“In An Adjustment Market”
The Denver Post reports from Colorado. “California has escalating foreclosures despite a respectable job market, following a trend that started in Colorado more than two years ago. The causes are familiar to Front Range residents, low home price appreciation, meager home equity and mortgages with payments that are adjusting higher, according to foreclosure experts.”
“Exacerbating the situation in recent months is a tightening in lending standards that has reduced the pool of available homebuyers.’A lot of people won’t be able to qualify for homes,’ said Robert Duran, president of First Liberty Lending in Longmont.”
The Coloradoan. “The Colorado Division of Housing’s foreclosure hotline is receiving about 75 calls per day, the most from Fort Collins, Colorado Springs and the Denver area. A recent survey shows 74 percent of callers were one to three months behind in payments, had an imminent sale date or had received an eviction notice.”
“Sara Allen, executive director at CCC in Northern Colorado, said Larimer County ranked eighth in 2005 and ninth in 2006 in foreclosures in the state. ‘Seventy-five percent were refinanced loans. Lots of people took out cash in the last mortgage boom,’ Allen said.”
The Rocky Mountain from Colorado. “More than 6,200 real estate foreclosures have been filed in the seven-county Denver area in the first three months of the year, a 30 percent jump from the record pace in the first quarter of 2006.”
“‘Our forecast was anticipating maybe a 5 percent to 10 percent increase over last year,’ said economist Patty Silverstein.”
“Kathi Williams, head of the Colorado Division of Housing, said she knew ‘the first quarter wasn’t going to be pretty’ based on the number of homeowners who were delinquent on mortgage payments.”
“Sarah Hays, a broker in Centennial, said that while the market is going to get worse before it gets better, investors and homeowners can get good deals, if they’re willing to be patient.”
“For example, a condo in Aurora sold in 2005 for $68,000 and is now being sold by the lender for $43,900, she said.”
“Hays also is seeing more move-up homes in foreclosure. A house with six bedrooms, four baths and 5,000 square feet in the Piney Creek subdivision along the southeast corridor is listed by a lender for $299,000, she said. Before the owner lost the home in a foreclosure, he tried unsuccessfully to sell it for $359,000.”
“But whether you buy a foreclosed home at an auction or on the open market, don’t plan on making a killing right away. ‘This is not a good market for flipping homes,’ Hays said.”
The Arizona Republic. “Metro Phoenix’s housing business may be struggling, but that’s not stopping a growing number of home builders from moving into what already is one of the country’s most competitive markets.”
“The Arizona Republic reported at the end of March that three newcomers were in various stages of launching local operations. Two weeks later, two more builders are getting projects off the ground, both in Estrella.”
“Some of the builders have said that the sag in the market following boom of 2004 and 2005 has provided builders a chance to get in. Some of the big national players that dominate new housing here over-reached during the boom, buying too much land and running prices higher.”
“Now, analysts say new builders can buy that surplus land cheaply and find competitive prices among trade contractors that are happy to have work in a slowing market.”
The East Valley Tribune. “A Phoenix-based developer made history at a state trust land auction Tuesday, buying up 269 acres in the Desert Ridge area for a record $149.5 million.”
“It was the Arizona State Land Department’s third attempt to sell the property in the past year, amid a slowing real estate market. The agency received no bids at an auction last August and canceled another planned for December after it became clear there would be no takers.”
“The previous record price for state trust land was $135 million, set in August 2005 for another piece of property in the Desert Ridge area. That land was purchased by builders Toll Brothers and Pulte Homes. The recent sale fell well short of the price-per-acre record of $1 million.”
“Rick Burton, one of three partners involved in the Desert Ridge purchase, said homes in the Desert Ridge project will likely be priced in the $400,000- to $500,000-range. Construction will probably start in 14 months to 18 months’ with full project buildout in three to five years, he said.”
“‘Now that we own it, as far as we’re concerned, the meter’s ticking,’ he said.”
The Arizona Daily Star. “New-home prices fell in March, while resale home prices showed little increase from the same month in 2006, said a report on real estate in the Tucson metropolitan area.”
“The median price of a new home dipped to $241,213 from $253,235 in March 2006, according to consultant John Strobeck.”
“New-home closings for the month dropped to 660 from 902 in March 2006. Resale closings fell to 1,559 from 2,001. New-home permit activity also dropped. A total of 555 permits were issued last month, down from 995 in March 2006, the report said.”
“Strobeck said he was ‘not surprised at all’ by the March statistics. Amid rising default rates for subprime mortgages, lenders are tightening their credit standards, keeping some would-be buyers out of the market, he said.”
“However, Strobeck said he expects the market will perk up again by late this year or early 2008. ‘We’re in an adjustment market,’ he added.”
