Realtor needs to sell about five houses a year.”
“There is also the older generation of Realtors, many of whom Craighead expects to retire. According to Craighead, older Realtors have been through enough near-disasters in the market not to want to push it any further. According to Craighead, a lot of the old-timers aren’t willing to go through a recession again.”
In case anyone thinks there is a real land shortage:
‘The California Department of Conservation has released preliminary data that show 18,801 acres of farmland in five valley counties has been converted to nonagricultural uses between 2002 and 2004. Statewide, from 2000 to 2004, more than 192,000 acres of prime farmland has been converted, double the rate of conversion for the period from 1996 to 2000, according to state mapping data.’
‘Even though the construction boom has cooled, there is concern that builders are targeting more farmland for development. ‘The interesting thing about these slowdowns is that even though they are not building, they are still out there purchasing options, they are still getting entitlements, so when the market starts to heat up again, they are ready to go,’ Gamper said.’
I find this so repugnant. These land barons are doing serious damage. It’s time these counties start protecting this fertile land. Once it’s taken out of production, and replaced by cheap stucco sh!tboxes which nobody wants, it’s more than likely lost forever. And, as our population grows, we need MORE farmland, not less. The more dependant we become on importing fruits and vegetables, the further our quality of life deteriorates. This, to me, is the most dangerous part of this overbuilding.
“….And, as our population grows….”
The underlying root cause of just about any problem socially and environmentally.
SNS,
I’m with you there. I ca’t find a problem that can’t be traced back to too many people.
But yet there are so many that believe China will effortlessly take over the world. Those masses of 1.2 billion people are a great benefit to the Commie Overlords running the police state. Where’s the disconnect?
“I can’t find a problem that can’t be traced back to too many people.”
Mass human extinction?
“Mass human extinction?”
How about the plague that ends all plagues, brought on by humans as carriers, brought on by someone poking at some newfound species, due to biological research studies for more housing near the Amazon.
“brought on by humans as carriers, brought on by someone poking at some newfound species”
Umm, no need to travel since we have them in our local hospitals:
http://en.wikipedia.org/wiki/Methicillin-resistant_Staphylococcus_aureus
Wow! My ADD wouldn’t even let me get through one paragraph of that! Bookmarked for another day……
Illegal immigration is not helping this, at all.
Neither is curing and preventing childhood diseases.
You are officially retarded.
Have to disagree SNS. If you want economic and social problems, there’s nothing that will bring them on better than a declining population.
We can all grab some of Neil’s popcorn and watch it unfold in Europe over the coming decades.
Europe’s problem is not a declining population. It is declining productivity. This is due to labor unions, aging, and government subsidies. No nation can survive without a productive workforce.
BS! Declining populations are fine unless you’re entire
economy is a collection of ponzi schemes, like Europe, Japan, the US, etc.
SD Jim,
How so?
“BS! Declining populations are fine unless you’re entire
economy is a collection of ponzi schemes, like Europe, Japan, the US, etc.”
Bingo!
The rest of you - read it as many times as it takes to sink in!
It is not just the debt that inflates - but the debt saps along with it. Without enough inflation in debt saps - there is not enough debt inflation which leads to debt deflation, the implosion of the ponzi pyramid, and debt sap deflation (through famine, war - see WWII, and conveniently timed diseases - see the Black Plague after the Venice banking system blew up).
Your delusions of ‘buying houses at the bottom’ aside, don’t expect the coming debt deflation to be any different.
Maybe told this one before: was on a geophysical research cruise, Fall of 2005. Twelve scientists of four nationalities and every political stripe. On shipboard for a month w/ no relief. Lots of time to talk about how to save the planet. After 17 days, a consensus: what is needed is a massive volcanic eruption that will extinguish 98% of the human population. Leaving the other species with a decent chance, if the surviving humans have any recollection of how things went wrong. May I add, I hope David Liar is not among those spared.
What? No pina coladas and group sex? Charo? Next time sail on Princess “The Love Boat.”
Too right, Banteringbear.
If anything, they aren’t making any more prime agricultural land.
It’s OK folks. There is plenty of farmland, we are not going to run out of food.
Most of the “food” grown in California is not food. We grow wine grapes, greenhouse flowers and other nonessential produce.
Almost all essential foodstuffs are grown in the midwest. Iowa, Kansas and other “flyover” states produce America’s food, and farms in those states have a vast overproduction capacity.
I don’t know where in California you are, but in my neck of the woods we grow rice, tomatoes, corn, almonds, peaches, prunes (plums, actually, but they call them prunes since they’re for drying), tomatoes, sunflowers, and various grains for livestock.
California has 12% of the U.S population. It is the 3rd largest state in the union. It produces:
2% of the nation’s corn
2% of the nation’s wheat
4% of the nation’s beef
6% of the nation’s chicken’s
30% of the nation’s decorative plants
93% of the nation’s wine grapes
California must import food from the midwest. The “food” this state produces, for the most part, has little or no caloric value.
We are the #1 producer of milk, 24% of the nation’s output.
Happy cows come from California.
We have no business growing rice in CA anyway. If the farmers didn’t get outrageously subsidized water, they wouldn’t.
I’m in Ventura, near the Oxnard plain which produces a large amount of strawberries, as well as, broccolli, celery, cilantro, raspberries, lima beans, lemons, avocadoes, tomatoes, chili peppers, and also one of the largest mushroom farms.
the US produces so much produce they can’t even dump it on the open market. We have plenty of food, too much in fact.
Good Point Clearview,
But food carries low margins, not enough to support Mcmansions at $1M a pop.
Avocados have a high fat content, and therefore a high caloric content. You won’t starve if all you ate were avocados, but they’re very expensive.Compared to avocados ,wheat is about 5% the cost per calorie, but we don’t grow wheat, or corn, or oats.
What we grow are the other produce you mentioned: strawberries, broccolli, celery, etc. Those products contain almost no calories. In fact, it takes more calories to digest celery that what the celery contains.
this was in reply to Krills.
You forgot to mention Lima beans. And the other cash crop Marijuana.
So, you can stay drunk while you eat your decorative plants?
You forgot eating oranges (Florida has the juice oranges). And lettuce. And table grapes.
I forgot to mention all the Lemon and Oranges in Ventura and Santa Paula.
Cows produce more green house gases (methane and CO2)than cars in the San Joaquin and Sacto Valleys. Didn’t know that did you?
According to the CA Dept of Food & Ag:
California’s agricultural abundance includes 350 different crops. Among those, the state grows more than half of the nation’s total of fruits, nuts and vegetables. Many of these commodities are solely produced in California.
click on my name for link
California is full of fruits, nuts and vegetables? Everyone knows that!
To Uptown:
And most of those fruits and vegetables have no caloric value.
California must IMPORT 60% of its food. We would starve eating what we grow here. Oranges have almost no calories. Lettuce, strawberries, broccoli, celery, tomatoes, grapes… these products contain little or no calories.
A person would have to eat 10 pounds of raisins a day to get the needed calories to maintain the human metabolism. 1.5 pounds of wheat (which is grown in the midwest, not California) achieves the same thing.
Note: when I say calories I am referring mostly to proteins. California produces very little protein containing food.
