Speculators “Late To The Party” In California
The Voice of San Diego reports from California. “New downtown condos were gold in 2004. Buyers rushed to deposit thousands of dollars to secure their spot. And so the company building apartments on Little Italy’s West Beech Street decided, eight floors in, it’d be better as condos.”
“The project, called Acqua Vista, was sold to K. Hovnanian Homes, which would finish construction on the two towers and change the project to condos. It was the first downtown project to be converted for sale before the apartments could even be rented.”
“But now, 14 of the building’s 383 units are in foreclosure, according to RealtyTrac. Thirty-eight units are on the market, some listed at a loss.”
“‘It’s the black hole of condominium values,’ said Anthony Napoli, a Little Italy Realtor, of the building.”
“The way in which downtown proceeds in the coming months could serve as a bellwether for overstocked markets nationwide. That’s why the 14 foreclosures in one complex stand out so starkly. The number of units for sale in Acqua Vista is more than double that of the building with the next largest pool of units for sale, said Lew Breeze, a downtown Realtor.”
“The addition of nearly 6,000 condos and apartments-turned-condos between 2001 and 2006 upped downtown’s residential quotient by almost half. But as these distressed owners, and the lenders who enabled them to buy, try to recoup as much of their debt as possible, the owners of the surrounding units could see their own values drop.”
“At least half of the owners currently in foreclosure eschewed down payments and used mortgages to cover the whole purchase price. For many in the project who financed 100 percent, it is proving difficult or impossible to refinance or sell without losing money.”
“‘The people that bought (in Acqua Vista) came late to the party,’ Napoli said. ‘They thought, like everybody, that things were going up. They thought they would make a killing.’”
“One distressed unit, is a 1,249 square foot penthouse. The owner, Carlos Espinosa, is a real estate agent himself and purchased the unit for $983,000 directly from the builder in June 2005, covering the entire cost with mortgages. He also owns another unit in the building, which he has listed on the MLS for $1.6 million.”
“The unit in foreclosure, has been listed on the MLS for 250 days with an asking price of $999,000 to $1.15 million.”
“As buyers have started thinking twice before making a deal, Acqua Vista has a few too many deal-breakers for units to sell at the same prices they garnered two years ago, Napoli said. ‘When a market turns, quality can still get you some value,’ he said. ‘But poor quality will plummet.’”
“Among the 14 distressed units, two have received notices of default, the first stage of foreclosure. Eleven of the units have been repossessed. One unit, No. 206, was scheduled for auction April 4. The owner of No. 421, which is scheduled for auction at 10:00 a.m. on Thursday, financed 100 percent of the $515,000 purchase price with New Century Financial Corporation when she bought her condo in January 2006.”
“Not much can distinguish one one-bedroom unit from another in a condo tower, so owners are often at the mercy of what price their neighbors’ units sold, or auctioned, for. That could worsen the foreclosure trend in Acqua Vista and in similar projects in the region.”
The LA Times. “There were 5,977 foreclosed homes on the auction block in Southern California in the first three months of the year, up from 711 in the same period last year, according to DataQuick.”
“There were six homes on the block this day. They were bought in 2005 and 2006, at the crest of the housing boom, by buyers who financed the entire purchase. That means the homes are probably worth the same, or less, than the amount the buyers owe. No one bid.”
“At 10:30 a.m., Travis Toth, an auctioneer hired by other trustees, stepped up to market a foreclosed condominium near La Cienega and West Jefferson boulevards in Los Angeles. The opening bid was $259,592, which was the sum owed on the mortgage plus about $20,000 in processing fees.”
“Right away, two men and a woman produced cashier’s checks to identify themselves as serious bidders. With cellphones at their ears and hands cupped over their mouths, the bidders bumped up the price in $1,000 and $100 increments.”
“After 10 minutes of back-and-forth, the auctioneer calmly declared, ‘Sold.’ The winner politely declined to give his name to a reporter except to say that he had been doing this for 11 years.”