‘Las Vegas home builder Jim Rhodes has suspended work on Pravada, a 5,750-acre master-planned community near Kingman, Ariz., because of land use, zoning and water issues, a spokesman said. Pravada had more than 1,000 reservations and will continue to take reservations, Marion said. The community would ultimately be built out to 30,000 homes.’
‘Dennis Smith, president of Home Builders Research in Las Vegas, said he was a little surprised at the decision because Rhodes had almost completed a golf course there.’
‘I’m sure it has something to do with Arizona’s unwillingness to accommodate his water needs,’ Smith said. ‘I can assure you that growth in Golden Valley was based on Rhodes legitimizing that area. That sets that community back five years, maybe more.’
Pravda + Prada = Pravada?
Second homes for new Russian immigrants?
Good one~
Get the violins out for the new stupids. Foreclosure is so 2007.Today 38 Democrats in the US Senate voted AGAINST (All the nay votes) making English the official language. Lareah probably wants Esperanto. hehehehehehehe
Wow! That’s huge.
Here is a link to another article. http://www.eastvalleytribune.com/page/rhodes It’s a video clip, so turn your sound down. The video isn’t the best part, click on the 3 articles linked on the right side, including the readers comments. I’ve been pretty vocal on the topix forum on this guy. But they don’t read anything I say, just call me names because I won’t bow to their great god - Jim Rhodes. It’s an amusing but long read with lots of delusional speculators. http://www.topix.net/forum/city/kingman-az/TCO9VM6L1QSNOT7PK They were hysterical last Thursday when someone said “I heard”, but at first just called him names for making up rumors, only they spell it “roomers”.
I spent a brief stint in Kingman 10 years ago so I’m fairly familiar with the area and can not for the life of me figure out why anyone would even think about putting a development that big there. If I remember right wells in that area had to be around 800 ft deep so most people who lived out there trucked in there water. There is nothing but millions of acres of land for as far as the eye can see (not desirable land, the kind of land that covered in cactus and rattle snakes). From what I remember about Golden Valley 10 years ago is that you could barely give land away out there. But you never know… I could never figure out why thousands of RV’s would flock to Quartzite every year around February. Maybe instead of putting up houses they could just install electric, water and sewer hookups for the soon to be homeless baby boomer’s.
This is just a drop in the bucket, Rhodes has three other approved subdivisions in the area. Over 130,000 houses from just one builder. All with golf courses, of course. Locals and retirees are priced out, but they don’t care. After all, the rich baby boomers are coming and 300k-400k houses are cheap to them. There was a prediction from an analyst, that Kingman will be the 3rd largest metropolis in Arizona by 2025 or so. With between 1.5 and 2.5 million people moving here. Kingman now has about 25k in the city limits and another 25k outside. Kingman actually includes about 695 square miles, all the way to the utah border.
“Kingman will be the 3rd largest metropolis in Arizona by 2025 or so.”
Now thats funny!
I lived in AZ for 6 years and can think of a hundred more desirable places in AZ than Kingman. I think this guy watched “Field of Dreams” too much as a kid. He can build it but they won’t come, not in those number and not at those prices.
It’s an amusing but long read with lots of delusional speculators.
This can’t be anything more than Mr. J. Rhodes with multiple user names, much like Dear Abby pretends to be answering readers letters when she wants to get her soap box out for the day.
Lack of water is enough of an issue to threaten building the houses, and so the first thing the developer builds is a water-sucking golf course?
Per him, the golf course will use 1 million gallons of water per day. There are also 2 lakes in his plan. He was asked in the water hearing what would happen if the nearby residents wells went dry, which is likely. He said that he would feel sorry for them, but it wasn’t his problem if they didn’t sink their wells deep enough.
Sorry, “per him”, you would think English was my second language. Should be “Per his statements to the water commission”
Lack of water is enough of an issue to threaten building the houses, and so the first thing the developer builds is a water-sucking golf course?
Classic line from Rodney Dangerfield in caddyshack
“golf courses, biggest waste of real estate there is”.
‘I’m sure it has something to do with Arizona’s unwillingness to accommodate his water needs,’ Smith said. ‘I can assure you that growth in Golden Valley was based on Rhodes legitimizing that area. That sets that community back five years, maybe more.’
What a jackass. Arizona’s unwillingness? How about Mother Nature? There’s no more free water for the carpetbaggers that come to town. Worse drought this state has seen in over 100 years, and lawsuits in the pipe clear thru 2050 on who owns “rights” to water in AZ.
New signs posted at entrances to Kingman now to read….’Welcome to Kingman AZ….please bring your own water……and leave any extra on our golf courses…Thank You…Enjoy your stay…PS…You are welcome go get on our future Bubble housing reservations list.
“Exacerbating the situation in recent months is a tightening in lending standards that has reduced the pool of available homebuyers.’A lot of people won’t be able to qualify for homes,’ said Robert Duran, president of First Liberty Lending in Longmont.”