Very inaccurate, to say the least.
Even the Apple Juice bought in California is “Made in China”.
Oh god, I didn’t even think of companies holding options long term. So the farmland is safe for only 4-5 years? Oh please o please let this real estate outlast the robber barons…
Honestly, we have plenty of farmland in the US. I am no fan of the fact that suburban has come to the Central Valley, but we are in no danger of starvation.
I was wondering what the name of the website for Mortgage fraud was that I saw here the other day. There is a house a couple streets away that is in Escrow for 667,000 and the most recent sale in the area was 477,000. This is in Ventura.
Are you looking for Paladin’s site? You can e-mail at his site, paladinreports.com
No, it was another site that I saw on here. Thank you, though.
FWIW it was yesterday in bitsbucket I think.
Thanks dude
Was this it?
http://www.flippingfrenzy.com/
I think krills is thinking about the site tom stone mentioned yesterday:
http://mortgagefraudwatchlist.org/
That’s the one ajh. Thank you all for your help on this. My neighbor I found out is losing his house after only less than 2 years of taking on the mortgage. The house is on the market 100,000 less than what he paid.
Wow.
There are 514,000 people who hold real estate licenses in the Bay Area.
The entire population of San Francisco County is only 740k. Who the hell are all these people selling to?
Martians ?
Each other
The total population of the 9 counties that make up the ‘Bay Area’ is ~6,783,760.
http://www.bayareacensus.ca.gov/bayarea.htm
True enough. I was only using SFO County as a comparison. Just for kicks, I thought about the 6.7 million. Let’s say 1.2 mil are children. Of the remaining 5.5 mil, let’s say there are 3.5 million “households.” That’s 1 RE agent for every 7 households.
So 1 in 13 people in the Bay Area is a Realtor ™ ? Yikes!
Before the NAR jumps on me, I realize a real estate agent is not necessarily a REALTOR ( TM ) .
Relax, Ben is ahead of you in the NAR “to be jumped on line”.
But they are currently pre-occupied with the spin line line.
There are 500,000 realtors in the entire state, not in the Bay Area. Surprise surprise, when it comes to real estate, news articles are almost always wrong.
No surprise and I wouldn’t limit it to real estate. I’ve had contact with a number of reporters over the years. They get it wrong at least half the time. What matters to them is “shock” value. Most are lazy and take what you feed them and still get it half wrong. Realtors and reporters should be close friends.
Last i heard we had 1.5M realtors in CA many, along with lendors etc etc are actually in SoCal. So do expect SoCal numbers to be skewed
“California: Real Estate Licensees Surpasses 500,000
The California Department of Real Estate reports the total number of Real Estate licensees reached 504 thousand in the state at the end of June 2006. This is an increase of 55,000 agents / brokers over the last 12 months.”
http://calculatedrisk.blogspot.com/2006/07/california-real-estate-licensees.html
does this count the population in San Quentin?
How many Realtors ™ would that add?
Here’s a great quote from a Realtor forum:
I have noticed over the last year that several new agents starting with me have struggled with depression while getting their business started. The depression can be paralysing; they end up not doing their daily activities and it creates a vicious cycle. This is the point for a lot of people that their career fails: when their depression and moods start getting in the way of them doing the things they need to do to be successful.
I guess I’d be depressed too if I jumped into an overheated market with no skills! Link to Realtor forum
From the forum:
“Hello,
I’m a real estate investor/businessman, and I’d like to get my real estate license. I live in CA and I know that I have to take a group of classes in order to get the full 4 year license. How long do the online classes take, and how soon can I be able to take the test? What’s the fastest I can get through this whole process?”
Nice timing!
Sounds like someone needs to unload — oops, I mean sell — some speculative — ooops, I mean investment — property and can’t afford to pay the RE commissions.
“What’s the fastest I can get through this whole process?”
Sign in today, …be bankrupt tomorrow…
Fast enough?
I used to hold a license, just to get the 3% knocked off my purchase price.
Has to be a misprint.
–
This is patently false. The number is for the whole of California. I am amazed that no one here caught it. Usually, people here are well informed.
Jas
–
“As of December there were more than 521,000 licensed Realtors in California, according to the DRE, which issues licenses.”
http://www.presstelegram.com/business/ci_5058311
Doesn’t the increase in available second homes smell a little recessiony? I know that in my area there are an ever increasing number of RV’s and boats for sale in shopping centers.
Why talk about recession ? With all the excess of the last 6 years, I personnally do not think we will experience a recession. It will be more like a big bad bad bad depression. 100,000 jobs have already been eliminated in the construction industry. 25,000 eliminated in manufacturing related to construction. I really think that the US will experience URSA MAJOR depression like in 1929. The context is even worse than 1929.
Do you mean behaviour like this might end?
‘it was almost like a knee-jerk reaction. You saw it, you bought it, because you knew it wouldn’t last long,’ she added.’
“… I really think that the US will experience URSA MAJOR depression like in 1929. The context is even worse than 1929. ”
I think you are right. With all the liquidity that won’t be recuperated, this bust is going to stink all the way to a global depression. All that is needed to trigger this is some crisis. Too much money has been thrown around carelessly. I know immigrants who can barely cover their daily sustenace who were qualified to buy a house. How more careless could lenders have been?
“All that is needed to trigger this is some crisis.”
One of these days a big well respected Wall Street bank is going to announce horrendous losses in either the mortgage market or the hedge fund arena. And that will trigger panic.
Try General Motors and Ford. The manufacturing sector could really surprise with spectacular busts too.
Ha! General Motors and Ford are places where, your money checks in, but it doesn’t check out. Why anyone with more of a brain than Terry Schiavo buys that stock I’ll never know.
You wont see anything like the 29 depression. We have better financial markets today then back in the day.
And yes things were really screwed up back then.
Louie,
glad to hear that from your professional perspective “all is okay”. I was started to get worried for a minute.
We’re working off a whole new paradigm…
One thing I remember hearing about the ‘29 depression was that it was triggered by margin calls coming in. In ‘29 the brokerages required only 10% reserves on your margin account. I don’t know about other brokerages, but TDAmeritrade wil let me do 50% reserve trading. So from a market leverage perspective, thats about 1/9th the available credit. In those terms I think our markets today ARE better off.
OTOH, the credit bubble today is in the housing market, and so a “great Depression” like bust could happen there, what with all the 100% financing. The “hard working population will save us” theory is out the window again, because I think those people back in ‘29 were just as hardworking as people today, and it sure didn’t save them.
I really hope that if something like the ‘29 depression happens again, people will find a way to band together. Lord knows a lot fewer people today have the manual labor skills to go work in an orchard somewhere tending the fruit of the earth.
“One thing I remember hearing about the ‘29 depression was that it was triggered by margin calls coming in.”
Substitute I/O option ARM loan resets for margin calls and you will notice a great deal of conceptual resonance…
We have better financial markets today then back in the day.
BWAHAHAHAHAHAHA!!!! Yes, now we can lose money at the speed of light.
An I/O option ARM loan reset in a lending environment that precludes financing IS the same effect as a margin call.