“Whatever his identity, he appeared to have scored a bargain. The final sale price was $267,500, more than $100,000 below its estimated value.”
The Wall Street Journal. “Lenders, stung by a surge in defaults, have rediscovered the virtues of caution over the past few months, eliminating many of their no-money-down loan offerings. That tightening is ‘really starting to bite,’ says Ed Mixon, a real-estate agent in Monarch Beach, Calif.”
“Mr. Mixon recently had to advise one of his clients, a young woman with a good job and credit record, to put off her dream of buying a $300,000 condo in Laguna Niguel, Calif., until she could come up with more than her current nest egg of $5,000 for a down payment.”
“A year ago, he says, she could easily have obtained a loan to cover 100% of the condo’s price.”
The California Aggie. “Home prices in Davis, which saw a steady decline during the past year, have leveled off and are anticipated to increase, local real estate experts said.”
“‘They seem to have leveled off over the first three months, but we’re seeing inventory starting to rise a little bit,’ said local realtor Joseph Whitcombe.”
“‘Many potential buyers are waiting for a better deal or more choice later on,’ said Andrew LaPage, analyst for DataQuick. ‘Before, people thought it was better to buy now or get bought out later on.’”
“The same scenario is also impacting other areas around Davis that are seeing an influx of new housing tracts. In nearby Woodland, home sales dropped by 48 percent from a year ago, and prices fell by as much as 14 percent.”
The Times Herald. “The local real estate roller coaster’s descent may be slowing, so now may be a good time for buyers to hop on, some local experts say. Home sales in the Vallejo area and statewide are still falling, but at a much slower rate.”
“The median price of homes sold in Vallejo and Benicia fell slightly from a year ago, said Jeff Dennis, Solano Association of Realtors president. But quarterly numbers are almost meaningless, he said.”
“In Vallejo, sales dropped about 33 percent in 2006 over 2005, but only 30 percent so far this year, Dennis said.”
“‘We are still experiencing high inventory, especially in Vallejo, and longer times on the market, so I expect more price reductions to reduce the more than 1,000 homes for sale here,’ Dennis said.”
“‘None of this is the end of the world. The predictions of the whole market going in the tank have been proven wrong. Our area is being hit, but it’s only as significant as you want to paint it,’ Dennis said.”
“Benicia mortgage broker Mitchell Chernock of Sky Valley Financial, Inc. says he sees a less rosy local real estate outlook.”
“‘Every day we talk to people who are under water in their mortgage,’ Chernock said. ‘How can you expect home prices to rise with a record number of homeowners going into foreclosure? With rising interest rates and adjustable mortgages skyrocketing, people will need to get out of their homes, and they won’t be able to sell them.’”
The builders were all down today.
The Housing Gods wanted us to have this……
Goldilocks will be back soon enough.
And the bears will eat her.
“Home prices in Davis, which saw a steady decline during the past year, have leveled off and are anticipated to increase, local real estate experts said.”
Call the cops; someone is on drugs. RE prices are heading up again.
“Home prices in Davis, which saw a steady decline during the past year, have leveled off and are anticipated to increase, local real estate experts said.”
Never mix hallucinogens with forecasting.
“The builders were all down today.”
Yes, but then they are not really down much over the past nine months, are they? There is something very puzzling about stocks which can have so many down days, yet somehow always bob back up to where they were a few weeks back, despite a never-ending barrage of worse-than-expected news.
There’s the rub, Stucco. Every time bad news comes out they say, “well, we expected this”. You need to be patient if you want to play the HB stocks. Eventually they will drift lower. I think you buy 2009 puts and just walk away. Playing them any other way will give you a heart attack.
The key to winning in the stock market is knowing how much pent-up demand and/or supply there is. If the small investor could see daily short positions on stocks (as the institutional investor is able–isn’t it interesting that the small investor is only allowed to see data that are weeks old in this regard), making money in the stock market would be easy.
To wit, too much shorting of HB stocks recently means that there is pent-up demand.