I’d like to buy a Vowel, please, an “O”
“Exacerbating the situation in recent months is a tightening in lending standards that has reduced the pool of available homebuyers.’A lot of people won’t be able to qualify for homes,’ said Roberto Duran, president of First Liberty Lending in Longmont.”
No Mas.
no shortage of money in our little hamlet (12 square miles surrounded by reality). on top of the $1000 per sq.ft. condos sprouting up like weeds, we can now offer you an 80 year old brick bungalow on university hill, needing renovation for $1.1 MILLION. we are only 7 miles from longmont, but we might as well be on another planet. when will the endless stream of california plates end in this town?
I just don’t get it. Boulder isn’t that nice.
OT: Siedman says VERY FEW places will see a 20 % correction.
This was in response to Pimcos assesment of 20 % haircut for RE.
20% is in the bag in most markets already
ca-fl-az-co
ask gary watts
I agree. More like 40%-50% before this race is won.
“OT: Siedman says VERY FEW places will see a 20 % correction.”
Perhaps he means in nominal terms after helicopter drops are used in a futile attempt to reflate the bubble and “accidentally” only serve to create inflation instead?
GetStucco, are you in zip code 92127? And if you are, does what you seeing square with Jim the Realtor’s #’s for that area?
Here’s the link, http://www.bubbleinfo.com/ scroll down about 2/3 of the page to where he talks about “Closed Sales in March.”
I don’t track sales data, so I cannot really say. The inventory of homes for sale in 92127 is up by over 10% thus far this year, but I see little evidence that sellers are dropping their list prices by much.
Taking his numbers at face value, it appears that homes are still selling in 92127, but at 9% less per square foot in 2007 than in 2006 (1 - 332/364 = 0.09 = 9%). Given the small number of homes sold and the considerable variation in home size and quality in 92127, there is no way to gauge whether this change is due to variation in quality-adjusted prices or variation in quality of homes that sold.
Thanks…
OK, here is an alternative hypothesis: Jim the Realtor is a poster child for my favorite Realtor joke (”Q. How do you know when a Realtor is lying? A. His lips are moving.”).
Here are DataQuick’s March 2007 numbers for 92127:
YOY changes from March 2006:
Sales Median % Chg
Used SFR 23 $850,000 -18.2%
Used condo 11 $367,000 -23.5%
All new homes 55 $698,000 1.7%
All homes 89 $700,000 -21.4%
The 18.2% used SFR price decline and the 23.5% used condo price decline don’t square very well with Jim the Realtor’s highly-suspect numbers.
The used home median sale prices are a more reliable gauge of YOY price changes, as there is an implicit quality control which obtains from separating the categories. By contrast, the “new homes” and “all homes” categories potentially confound changes in the mix of condos and SFRs which sold with changes in the median sale prices for the separate groups. And the new home category could be heavily biased by an increase in the average quality of homes sold, as there is lots of inventory coming on line from the wannabe Rancho Santa Fe development known as Santaluz.
For perspective, note that the median list price of SFRs currently listed on ziprealty.com for 92127 is $1,395,000.
http://www.dqnews.com/ZIPSDUT.shtm
“A Phoenix-based developer made history at a state trust land auction Tuesday, buying up 269 acres in the Desert Ridge area for a record $149.5 million.”
idiot.
Did downtown suddenly create 269 acres? Where is desert ridge?
I doubt that land is worth more than $100k/acre at this point.
Ginster, your assesment of the developer was too kind.
Got popcorn?
Neil
It’s very north Phoenix. Basically, just about everything north of the 101 around Tatum Blvd. is considered Desert Ridge and has been experiencing a massive amount of development for the last 7 years.
At over $500K per acre, good luck getting that to pencil out.
But the article goes on to quote the developer that he plans to build houses in the $400K to $500K range. WTF?
They’re probably planning 2,700-3,000 sq ft houses on 6,000 sq ft lots. Let’s see 43,560 sq ft in a acre divided by 6,000 = 7.26 homes = 7 homes an acre.
They paid $555,762 per acre divided by 7 homes = $79,394 per lot.
Hmm, I’m sure they know what the plan is and this is an upscale area, just north of Phoenix, just west of Scottsdale, and just south of Cave Creek/Carefree. Lots of saguaros, short trees, snakes, and gila monsters.
Heck, they’re going to do it because that’s what builders do. With the cost of everything going down, I bet they make money at it too.
FM
My buddy overbought in the Aviano complex in desert ridge a year ago so I assume that’s near where this sale took place. north central phoenix if I remember correctly, near the end of the squaw peak expressway (although I think they changed the name of that, no?). The actual city limits of Phoenix goes way north all the way near to the carefree highway
Yes, Aviano is the Toll community. There are lots of stuck flippers trying to unload those homes. It is a disaster. Huge mcmansions….not my bag, baby.