Job gains or losses are almost irrelevant now. Remember that more than 70% of our economy is based on consumer spending, and we have been in negative savings territory for at least six quarters. The number of jobs in the economy good stay the same, but if the savings rate returns to even a paltry 1 or 2%, that would take quite a whallop out of the economy.
Yes, it has the potential to be bad. People were talking about the theft of gold by roosevelt in ‘33 on another thread. it is interesting to compare:
In 1929 we were a nation of savers, with a mostly sound (setting aside the infant fed) gold based monetary system. Only the very wealthy, high net worth, or high income had access to credit. Taxes were low, medical costs were low, crime was low, vices were frowned upon, families were stable, property rights were respected. High exports. No welfare state, no military-congressional-industrial complex.
Now we are a nation of debtors. Gold was finally delinked from the dollar in ‘71 following the demonitization of silver in ‘64. Credit cards began in the 50’s with Diner’s Club (but only for the weathy), then hit the ground running in ‘73 with the introduction of Visa Cards to the masses. Now they extend credit to those with no credit history, from illegal aliens, to college kids, to the family pets. Your money is based upon “faith” in government. Your pensions depend upon someody’s ability to perform. Pension and investment assets for the most part equal someone elses’ liability. Poker shows are as ubiquitous as reality tv. Investment, from real estate to hedge funds are nothing more than speculation. Government services are demanded by more and more interests, yet are supported by nothing more than ponzi schemes.
Believe me, folks, we’re about to take it in the shorts. The bright side is, that if this is allowed to work itself out quickly, we’ll come back with sound financial practices, and a resposible work ethic. (I hope)
Paul
OT: That’s my KFC/Taco Bell in the news. This must be the Taco Bell on 6th Ave. and West 3rd St. in the Village. It’s across from “The Cage”. That is a nasty neighborhood. If you ever want to stop for lunch, look me up. I used to stop to get my Taco Bell fix. I think those days are done.
My wife is going to flip when she finds out about this. Aaarrggghhhh.
I went to NYU, and I know exactly the street location but I can’t picture the exact Taco Bell in question. I used to go to the Wendy’s once in a while which is right there. Never got the nerve up to hit any Taco Bell anywhere in NYC though. By the “Cage” do you mean the basketball court?
I walked by the place every day after getting out at the subway stop on 4th, but for some reason I can’t recall the taco bell in question.
I think the Pleasure Chest is right next to it. Or maybe it is Fantasy Island. Or maybe it’s the tattoo parlour/body piercing shop that is right next store. The Cherry Boxx, Pink Pussycat and Tic Tac Toe are all right around the corner. I’m not making that up.
Yes, The Cage is the basketball court, with handball courts running adjacent. You’re thinking of the right place.
Definitely remember all the tatoo, body piercing joints right there. I hardly ever crossed over to the west side of sixth though. I usually tried to avoid the whole Christopher Street area.
“I usually tried to avoid the whole Christopher Street area.”
I hold the proud distinction of being the only straight male to live on Christopher Street, ever.
Go talk to your doctor NYCB. Taucoo Belle is the absolute worst place on earth to eat if you want to live past 50. Check it out.
Something tells me we won’t be going there any more.
A couple years ago I was experiencing a very stressful time in my life. Every three weeks or so, I’d find myself driving to Taco Bell, to order a Spicy Chicken Soft Taco and small Pepsi. One night I snapped out of my zombie-like state and took a look at my surroundings. I realized that my Taco Bell visits were a result of the temporary insanity I was experiencing.
To this day I wonder what microbes have lodged in my intestines and are silently waiting for the correct moment to make their nefarious presence known.
Re: microbes
That which doesn’t kill you makes you stronger.
Agreed. I slept with my wife last night, whose fever was 102 degrees F. I don’t believe in the AMA’s germ theory of disease.
I never let my wife being sick stop me from having fun either.
Oops GS, I thought you meant something else when you used the word “slept”.
I don’t believe in the AMA’s germ theory of disease.
(I know this is way OT for housing, but hey, it’s friday.) I think it’s important to exercise the immune system just like everything else. So kudos to you GS!
lol…u guys are funny
That is nothing, have you heard about the KING RAT that populates NY. It is a BIG cat size rat with an agressive temperament. When you hear about children being bit by rats in NY low income neighbourhoods most likely it is the doings of a KING RAT. Notice I am using capitals as they are SCARY. Anyway, a friends daughter was doing holiday work in a Sears store at Grand Concourse in the Bronx and she saw KING RATS roaming the store during business hours. According to her she was so dramatized upon the first sighting she left the store and went home. Anyway the point is that NY is covered in filth and the rats are everywhere as evidenced from the story. By the way just recently I spoke with a retired old time New Yorker who worked for the city during the seventies when the landlords were setting their properties on fire and the “Bronx was in fire.” He recalls how they used to throw large poison cylinders into vacant buildings, through windows, to kill the KING RATS because you could not risk walking in to the buildings,-there were so many of those…..KING RATS!
LOL, good stuff!
I have seen one of those!
It had a name!
DONALD TRUMP!
You guys are killin’ me today! ha ha ha
Never trust a place where you can eat dinner for $2.
Early February home sales on familiar, sluggish pace
More of the same. That’s the story of early February home sales. Flat pricing. Slow sales. Median prices are 0.2% above a year ago but 5.8% below June’s all-time revised high of $642,500. Sales volume runs 19.7% below the year-ago pace. For the 22 business days ended Feb. 7:
Slice Median Vs. ‘06 Sales Vs. ‘06
Houses $675,000 +0.9% 1,335 -15.6%
Condos $440,000 -4.9% 528 -27.4%
New* $539,250 +12.3% 383 -21.4%
All $605,000 +0.2% 2,246 -19.7%
* Includes single-family homes, condos and recently converted apartments
The new homes incentives are distoring this number. I have asked John L. to review and correct. He could care less!
Heh heh…good luck…yeah, that new homes number is the only thing keeping the numbers afloat…
I really hope you are wrong but there are a few things that point to your scenario. They include 1)Incredible amount of debt out there including mortgages and consumer debt 2)Slowing of housing market 3)Tremendous amount of outsourcing of jobs 4)Huge government deficit AND debt. 5)Changing demographics-how will the shrinking labor pool pay the ever increasing entitlements coming due to the baby boomers 6)And for you Kondratief (spelling?) followers out there isn’t this about time for the Kondratief winter.
Hey lets hope for the best but the near future does look a little dicey.
“Monica Wilson loves her vacation home, an ocean-view condo within walking distance of the beach in Carlsbad, Calif. She paid $620,000 for the place 13 months ago. But since then, the California vacation-home market has gone soft. ‘If I sold my second home right now, it wouldn’t do very well,’ the Pasadena-based real estate agent said.”
$620K for a condo (that’s not overlooking Central Park). They saw her coming.
LMAO
I wonder if she is renting the place out or just using it as a vacation home.
Real Estate agents don’t make what they used to.
620k = $7750.00 per year just in prop taxes.
620k = $7750.00 per year just in prop taxes.
Mr. V, In CA you can only dream of a tax rate of 1.25%, please add the endless list of “Assesments” and the real tax rate is around 2%.