The thing about Desert Ridge is that just north of it is several square miles of desert. It is a nice area but there is an awful lot of dirt around it.
What are these guys thinking? Even the name: Desert Ridge. We’re most like heading for an extremely dry period (the last 200 years have been unusually wet in South CA, AZ and NV according to scientists).
And then someone builds a golf course in the desert, but has to delay the development of housing “because of land use, zoning and water issues”.
Just wait until the Colorado river has been reduced to a trickle and water is $1 per gallon…..
Water at $1/gallon? That’s cheap! People are today paying $6-8/gallon for bottled tap water, by the lakeful.
That guy has just become the bagholder poster boy for Arizona.
NO WAY that looks any shade of good on a balance sheet.
Well, but then they go on to say it’s not a record:
‘The recent sale fell well short of the price-per-acre record of $1 million.’
$553k per acre for just [b]land[/b]???? In [b]Arizona[/b]???!!! (no offense Ben).
Pass [b]me[/b] some of that Peyote.
OK let me try that again….
$553k per acre for just land???? In Arizona???!!! (no offense Ben).
Pass me some of that Peyote.
There that’s better.
Guys, when it comes to Desert Ridge you don’t know what you are talking about. All these coments without a smidgeon of knowledge simply serve to dumb down the thread.
I live right in the area. My opinion, outrageously overpriced. What are your thoughts?
I’m not saying the purchase will make money. But this is a nice parcel of land in a highly desired area that is will grow rapidly no matter what happens to the PHX market in general. It’s just too good a location.
The ‘zzz’ in your handle is apropos because you are clearly asleep at the wheel.
It is not in the middle of nowhere. It is close to the intersection of two heavily travelled freeways. It is “on the way” to Scottsdale. It is not worth $550K/acre.
I do not see it as “too good” of a location. I tend to roll my eyes at areas/developments that declare themselves premiere/upscale before the real world makes that call.
Got a house in Aviano you’re trying to flip, eh?
^^^^^^^^^^^^^^^^
i want what he’s smoking..^^^^^^^^
And what “knowledge” would you possess about this?
It’s not possible to “dumb down this thread”…you just haven’t been paying attention. Desert Ridge isn’t magic, just like the Anthem didn’t turn out to be magic nor did Pinal County…at one time, people thought they were the schizznit. Didn’t turn out that way. Anthem is national known as the premier “swinger” subdivision of the nation. And Pinal County just wishes.
Who knows what Desert Ridge will turn out to be, but it’s clear that it’s not going to make these new owners what they hope to make. Ever.
“Now, analysts say new builders can buy that surplus land cheaply and find competitive prices among trade contractors that are happy to have work in a slowing market.”
How many of us predicted that the builders will be able to stay a step or two ahead of the flippers?
Phoenix is going to be interesting!
Got popcorn?
Neil
“Now, analysts say new builders can buy that surplus land cheaply and find competitive prices among trade contractors that are happy to have work in a slowing market.”
I still don’t see how they can compete with the mass foreclosures that will happen in Arizona
Mo Money,
Even foreclosure holders get dillusional about prices. This is all about “velocity of transaction.” 25% off labor, 33%+ off land, 33%+ off materials means that these builders will be able to stay ahead of the curve for the next year.
In other words, the inventory overhang will continue to grow.
Got popcorn?
Neil
But don’t your estimates indicate that at best the recent entry homebuilders will break even at best ? Not a very good business model.
When buying foreclosures myself I never had a bid refused even when I offered considerably less than asking.
I don’t understand how they can call 555k per acre of desert land - cheap.
Especially when this is what you will be competing with. This link shows future projected housing units in the next several years. The teal color is all undeveloped land. 56,800 future units and this guy thinks it is valuable at $550,000 an acre.
http://www.citynorthaz.com/area_housing.php
“Within Desert Ridge, there are currently 6,500 single-family homes and condominiums under construction and approximately 10,000 more to be built within 5 years.”
this is a very misleading picture.. phoenix is NOT this green from the air, they photoshop’d all the desert into ‘green’ space.. makes you think its a east coast city.. unless algae started growing in the desert without me noticing.
got cash?
Comments????
NEVADA REAL ESTATE LICENSEES
Year Active Inactive Total
1979 7,368 2,118 9,486
1984 6,055 7,601 13,656
1989 7,378 4,225 11,603
1994 9,831 5,582 15,413
2000 12,578 5,140 17,718
2006 28,899 7,886 36,785
If you don’t have any Nevada friends in real estate, then you TRULY don’t have any friends!
Nevada population
1980: 800,000
1990: 1,200,000
2000: 2,000,000
2003 est: 2,240,000
2006 est: 2,500,000
Population 1980 to 2006 est = +213%
Active realtors 1980 to 2006 est = +294%
Interesting.