Realtor selling her overprice condo… she can always sell it to a San Diego fireman who is averaging, not including benefits or pension a average of $117,000 a year.She can hand out her flyers to every fire station. I would do it soon as Enron by the Sea is about ready to go bankrupt!
Also heard that employees of the city of SD are doing well too. Why work for private industry with no job security and no pension. Work less, make more, and have better benefits and a super generous retirement package. You can also improve your video game skills or learn a new language at work.
I’ve really improved my blogging skills since working here at Edison…lol
Actually, she should sell it to a Boston cop.
1,276 of them made more than $100K last year (only 407 fireman were in that range); 25 more than $200K.
http://www.boston.com/news/local/articles/2007/02/22/police_take_home_citys_biggest_paychecks/
Or, just sell it to a SF city employee - more than 3,000 in 2005 made more than $100K. And, if I recall, they get a day off every other week (kinda like the French; 35 hour workweeks and all that).
And let’s not forget those National Park Service ranger jobs in California…
Okay…let’s clear up the misinformation.
In order for a SD firefighter to make $117,000 per year, they have to put in some major overtime.
Firefighters work an average of 56 hours per week BEFORE getting overtime.
Personally, I’d much rather see firefighters, cops, teachers and nurses being paid $100K/year than entertainers (actors & athletes) or CEO’s. At least the former provide services which we need rather than what we want. Which is more valuable?
Just wait until you get into an accident & require immediate life-or-death treatment. You’ll be singing a whole different tune.
Just wait until you get into an accident & require immediate life-or-death treatment. You’ll be singing a whole different tune.
Yes especially if they have been working alot of overtime paying for their big house. maybe they will be so tried they will just shoot you by mistake?
These precious firefighters let San Diego County burn down a few years ago. hard working - my A$$.
And Teachers? What, exactly, services do they provide? I know indoctrination rather than education when they can fit it in between whining for more money.
Ugh.
Paul
If the money’s so good, and the job so easy, why aren’t you doing it?
The young ones with the big motor homes and h2 hummers could use a second home I suppose to store all their motorized toys.
“There is not a lot of sales going on and buyers are on the sidelines waiting for further corrections. And sellers do not want to drop their prices. So, there’s a stalemate occurring”
Logjam clearing flood gates are beginning to swing open. Defaults are skyrocketing and REOs are not far behind. That should get the price correction out of stalemate mode, in a hurry. REOs can’t be held long as lenders know they are worth less every month, carrying costs eat them alive and not to mention they don’t look attractive on their books at reporting time. Call it MUST-SELL INVENTORY.
Agreed. I think by the time we start to see 3rd QTR financials from banks/lenders the game is over. It will then be an ugly Christmas for many people.
I think even 1 qtr sooner. Summer… July, when the lenders report and pressure to keep REO inventory down gets serious. The fire sales should hit before fall.
I agree the floodgates are opening. Bummer its too late to keep the dam break from happening.
And for the record, the phrasing “on the sidelines” annoys me. I’m a spectator. I’m not about to jump into the game. I’m not on the playing field. My uniform is at home in a bag in the back of the closet. Don’t even think we’re about to rush on the first time the coach says, “dude, you’re in.” NO!
I’m in the stands with my bucket of popcorn. I’m enjoying the mis-plays.
I’m not getting onto the field until late 2008 at the earliest. That’s not on the sidelines. That’s up in the stands.
Got popcorn?
Neil
No reason to even bother putting on your uniform when they’ve just started mowing the grass! I expect the field to be ready in oh, 2011 or 2012.
Agreed.
“There are 514,000 people who hold real estate licenses in the Bay Area.”
I think the 514k number is for the whole state.
Nope, better brush up your reading comprehension skills. 514k is just for the Bay Area.
Published July 5, 2006:
As of May, California has a real estate licensee population of 500,053.
http://realtytimes.com/rtapages/20060705_moreagents..htm
Better brush up on your knowledge.
“… buyers are on the sidelines waiting for further corrections…”
Describes me perfectly.
Me, too. But I’m starting to get impatient again. The one thing that keeps me from buying is this blog. Thank you, Ben. Thank you, fellow bloggers. You have all predicted what’s happening now, so I HAVE to believe you’re going to be right going forward as well (meaning there’s a lot more correction to come).
A co-worker of mine who makes the same $$ as I do, but who has FAR less savings (if any) not to mention credit card debt (I have none) and a car payment on a 2007 Honda (I have no car payment) is considering buying a house and asked my opinion. I zillowed it for her and told her what I’d offer from what they’re asking (and based on what I think she can afford which, frankly, I don’t think she can even afford that). Anyway, the number I came up with is 85% of their asking price. She won’t offer that - feels too bad (she’s buying from another co-worker…big mistake IMO). Honestly, if she buys this house at full asking price and ends up swinging all her bills successfully, I will be amazed and positively dumbfounded (though her parents are LOADED so I have to think they will be helping out).
And I continue to wait…
“And I continue to wait…”
Me, too. After renting now for a year and a half, I can tell you it pretty much sucks profusely in terms of stability. You are at the mercy of your landlord/property manager or other tenants if you are in a complex as opposed to a detached dwelling. If one of your neighbors gets wasted and sets a fire, you’re eating s**t because of the actions of an asshat. Even with renter’s insurance, it sucks.
I much prefer owning to renting, even if the bank is my landlord. At least the bank won’t hassle me if I park in the wrong spot, or conversely, park in my spot. But in this current financial climate, I’ll tough it out.
Heh heh, the bank might not hassle you but a lousy HOA can…
“Heh heh, the bank might not hassle you but a lousy HOA can…”
Don’t I know it! Been there, done that. And for that reason, my dream home, at this point in my life, is a solid little concrete block house with terazzo or hardwood (Dade County Pine or cypress) floors in a traditional non-HOA neighborhood built anywhere from the 1950s to early 1970s.
does anyone have some popcorn?
Me too! When prices correct to a balance between the cost of renting vs. owning… then I will open the checkbook. Can’t believe the idiots who are still rationalizing that paying double what they could rent the same property for is a good idea. That is not even counting maintenance and upkeep costs. Some people really are just stuck on stupid.
$100K in depreciation pays a lot of rent !
A most excellent point!
Not paying interest, property tax, insurance, and maintenance on a grossly overpriced house also pays a lot of rent!
Recent depreciation on homes in my area (since 2005 peak) is roughly $160K (from $650K in Su 2005 to $490K now).
Our rent is below $30K / year (I am overstating it to err on the conservative side, and to take into consideration potential rent inflation, a hobgoblin the REIC always uses to scare priced-out renters).
Years of rent payable out of recent depreciation =
$160 / $30 = 5+ years — not bad to live “for free” for five years, eh?
On the other hand, if the rent goes down (as some of us have been predicting for a while, and we’re finally seeing pockets of proof), your deal will get even better:
$160 / $20 = 8 years or
$160 / $16 = 10 years.
athena,
Well… true but isn’t it encouraging to watch the market for “2nd homes” react like a person going into hypothermia?
I mean, as the cold takes over the body says, Hey, I gotta look out for # 1 here! So as vital organs become more and more important things like fingers and toes are sacrificed. As hypothermia further sets in limbs become “expendable” and we’re down to the heart, brain and lungs.
Seeing these far flung “resort/vac.” areas get frozen over and spread back to major metro markets will need more than a dry blanket and some cocoa! :0
actually Dinor it does warm my heart to see just how effed people are on those “second homes.”
Sonoma is one of those places that kept the marketing mantra of “you can’t lose. buy a house, buy two…” The pitch was that you can’t lose because prices are only going to go up… and this is Sonoma, everyone wants to live here so you can use it as a “second home” or use it as a vacation rental and never lose money.
uhm…. Can’t wait for the numbers to balloon just like the faux appreciation bubble and shove them the faces of the idiots in the big box of stupid. ;-D
phew… that rant felt kinda good.
“When prices correct to a balance between the cost of renting vs. owning… ”
The thing is that the fallout could be so massive that rents may also have to fall. That would lower the floor even more. I don’t know if it is likely but it is very possible.
Yep, rents may also fall, especially in areas of massive overbuilding. Whenever I think about buying for investment, I remind myself of that.
House prices don’t fall in a vacuum - a broader recession tends to follow. This has the salutary effect of inducing some people to move elsewhere to find work, and fewer new people to arrive, thereby causing rents to fall.
This happened in SoCal in the 1990s, when it seemed like half the apartment buildings had banners advertising “$99 move in special” or “three months free.” Those were great times to be a renter OR a buyer!
What is a recession?
Is it the consumer doesnt buy? or the Producer cannot sell?
In the late 80’s-early 90’s Silicon Valley Companies couldnt sell at the cut throat prices our Japanese competitors were dumping on the market. Therefore we had adjust or leave those markets. This caused job loses. That has not changed, in fact we are more cost constrained on wages because of cheaper world products. We still have price competition from Europeans and Asian producers in many industries…. Hardware, chips, Software, Medical Devices or Biotech.
Does it make sense that prices have gone 300-400% in the Bay Area.
Rents are tricky because of how local it is; segmentation is everything.
But my gut hunch is that overall, in the short-term, rents will probably go up as FBs are shaken out of their home, new buyers decide that buying a house isn’t worth it, but the diehards will still think they can sell their home. More people looking for rentals than rentals coming on the market (since they’re being withheld in hopes of getting sold)
But once you get past this, rents will go down as these dwellings are turned into rentals. Rents are based on real-life affordability and population growth. There is a natural gating for massive oversupply. Housing, OTOH, was built on speculation where the market feedback loop was broken. So, overall, I think there is an oversupply of housing which will cause prices to fall for both rent and housing prices.
I think some areas could see rental increases. For instance, folks who commuted 2+ hours from the exurbs to live in their FB home might elect to choose to rent closer. Rents closer to the job hub might go up or at least not fall substantially if housing supply couldn’t expand quickly (eg, San Francisco). However, rents in the exurbs or cities with lots of expansion capability could suffer along with housing prices (eg, Riverside or Sacramento)
I track rental listings in my area for SFR and there is a distinct upward trend since March of last year. Increased selection should lead to lower prices/sq.ft.
I’m paying $.50/sq.ft. for my brand new rental, so my experience tells me that barring additional inflationary pressures rents will continue to decline as currently vacant homes get occupied one way or another.
We have at least 2.2 million vacant homes plus 1.5 (or more) million new homes being built this year alone.
Most BK/FB will not move to a rental but to their relative’s (or friends?) home since they won’t have any deposit money (let alone last month’s rent which seem to be required in Inland Empire rentals). If the rents aren’t coming down, they’ll start soon…
And don’t forget the squatters who will be renting for free be it foreclosed [ex]-homeowners or transients taking over un-managed home.
I suppose next line of business would be to hire illegals to start arson (they get paid after they get sent back to their home country after the insurance co pays out — they’ll get felony charges so they will be deported). Win-win for home owners and illegals.
I think you are correct. I am already seeing places in Sonoma that are sitting on the rental market… and sitting and sitting and sitting. The rental prices aren’t all that out of whack… yet nobody is renting them- and some have been dropping their prices, and still no renters. So the rent price indeed may need to come down, but in areas where FB’s have had to move out of their foreclosed house, they will likely be renting. and if the area has limited rentals available they may not have noticeable drops in rental prices… simply because the FB will be looking at rents that are already 1/2 or 2/3 less than what they were paying for their defaulted mortgage. But it would be GREAT if rentals came down even more. I wouldn’t be complaining.
I would love to hear the internal dialogue of an FB, as he encounters one overpriced POS rental after another, during his search for affordable housing, subsequent to the foreclosure of his “investment” property.
It’s probably a safe bet to assume that whoever buys the FB’s foreclosure will be renting it out for a few years presumably at a profit, maybe more, until the RE market turns around. Their basis will be low enough to drop the rent so it remains occupied. You should have an easy time getting into a rental…
guys.. easy on bashing the rental rates… i’m looking at picking up some positive cash flow rental properties when the dust settles..
-got cash?
I won’t buy too quickly unless your area has more renters [esp. transients like university students] than rentals [and people are moving in rather than moving out -- check out U-haul reservation rates to gauge which direction the flow is].
If you have many empty homes for sale along with rentals [or repartments] coming [back] to the market, then rental prices will come down. So unless you buy at significantly positive cash flow (after including few weeks of vacancy per year), IMHO, I won’t count the chickens, yet.
Even if we do get [hyper-]inflation, unless the renter’s wages go up as well, you won’t be able to raise the rent.
With all these unknowns, cash in MMF, CD, etc. would be a better bet in my view…
MMF = Money Market Fund, not FDIC insured. Money market ‘account’ is insured.
The Fed better hurry up and create some high wage or at least rental inflation, because lending standards are no longer loose enough so that anyone who can fog a mirror qualifies for a loan, and buyers can rent for much longer (even at a low rate of rental inflation) than sellers can eat their negative cash flow (including capital losses on falling home values). I would say the Fed is at risk of losing the War on Savers if they don’t hurry up…
“The dive in new-home construction around Lincoln has created a monster for a small school district, as developers’ fees slow to a trickle and the interest mounts daily on $189 million that the district borrowed to build new schools.”
I have to believe that a school district could not be so blind as to what was going to result from all this. Did the districts financial department really believe that appreciation was going to sustain at double digits and the 1 in 5 no-down payment loans would simply refinance when their arms had to reset? I’m not in the planning business by any means but In 2003 I’d have to think “whoa this is getting ugly, maybe better rethink this a little.”
They kinda need to go with the high side. What if they estimate too low and then they put the kids in ‘portables’ (i.e., trailers)? The community has a fit and the supers/board are run out of town… I’ve seen it before!
Understandable but would that not be under normal circumstances? This has been anything but a normal circumstance
JMO
Some guy in the schools financial dept bought a home with the expectation it would increase 20 % for next 5 years.
The housing slump is being felt more broadly than expected.
http://www.cnbc.com/id/17297181
Imagine that !
Not only are big home-improvement retailers like Home Depot and Lowe’s feeling the pinch, but banks and other mortgage lenders are seeing their stocks drop on concerns that more homeowners may be unable to make their monthly payments. Then there are smaller outfits like furniture and appliance makers which are seeing their sales weaken.