The 1979-2000 gain is probably proportional to state population growth, but the increase since then is off the charts.
Actually what most people don’t realize is that NV’s populate has more than double since 2000. It’s that “shadow population” of illegal immigrants - most of which are RE agents.
“‘Seventy-five percent were refinanced loans. Lots of people took out cash in the last mortgage boom,’ Allen said.”
More proof that it’s not just GFs from ‘04-’06 that are having problems but also those who’ve owned for years loading a 2nd onto the house.
With what equity. Prices along the front rage have been pretty flat since 2001. Of course, there are those lenders who will let you borrow up to 125% of your house value.
FWIW, Colorado was body slammed in the last recession. State tax receipts still haven’t recovered. We lost a lot of good jobs, and created a whole bunch of crummy ones. A lot of people were un and underemployed during the 2001-2004 time frame. I wouldn’t be surprised if a lot of those who took out loans did so because they were trying to consolidate debt they took on during that period.
I believe Ben mentioned last week that he noticed more refis in trouble.
Here’s a question that’s been bugging me. When they say “over $1 trillion in re-sets to sub-prime loans in the near future” do those $$ figures include refinance loans? In other words, are the sub-prime loans all original purchase loans, and all the numbers we’ve been reading about are totally overlooking refi loans, or are the refi loans already included in the sub-prime, alt-a, etc. categories?
Thanks,
“More proof that it’s not just GFs from ‘04-’06 that are having problems but also those who’ve owned for years loading a 2nd onto the house.”
Weren’t 40% of home sales second homes, in ‘04 or ‘05?? Cash out re-fi’s could have been for additional “investment” in RE, meaning these folks are doubly screwed.
Lisa,
The “affluent’s wealth” is so tied up in real estate that they’re screwed so many which ways its not even funny.
Sigh…
Got popcorn?
Neil
“‘I can assure you that growth in Golden Valley was based on Rhodes legitimizing that area. That sets that community back five years, maybe more.’”
Nothing, nothing could set godawful Golden Valley further back than it is. Nothing.
The Golden Valley deserves to be pissed on…
It needs to be set back, a lot. The prices, because of Rhodes, are ridiculous. Lots with no water or utilities and dirt roads were going for a few hundred dollars in 2004, now the same size lots are going for around 50,000 or more, lots more. Forty acre parcels called “Legend Ranch” that sold for about 40,000 in 2004, were selling for as much as 1 million last year. Some prices have fallen, but they feel that they will go up considerably once Rhodes starts building his “utopia”. And after all, Golden Valley will be the new bedroom community for Las Vegas, don’t ya know. It’s over 100 miles away, but people will be falling over each other to buy there and commute.
I just gotta ask. How much more crap can these schmucks continue building, let alone think about building? We are going to have several modern-day ghost towns that can be tourist traps in about 50 years.
“Honey, let’s go to McMansion’s in the Sky by Heavenly Gates. I hear that they built 5,000 Faux Chatauxs on less than 300 acres. Unfortunately, only one house sold and the entire US housing market collapsed, so the Donald turned it into a modern-day ghost town.”
Don’t be too rash. We need SOMEWHERE to put 18 million Iraqi Shites. And they are used to not having potable water… Of course we’ll have to teach them how to golf, probably a gov’t program for that.
Speaking of adjustment markets, this just in from Tucson:
http://www.tucsonweekly.com/gbase/Currents/Content?oid=oid:95075
BTW, the neighborhood mentioned in this story is considered to be quite hot and trendy.
LOL. I’ve seen that movie and I don’t like how it ends!
Ouch.
By the way, you owe me a new keyboard and monitor. And the cleanup crew isn’t going to be too happy tonight.
Ah come on, you dig up some dog bones what do you do with them? Throw them over the fence. Simple.
Dunbar/Spring is hot and trendy?
All this and yet prices where I live are still skyrocketing.
Seems like a lot of specuvestors are using the local real estate market here to park some cash, essentially using us as a piggybank - leaving people that want to live here out in the cold.
This past weekend a house that was to going to be in the foreclosure auction on April 25 went on the market and had seven offers in one day. This house was built in 1976, looks like it will fall over any day, 3bd, 2ba, sold for something over $400k.
I am loosing my mind wondering WTF?!
They must be using Oprah’s nearby mansion for the comps.
What seems odd about the ski resort areas (and the whole I70 valley area in general) is that supply refuses to keep up with demand, even though there is plenty of room. I can only imagine that there must be restrictions on subdividing. I have seen that even in Larimer county. A developer wanted to subdivide some land near Masonville into several hundred 3 acre lots. The county wouldn’t let him do that, and so it wound up being subdivided into 30 acres lots instead.
at the rate it’s going, boulder might eclipse aspen as the new money spot in colorado. no shortage of big money in town. all the mountain towns are the same. even grand junction is on fire right now. californication across the western slope.
I live in the mountains, 11 miles west of Golden. Beautiful country. Real estate is DEAD here.
11 miles WEST of Golden? That’s pretty much the middle of nowhere isn’t it? Doesn’t getting to Denver involve a treacherous mountain pass? Not to mention DIA is clear over on the other side of Denver. I’d be shocked if RE was ever anything but dead out there.
I guess there is the School of Mines and the brewery in Golden proper, but that doesn’t seem like the stuff of high RE valuations. Or maybe I’m just ignorant of CA…
I don’t get it. Boulder is so butt ugly. Take away the Flat Irons and Pearl St. and its just a dirty, run down town.
Yes, and take away any supermodel’s face and body and she is just an ugly, scarred woman.
Ben, here’s a Contra Costa article:
http://origin.contracostatimes.com/news/ci_5693877
Army gives land to developers for services…..
slightly OT ,but does anyone remember when
anyone at the fed suggested less gov spending to reduce inflation ?
could big gov be the problem ?
Colorado Division of Housing’s foreclosure
“California has escalating foreclosures despite a respectable job market, following a trend that started in Colorado more than two years ago. The causes are familiar to Front Range residents, low home price appreciation, meager home equity and mortgages with payments that are adjusting higher, according to foreclosure experts.”
Our family drove from SD to the Sierra national parks and back this week. There is no shortage of “For Sale” signs posted along the highways of the Sierra foothills, and there are unbelievable numbers of new McMansion tract home developments out in Central Valley towns like Fresno and Bakersfield (no news here to Crispy & Cole, I am sure…). It seems as though a sizable fraction of the state’s real estate is up for sale.
It seems as though some economic policymakers in high places believe that respiking the housing bubble punchbowl will somehow fix the situation; I wish they could take a drive through some California real estate markets to gauge the stupidity of this idea.
Or they could come over to Arizona and do the same thing.
Wait a tick. It’s not different everywhere?
We have a 30k housing development here too plus lots of lots.
I’ve driven from the Sierras down San Diego way a number of times and for a housing bubble junkie, nothing beats interstate 15, starting from around Glen Halen Park, all the way down to the border.
Glorious excess and then some.
Speaking of Mr. Crisp a NOD was filed against his wife this week on a house they both own…
The fact that California’s job market is strong is very important in understanding what’s happening here.
Here in Santa Barbara if you have a viable skill or trade you can find a job. You won’t be able to afford a detached home, even with falling prices, but you can find a job that will pay enough to buy a small one bed one bath condo, if you want to live like that.
The collapsing housing market in California is happening because of rampant speculation that occurred over the last 11 years, starting with the dotcom craze that poured hundreds of billions of dollars into this state. The state’s economy is doing O.K, but will be impacted by the the loss of all that real estate investment money. As the housing market falls apart, the California economy will shrink and millions of people who came to California from other states and countries will go back home, keeping unemployment down.
Businesses who grew too big too fast in California will go under. Businesses who kept it small and kept their overhead low will do just fine. And Cali natives with in demand skills and educations will have plenty of work.
So can anyone with a job requiring said “in demand” skills that is still standing after the coming blow-up be considered a native Californian?
I am just trying to understand your reasoning. Do you really believe that only “non-native” Californians will be affected by the scenario that you present, or is it just a case of wishful thinking?
I’m basing my assumption on what happened in 2001 when the dotcom scam when bust.
If you recall, between 1995 and 2001 millions of people flooded into Cali to take computer/dotcom jobs. When the dotcom fraud went tits up in 2001 millions of people packed it up and went back to where they came from. California’s a bitch if you don’t have a job, and Mom and Dad always has the spare bedroom back in Grand Rapids or where ever.
In 2001 California’s unemployment rate went up to, I think, around 5.9%. If all the dotcom losers had stayed in Cali that rate would have been much higher.
Look, this is a weird situation. real estate is tanking during a time of fair economic conditions. California’s population is highly transitory, with high percentages of the work force renting. Nothing about this situation is normal. Your guess is as good as mine.
Santa Barbara has a decent job market because of the godawful cost of housing here — $800k and up for a decent 3bd/2a plain-vanilla tract home in Goleta or Carp. 1bd/1ba condos start at maybe $400k and up. A large mobile home sold for over $500k recently.
Even for desirable employers like UCSB it’s difficult to keep people here or recruit from elsewhere when housing is so far beyond most pay scales. Even doctors are balking at moving here for financial reasons.
One bed one bath condos are selling for $369,000 on Dearborn Place, which I know is a gangbanging dump but that price is $100,000 less than what they were selling for in 2005.
In 2008 1/1 condos in Goleta will run $200,000, 2/1 condos will be $250,000.
Of course, you can buy a 2500 square foot 4/2 home with a detached garage and swimming pool in NorthWest Austin, Texas for that much, and make the same salary to boot.