“People don’t realize the impact housing has,” Richard Manoogian, chairman and chief executive officer of home improvement product giant Masco, said on CNBC Friday “There is a much larger ripple effect than people realize.”
He goes on to say…
“The housing industry will be down deeper in the short term than is generally expected. That will result in the economy being slower than expected and greater unemployment than expected,” he added. “The good news is I think that will slow inflation and lead to lower interest rates and a stronger 2008. By (next year), we’ll start seeing a nice improvement in the housing industry.”
First there wasn’t going to be any bubble at all. 15% in the bag ! Then it was just a temporary slowdown. Then the bottom was in. Now 2007 is a right off, but the turnaround will happen in 2008.
These guys just don’t get it.
Should be write off, not right off !
But some of them are starting to…
http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aR_E2Jaaby04
These guys just don’t get it.
It’s not too surprising, their salaries depend on not getting it.
I don’t think I’ve EVER heard a paid financial pundit say “I expect things to be gloomy for the next 4-5 years” despite the fact that recessions and downcycles tend to last at least that long.
There’s no reason to expect this time to be any shorter - in fact it could be longer if the broader economy really tanks, which I expect it will.
First there wasn’t going to be any bubble at all. 15% in the bag ! Then it was just a temporary slowdown. Then the bottom was in. Now 2007 is a right off, but the turnaround will happen in 2008.
I have to admit though, this is a big improvement. It was only a year ago that the majority of pundits were denying that there was a bubble at all, or that prices could ever fall.
I’m actually impressed by how fast this whole mess is unwinding. San Diego median house prices already back to mid-2004 levels - I wouldn’t have expected that milestone for another year at least!
LA and OC will be following San Diego’s lead soon, I expect, and that’s when the party will be in full swing. If you think we are reading a lot of tales of woe now, imagine the anguish a year from now!
I have to admit though, this is a big improvement. It was only a year ago that the majority of pundits were denying that there was a bubble at all, or that prices could ever fall.
I’m actually impressed by how fast this whole mess is unwinding.
I have to agree. Its getting a lot better. Defaults actually affected the market indexes today. Things are looking up.
You can ignore reality for only so long. Their attention span is short, but if they read it on the wires every day for 12 months, they have to sign on sooner or later. They don’t mind looking stupid for a day, but a year is a different story.
‘There is not a lot of sales going on and buyers are on the sidelines waiting for further corrections. And sellers do not want to drop their prices. So, there’s a stalemate occurring.’
A stalemate is a game ended in a draw. This game ain’t over.
I think the killer is Mr’s Appleton-Young…in the office…with the fake diploma. Am I right?
One side is hemmoraging, one side is not. That’s not a stalemate, that’s a siege.
that’s a siege
Nice image. I can just see the sellers walled up in their stucco castles while the buyers outside bombard the walls with lowball offers launched from their trebuchets.
emcee,
Definitely a nice analogy.
But this is one of those huge sieges where only a small portion of the assaulting army is manning the siege machinery. You see, a little festival is being held outside the gates. Jousts are going on, a dance will occur this evening, and the starving castle occupants cannot believe the shear amount of food being prepared for the army out at their gates.
Yet those in the castle out-number the assaulting army. But somewhere along the way they pawned their armor, swords, and siege machinery. They’re a little pissed, as they pace the battlements in their silks, to see that equipment in the camp of the assaulting army. As they pace their stomachs growl from hunger. They see the signs of disease in the castle.
But they hold their head high… somehow wishing something will change in spring.
Funny… the creek supplying water to the castle is going dry… Oh.. their bankers joined the siege by damming the creek… why… why…
Got popcorn?
Neil
I like the image. Kind of like the Maginot line. Billions invested in bunkers loaded with Frenchmen and the Germans drove around it. 6 weeks later, the white flags were a permanent decoration on every French household.
Kind of like a McMansion subdivision. Millions of FB hunkered down with their granite counters waiting for the spring bounce. Getting surrounded is not just possible. Surrender is inevitable.
No wait! I forgot. It’s different here (or this time)!
MSNBC has a ton of online videos on housing sector today, most of them bearish !
SubPrime: Is the worst over ?
http://www.cnbc.com/id/15840232?video=187581664&play=1
SubPrime Spillover Effect
http://www.cnbc.com/id/15840232?video=187564434&play=1
Housing Cracks In California
http://www.cnbc.com/id/15840232?video=187561991&play=1
SubPrime Scare
http://www.cnbc.com/id/15840232?video=187516985&play=1
Ouuppss not a good sign. When official media becomes bearish, you have to be very careful. There is just ONE important rule to follow. It”s only when TIME magazine will have on its cover page: “HOUSING: It’s the end of the world! Sell!” You will know that the bear is finished. We are not there yet.
I don’t know about that. Time Magazine was the very first media outlet to link to my original HBBlog by name, in the spring of 2005.
Good to see about them being progressive in providing information.
However… there is a big difference between a link or mention of a blog and a cover story.
When the cover of time magazine is a home exploding with the caption “Can you ever sell your house…” There will be less than six months to the bottom.
Got popcorn?
Neil
yeah there was a Fortune magazine in September 2002 that said housing was overpriced…
and in large part on the coasts it was.
“Even popular, out-of-state markets are getting less interest from Californians. In 2006, Phoenix home sales to Californians fell 50%, and Las Vegas sales dropped 32%, DataQuick said.”
I wonder how those numbers will evolve now that liar loans and other types of underwriting-free mortgages are suddenly going out of style?
If it means fewer CA equity locusts in AZ housing markets, I’m all for it.
What if it means more vacant homes in AZ housing markets?
Illegal immigrants will get 100% FHA loans from the Bush-Kennedy gang to fill up those homes
Feb. 23 (Bloomberg) — U.S. stocks dropped a third day, buffeted by a slump in financial companies on concern the fallout from mortgage defaults among the riskiest borrowers may spread. The Dow Jones Industrial Average headed toward its biggest weekly decline since August.
Countrywide Financial Corp., Lehman Brothers Holdings Inc. and Bear Stearns Cos. led the retreat, which pushed the Standard & Poor’s 500 Index down the most in two weeks. Eighty-five out of 88 stocks in an S&P 500 gauge of financial shares dropped on speculation loan delinquencies will rise.
“Once the ball starts rolling, people don’t know where it’s going to stop,” said Michael Alpert, who helps manage about $1 billion at J&W Seligman & Co. in New York. For stocks, “if you have a list of plusses and minuses, the minuses are starting to stack up.”
http://www.bloomberg.com/apps/news?pid=20601084&sid=aJ3TE6Lmnp64&refer=stocks
Financial shares in the S&P 500, which include lenders, insurance companies and fund managers, slid 0.9 percent, the steepest loss in two weeks. Banks dropped 1 percent, the most among two dozen industry groups.
Subprime-mortgage defaults have been rising nationwide as weaker home prices and higher interest rates make it harder for borrowers to repay. HSBC Holdings Plc and New Century Financial Corp., the largest U.S. lenders to the riskiest borrowers, this month said profit may suffer as more loans go sour. Investors are concerned the problem will get worse.