On April 12, Royal Bank of Scotland Group Plc’s (RBS.L: Quote, Profile , Research) Greenwich Capital Financial Products Inc. unit was named the lead bidder in an auction of more than 2,000 loans.
It offered $47.3 million for the loans, which had a face value of $170 million.
New Century postponed a hearing regarding a potential auction for its loan origination business, which stopped making loans last month.
Hedge funds will have fun gambling on bailout prospects, especially with Connecticut Senator Dodd leading the charge…
48 / 170 = .28
They are offering 28 cents on the dollar for these loans. So, they break even if approximately 3 out of 10 pay off the loan?
oh yeah..this sub prime thing isn’t really a problem at all
move along now…nothing to see here..now let’s bid up the stock of Downey Savings, with about 80-90% of its loan portfolio in sub-prime and alt-a loans. That’s what has transpired in the stock market this week. go figure
“However, Strobeck said he expects the market will perk up again by late this year or early 2008. ‘We’re in an adjustment market,’ he added.”
I can’t disagree. People are going to have to adjust to higher mortgage payments OR adjust to renting OR adjust to living with their friends and family. In addition, they will have to adjust to falling prices AND the inability to withdraw equity AND the inability to refinance. Yes, people are going have to adjust to a new and unexpected perked up reality.
You’ll enjoy the comments that follow the story:
http://regulus2.azstarnet.com/comments/index.php?id=179075
From the comments section:
“No new rental units coming on-line, 35,000 new ‘net’ people coming to Tucson yearly.”
I guess the Arizona kool-aid is 3.5 times stronger than the Florida kool-aid.
The Kool-Aid is VERY strong here!
Enough with the “Kool-aid” references already. That was overworked about 2 days after it was said four months ago. It was somewhat humorous at the time, but now it is stale. Anyone else agree?
Jimmy,
drink you kool-aid, and off to bed.
How ’bout rich, chocolaty Ovaltine?
The same principle applies to investing in real estate or anything else: When everybody starts buying, you sell, and when every sells, you buy.
When everyone starts using a catchy word, you stop, and when everyones stops, start using it again.
People on this blog should understand it, unless they really don’t understand this blog.
Follow-up example:
Mid 80’s “I pity the fool” — very uncool.
Today “I pity the fool” — so cool.
Know why there weren’t any good jokes about the Jonestown mass suicide in Guyana, almost 30 years ago?…
The punchline was too long~
See. That’s cool.
It turns out that the loosening of lending standards may have taken place in the commercial RE markets, as well.
The builders are building more of these sh*t-boxes?! Jeeez. I’m starting to get a sneaky feeling these builders are assuming that, like the hedge funds, if the “fit hits the shan” the damage would be so great to the economy the government will bail them out. Basically, they figure they cannot lose. Let’s face it folks. The US now prints dollars (evern though more and more of the world doesn’t want them) on a “as needed” basis. Not good.
And here’s why there’s been rampant fraud in this housing bubble:
From the opening statements of Patrick Leahy in the Senate Judiciary Commitee grilling of our top Justice Department gremlin:
” I have warned for years against the lack of prosecutorial experience and judgment throughout the leadership ranks of the Department. We are seeing the results amid rising crime, rampant war profiteering, abandonment of civil rights and voting rights enforcement efforts, and lack of accountability. This Justice Department seems to have lost its way.”
Exactly. No consequences and the law has become a complete joke in the US, so why be surprised at all the mortgage and other types of fraud that took place during the bubble? In any organization, things come from the top down. Thus, the rampant housing bubble fraud. Why not? When crooks, thieves and incompetents are in charge, who cares? People don’t fear the consquences, because there aren’t any, except for a few examples made here and there. Complete breakdown of anything resembling law or justice in the US. At least Leahy gets it. Rampant crime and fraud doesn’t happen unless it is rewarded or ignored by higher-ups who are of like mind.
Rampant crime has to do with the feds? Somehow the feds are the ones behind black kids murdering black kids here in Boston at increasing rates.
Somehow I miss the connection.
And “voting rights fraud”? Show me ONE person denied voting rights. Heck, I can show you one non-citizen who’s had the right to vote in Boston for a decade!
Thanks motor voter bill!
And local officials have NOOOO responsibility for what’s going on in their back yards? None?
How sweet a deal that must be, just point to the feds as local fraud goes on beneath your nose.
Whether what he says rings true or not, when I think “Pat Leahy” - I often am led to think “affectation”, or perhaps more appropriately, “jackass.”
Great post, palmetto
Thanks, spike.
Now, to address this: ” Rampant crime has to do with the feds?” Absolutely. In any organization, such as our country, behaviour filters down from the top, where examples are set. Criminality, violence, nastiness, marginialization of people, cheating, lying, thievery, all of this comes from the top where the example and policy (written or unwritten) and reaches the local level.