`Work its Way Up’
“The consensus has been it’s going to be contained. Now people are questioning that,” said Bill Strazzullo, the Boston- based chief market strategist at Bell Curve Trading. “It’s going to start with the weakest credit and work its way up.”
Countrywide, the biggest U.S. mortgage lender, fell 86 cents to $39.28. Three insiders, including Chief Executive Officer Angelo Mozilo, sold a total of 96,500 shares yesterday, according to filings with the U.S. Securities and Exchange Commission.
Lehman Brothers slumped $2.55, or 3.1 percent, to $79.48, the most in the S&P 500. Bear Stearns lost $4.66 to $161.42. Both make loans and repackage them into securities.
Homebuilders also dropped. Those in S&P indexes lost 2 percent, falling for the third day. D.R. Horton Inc., the largest U.S. builder by market value, decreased 36 cents to $26.96.
KB Home fell $1.06 to $51.50. The fifth-largest U.S. homebuilder is under criminal investigation by federal prosecutors over stock-options backdating that led to the resignation of the company’s chief executive officer, people familiar with the matter said.
KB Home Associate General Counsel David Simons declined to comment. Assistant U.S. Attorney Alex Bustamante in Los Angeles also declined to comment.
Bond prices rebounded from a sell-off a day earlier, as investors sought quality amid concerns that subprime lenders would be forced to book big write-downs for consumers who were unable to keep up with payments. The yield on the benchmark 10-year Treasury note fell to 4.68 percent from 4.73 percent late Thursday.
“The defaults that you’re seeing in the subprime market are a bit of a wake-up call for investors. I think you’re going to see a continued flight to safety,” said James Sonneborn, wealth manager at RegentAtlantic Capital LLC.”
http://biz.yahoo.com/ap/070223/wall_street.html?.v=43
You know, market tops come and go this way. One day things just quietly turn a corner and never look back. Could this be that corner?
Still no bearish articles on LA?
I have not read too many about the LA area, only a recent one where sales prices were down in some areas.
Sales are slow in my area near LA, but I still see the idiocy of sales for some overpriced junk homes.
The last of the suckers are still buying. I still don’t think lending standards exist at this point.
I am trying to get excited about declines in Modesto and Fresno, but it’s not working.
Do you mean that you are watching and waiting and not seeing anything dramatic happening yet? I live in Fresno and want to buy, and plan to start the trend - offering low ball offers.
Peek at the housing tracker site. Within the last week over 4k units have been listed for sale. Over 20k for LA…last year it was around 13k on Feb 21.Yes prices still rising,inventory rising…
As Dinor says…if you jump out of a 90 story building and you’re falling past the 85th floor…You’re OK so far! There is a long way to fall here. Patience…if rents go up…they’ll have to raise the rates which will push prices down. If rents stagnate…it’s still cheaper to rent! I’m seeing a LOT of rentals out there.
I hear ya… no bearish articles… hardly even a bearish anecdote. Central Valley… panic, IE… panic, SD… panic, Florida… panic, MASS… panic. LA? Don’t see any panic here… I mean… there has to be panic here *somewhere*, but no one’s letting on if there is. And people *are* still buying this overpriced crap. Guess there’s a lot more suckers here than I thought… Oh well, the water’s heating up… the pot’s gotta boil eventually right?
I don’t know, I’m looking around and seeing very little building since, well, the 1970s, really. Most of the houses here in LA are actually 1920s or 1950s. No huge subdivisions of 2005-built mcmansions monstrosities here. Overbuilding won’t crack this market, like those other places. But the fact that no one can afford to buy a house and actually make a down payment has to catch up with us, eventually, right?!
You must not live anywhere near where I do. Look at Playa vista, Marina Del Rey, Redondo Beach, Lawndale, Torrance, and that condo heaven, Long Beach.
Overbuilding is certainly going to tank this market. Not to mention job losses. We’re losing technical people from southern California at a rate that hasn’t been seen since the 1990’s aerospace layoffs.
There are even streets in Palos Verdes with FIVE new Mcmansions being built. Not to mention Trump’s folly and those new “starting at $2.5 million” homes along PV drive near the RPV, PVE border.
No huge sub-divisions… just lots of new units. And all of that debt is going to do a number on the local banking.
The ABX indices have now turned over at the AA and AAA level. (Ok, not much, but an obvious turn down.)
Its only a question of when… not if.
Got popcorn?
Neil
Playa Vista is one example of possible overbuilding, although those are condos, not SFRs (single family homes). The other examples you gave, 5 mcmansions here or there, are a drop in the bucket in a city the size of Los Angeles, even if they are listed for 2.5M. There are just no big tracts of new houses here, there just aren’t, there is no available land. That doesn’t mean values won’t go down here, they have before, but this might be the one factor that’s propping us up as of now.
The feeding frenzy is in the illegal alien/Spanish-speaking-only crowd right now. These are the last the suckers and will be the undoing of the LA market when they take the keys back over the border. You can’t con and honest man, and the illegals aren’t honest. They wouldn’t be illegal if they were honest…
I know several people who work in this market who are still closing 2-3 sales a month in the tortilla-heavy areas. My wife’s Mexican-born (now naturalized US) and she works in a business that has a large, er, “migrant” work force: flowers.
I know a number of Mexicans, and you are totally right, they are still flipping in the hood as though the RE market can only go one direction: up. They have no recognition of any news of a downturn, and Spanish radio does nothing but advertise “ochenta/veinte” loans. We talk about people who have never seen or don’t remember a down market, but a lot of these flippers are new to the COUNTRY, and have no understanding that prices could actually fall. As of right now, though, there are some immigrants making a lot of money.
Oh God, I am finally happy. This California thread caused me to go into dqnews as I often do, and this time I found county/regional foreclosure statistics. Of Socal, Bay Area, Coast, Mountains, Nocal, etc., the region with the greatest yoy increase in foreclosures is…the Coast !!! (That means, Monterey, SLO, Sta Barbara.) Cagan’s “fireburn” piece would lead us to expect that, and yet as I have watched Morro Bay in detail, I have not been able to see this picture evolving the way I would like. Well NOW i see it. rah rah rah rah rah rah rah rah rah rah rah rah (cheerleading the implosion)
“Still no bearish articles on LA?”
La county still has some froth in many marginal areas,no doubt some ignorant Fb’s still overpaying in inner city crap areas of LA. At least some marginal zips show some reduction in yoy%, EG compton. The effects of the subprime meltdown will take maybe 2-3 more months before virtually all marginal purchasers are shut out of the LA subprime market. Perusing Jan Dataquick and yoy’s show mixed picture for LA Area, with some zips in high- priced coastal areas showing drastic reductions in yoy%. Some areas such as long beach are starting to show significant yoy% reductions in most zips.
Foreclosures in LA county have shot up to 1600+ from 1250 in early feb. This will be one of the key gauge indicators to watch, and further sharp upticks in LA foreclosures/nod’s should start having actual negative effects on RE pricing sometime in yr2007. Right now LA is really stagnant in sales volume all over the county.
The LA housing bubble market will fray and unravel slowly, not in any catastrophic sudden meltdown. The MSM will always be several monthes behind reporting current trends anyway. And LA is such a large and varied market that different areas will experience the RE meltdown in varying speeds.
The areas oF LA which are neither marginal nor superexpensive, the dull vanilla middle class burbs such as Torrance,van nuys, Whittier,Burbank, east Long Beach,lakewood,ect, have simply stagnated as far as yoy % and show a downward trend. Unlike the inner LA ghetto zips they haven’t had the benefit of rampant inner-city fraudulent overappraisal/Mort fraud selling to duped immigrants to help boost the yoy’s.
Lets look at some data on hi-end zips in LA county:
AREA ZIP #SFHSOLD PRICE YOY:
Agoura Hills 91301 31 $795 -3.9%
Beverly Hills 90210 19 $1,899 -17.9%
Chatsworth 91311 20 $725 22.5%
La Canada Flintridge 91011 11 $1,363 1.8%
Brentwood 90049 17 $1,479 -11.7%
Hollywood 90068 22 $1,165 8.4
Westchester 90045 24 $695 -13.1
Long Beach 90803 16 $850 -19.0%
Manhattan Beach 90266 31 $1,308 -11.6
Pacific Palisades 90272 20 $2,000 -12.7%
Pasadena 91106 13 $1,295 72.7%
Rancho P.V. 90275 31 $929 -24.2
San Marino 91108 18 $1,288 -7.5
Studio City 91604 15 $1,200 16.5%
Valley Village 91607 18 $688 -11.3%
I selected a varied sampling of hi-end or solidly middle class zips and included both neg and positive yoy’s for impartiality. 10 zips showed neg yoy and 5 positive. Attempted to only display zips with a fair amt of selling activity(15 to 31 for most zips). Data shows a mixed picture but overall a trend toward negative yoY for majority of LA pricy zips.
Studio city/pasadena/chatsworth puzzling abnormally hi yoy’s may be expained by some small group of newly-built megaexpensive villas just on the market. All over the LA expensive coastal areas/hollywood hills one will still see open available plots or teardown lots that some hollywood mogel decided to erect a brand-new mega=palace on.
This Mexican guy, basically a dayworker who’s been here long enough to speak English fairly well, came to fix my drywall last month and told me he “owns” three houses, and is currently converting a house into a duplex to flip in a year. Plans on sending each of his 3 kids to medical school with the profits, he says. There is no way this is sustainable.
It’s hard to say what is more popular now in south central, gangbanging or flipping houses. LOL
I am truly shocked that a school district would take out an adjustable rate loan in general. But weren’t interest rates at historic lows just a scant 18-24 months ago? Forget the projections, just the idea of a government entity, dependent on something like taxes, taking out a 30-year loan with a short-term interest rate, seems . . . crazy. Am I missing something? Is this normal operating procedure? And, more important, is this wise?
IAT
“I am truly shocked that a school district would take out an adjustable rate loan in general.”
Why does that shock you ? I bet most of the trustees have them personally and they were probably thinking what a smart thing it was, so they took one out for the school. Doesn’t surprise me.
More trouble in sub prime land.
I get the feeling its starting to accelerate.
http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=asBbJMlj7uR4
Now Time magazine of all places is speaking of the Housing Bubble!!!!!
http://www.time.com/time/business/article/0,8599,1592751,00.html
As someone said, when Time Magazine has as it’s cover story “The Golden Age of Renting”, that will mark the time to buy.
Absolutely true. Wait the signal from TIME magazine.
HAH!!!
Talk about a psuedo sceince ! Using internet “hits” to conclude the bubble isn’t bursting is just plain silly.
I think there is something to be said for this methodology. I would just have come up with different explanations. I think the reason that “housing bubble” is not as searched a term is that there is developing a common understanding that there is a bubble. There have been scores of mainstream articles mentioning and usually inadequately refuting the evidence of a bubble. Why search for what is right in front of you in nearly ever newspaper and media outlet.
In addition, the article dismisses the truly insightful keyword analysis. What about words like foreclosure, short sale, and refinance. If the article included those, I think there might have been another conclusion.
“If the article included those,…”
Forget about internet searches for common-knowledge stories about the existence of a housing bubble. Focus on the number of MSM media articles about “Subprime” and you will get quite another conclusion, indeed…
Just to make my point, I carried out this exercise in LexisNexis Academic:
News Category = General News
News Source = Major Newspapers
Search Terms = ’subprime’ in heading, lead paragraph(s), terms
Number of articles found over
- previous six months = 470 (470 / 365 / 2 = 0.64 per day)
- previous month = 202 (202 / 30 = 6.7 per day)
- previous week = 82 (82 / 7 = 11.7 per day)
- previous day = 21.
Methinks I detect a trend, or would “slow explosion” be a more apt moniker?
Great follow-through GetStucco. I keep trying to explain to clients that it’s going to be the subprime implosion that creates the vortex of illiquidity. Please, please do NOT catch a falling knife and buy now. Some listen and some simply won’t listen to reason for all the reasons observed and outlined on this blog every day.
“Please, please do NOT catch a falling knife and buy now.”
I tried to explain the situation to my mathematics-instructor sister in Dec 2006, but the emotional need to buy a move-up home overwhelmed the still small voice of reason. Now she and her husband own two homes during a period of drastic transition in the lending market. I wish them the best on finding a buyer at 80% of where they thought they would be able to sell the home they are leaving.
Plus, we all bookmarked this blog months and months ago.
That’s what I was thinking, Tulips. Except actually I didn’t do it. When I’m in google I type “h” and of course the first choice that comes up is “housing bubble blog”, and I click on that, and then on the number one entry. Hmm, I still think you’re right. Most people are better at minimizing their key-strokes than I am.
You will also note the average number of comments on each of Ben’s threads has roughly doubled over the past year. Why crowd out your comment time performing a redundant google search on “housing bubble” if you can go directly to the latest news?
Exactly. I started “Googling” the words “housing bubble” back in 2003. Multiple times — every day. Because there was so little info out there (I read/posted on U.K. blogs, as U.S. ones didn’t really exist to any extent — many were dead sites, because the bears had grown despondent).
Anyway…once I found Ben’s site in spring of 2005, I’ve rarely searched under “housing bubble”. I’m sure many more can say the same.
I now have a whole folder in my bookmarks for housing blogs…it’s my new favorite way to lose track of time.
“She paid $620,000 for the place 13 months ago. But since then, the California vacation-home market”
What line of work is she in? We make a pretty decent chunk of change, and we’re balking at $700K FIRST homes.
“But there’s an upside to not selling his vacation home immediately. He can still use it.
“It’s snowing there now,” said the retired commercial diver, who resides in Ventura. “I’m going to be up there this weekend.”"
It’s snowtime in Yosemite right now as well. Gonna stay at a lodge this weekend, and spend a fraction of what this guy pays in loan service and upkeep.
She is, of course, a real estate agent. It says so right in the article.
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I hope I not too far off topic here. Has anyone heard or posted about this website? I heard it on a radio ad (870 am in SoCal).
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Look’s like someone’s trying to take advantage of the current situation. If only it didn’t include having to actually buy a home, it might be a better idea.
WSF
California is loaded with NUTS
For those of use who were around during the early 90’s crash, and for those older folks who lived through the Great Depressions, all I can say is BOHICA!!!!
Bend Over Here It Comes Again.