Now, you have to understand our justice system to see how it filters down, but we’re talking about attorneys general and district attorneys who, although employed by the feds, are involved in regions all around the country. If they can’t do their jobs, or do their jobs according to politics and not what is justice, what can we expect? To illustrate, right now we have two Border Patrol agents who shot a Mexican drug dealer (they were doing their jobs) and for their troubles, are now incarcerated as a result of a Texas AG who has played politics with their lives. So how anxious will other law enforcement officials be to carry out the law and protect citizens? Not very. The police near by in Bradenton stood down while two gangs had a shootout on the beach over Easter Weekend, with citzens caught in the crossfire and deprived of happy holiday family gatherings. Need more? Watch the video and photos of the police in their vests, armed to the teeth, cowering behind trees and walls while the psycho went nuts at Virginia Tech. So how does this relate to the housing bubble? What if you were an attorney general in the Southern District investigating mortgage fraud in Florida? And you receive a call from Washington telling you to stand down because the CEO of the company was a huge campaign contributor?
BTW, back in the day when I was kicking around Ft. Lauderdale, I met a district attorney who worked someone who is right now very prominent and has high political aspirations. They worked together in the Northeast. This DA had a Washington kibosh put on his work against a drug ring in Florida. Years of work down the drain, as a result of Washington politics. How many young people of all races were affected by this in South Florida, as the products of the drug ring were made available to them? I don’t know, but I’ll bet it was more than a handful. That’s how national affects local.
“The Rocky Mountain from Colorado. “More than 6,200 real estate foreclosures have been filed in the seven-county Denver area in the first three months of the year, a 30 percent jump from the record pace in the first quarter of 2006.”
———————————————–
The Great Depression was also the Great Deflation.
The price of everything dropped.
People stop spending when they don’t have money.
Got cash?
“The price of everything dropped”
Brad,
I hope you’re right…think it will happen to these also?
http://www.unitedshades.com/product.asp?idmodel=juliet
yes- on Craigslist
I wonder what percentage of Denver area foreclosures are in Aurora. In metro Denver, the farther east you go, the cheaper it gets.
They never learn:
http://www.charlotteobserver.com/523/story/91014.html
More cuts in CA subprime lending industry. 771 jobs, gone:
http://tinyurl.com/yskget
“Lots of people took out cash in the last mortgage boom,’ Allen said.”
Yes, but they they used that $$$$$$$ for “improvements” and the rest they socked away into “Savings” The economy?…no worries, move along…;-)
“California has escalating foreclosures despite a respectable job market, following a trend that started in Colorado more than two years ago. The causes are familiar to Front Range residents, low home price appreciation, meager home equity and mortgages with payments that are adjusting higher, according to foreclosure experts.”
And home value changes affect your mortgage payments… in what way?
I think the implication is that if you’re underwater and suddenly need to sell (for whatever reason), well you can’t.
An interesting stat I saw the other day regarding Colorado foreclosures. Larimer and Weld counties are next to each other. Larimer has a larger population (300K vs. 150K IIRC), but while Larimer has 100 forclosures in progress, Weld county has 800!
The big difference between the two counties is that Weld’s average household income is quite a bit lower than Larimer’s, in large part due to a huge presence of illegal immigrants. The Weld foreclosures are mostly low income immigrants who bout 150K houses on a 10/hr income (with liar loans of course).
Colorado home prices had a HUGE run-up in the mid/late 90’s with the telecom boom. Prices are still too high, and we are in for true RE battle. Home owners here are stubborn like no other place I have seen. Even Texas. (No offense to TX, I am a 20 year transplanted Texan.)
Chalk that up to Colorado’s boom and bust economy. They thought in the late 90’s that the state economy had become sufficiently diversified to end the boom and bust cycles, but that was not to be as the Telecom Bust and Offshoring did a double whammy that we still haven’t recovered from. I guess that the silver lining on the cloud is that houses out here don’t start at 500K.
I don’t think Colorado ever had the whopping increases year after year after year that some areas in SoCal did.
My house in Westminster, CO almost doubled in price from 97-01. I’ve rented in Boulder since 05 and walked to work. I highly recommend it.
Money manager predicting bigger subprime fallout:
http://biz.yahoo.com/hmoney/070419/041907_rodriguez_subprime_moneymag.html?.v=2
“If we have low-to-mid-single digit appreciation, then the world is safe - this will have a short-lived impact. But what happens if we have zero appreciation, or even price declines? If you ask the credit agencies, they will tell you their models just fall apart.”
GE’s WMC Mortgage to lay off half of staff
http://www.reuters.com/article/ousiv/idUSN1943323620070419
Let me introduce you to the Greatest Explorer in California History:
http://www.josephrwalker.com/Preface.htm
I wonder whether Countrywide has picked-up any of the servicing operations of these defunct lenders?