And I think that this will ebb and flow and by 2009 the HB stocks will be considerably lower than today. If you are negative over the long-term you can wait out those shorts-caused peeks and valleys.
“To wit, too much shorting of HB stocks recently means that there is pent-up demand.”
I guess New Century and Accredited Home Lending didn’t have enough shorting.
I thought Gordon Gekko told Bud Fox in the movie Wall Street that the way to win on Wall Street is to have insider information. He said to stop bringing me information and go out and find me some information.
blue horseshoe loves [insert homebuilder stock]
Stock market does not reflect the health of the national economy anymore, since it is global, and surely manipulated by PPT. I had red on the EU news that US companies generate up to 40% of all revenues in EU countries alone. Take with it Far East and you will see smaller amount of revenues are generated in the US for the multinational companies. Even if the USA will head to recession, which is not far off considering last Qtr growth of 1.2%, the stock market still could rise. The DOW goes down significantly since 1997 only if there is international event with far reach consequencies (Russian Default, 9-11, China Feb-2007, …)
virginian:etal:
You just posted, ” what I have said in the past”. Stocks have detached from their fundamentals. (?) why? For 25 yrs stocks rose on flat infaltion numbers with good economic data.
But now the man on the street knows inflation is more like 8%, and the economy is drifting negative MOM since approx. 2004. In fact, one could read that stocks {an intangible assets} are traded like a “real hard assets” as if they are protection for the 12-20% increase in the money supply.
So people in the USA see the Dow, oh 13000 “new highs” while people using the DOW, in virtually any other currency can’t seem to retrace the 2000 top. see this report
http://www.financialsense.com/fsu/editorials/petch/2007/0430.html
I don’t this this is an insider information thing. After the close AHM announce a huge secondary offering, diluting their already pathetic stock.
What it could be:
1) Some “smart” money thinking the bottom is here in the mortgage industry and buying cheap.
2) Hoping for a buyout.
Both things, in my opinion are delusory.
I was at UCLA yesterday and hapened to walk by KB’s big beautiful towering shiny building on Wilshire Blvd. Then I put a little hex on it.
I hope the sidewalks are made of rubber..
“I hope the sidewalks are made of rubber.. ”
I don’t.
Let’s just hope that they are easy to clean.
Meh. The wind blows to the IE and I’m sure it will not smell all that much worse than normal.
Quit the drama. These guys have already made a ton of money.
What makes san diego’s situation all the worse, is they’ve secretly turned into el lay, after spending generations bagging on the city of angles…
The only thing thats seperated the two is a tiny piece of expensive beachfront called Camp Pendelton. Same cars, same condos, same houses….its the epicenter of the UNITED STATES OF GENERICA
I haven’t been down there in a while but the best part of Camp Pendelton was the warning sign showing families fleeing across the 405 right before the CA agricultural harassment stop.
“haven’t been down there in a while but the best part of Camp Pendelton was the warning sign showing families fleeing across the 405 right before the CA agricultural harassment stop.”
Strange but the US Military and SCE(San Onofre) hold a 20-30 mile almost pristine stretch of largely undeveloped hill/shoreline property fronting the Pacific from Basilone Road(north entrance to CAmp pendleton) all way to outskirts of Oceanside.
Ditto for Port Hueneme base in Oxnard and Seal beach Naval weapons station. Both also have large tracts of estuary swamp ecosystem land, largely undeveloped, along the desirable pacific shoreline. Strange that the U.S Military still holds large almost pristine shorefront tracts, some of them designated wilderness preserves. These areas are almost the last bits of SCal shorefront not given over to urban/housing development.
“almost pristine shorefront tracts, some of them designated wilderness preserves. These areas are almost the last bits of SCal shorefront not given over to urban/housing development”
Another sad note on the razing and development of Ca Coastal wildlands and preserves. The Playa Vista large Planned community In West LA has completed its first phase from Lincoln half way to Centinelia along Jefferson south to the bluffs. The last final eastern Half centered around the old Howard Huges hangers is still ongoing. T will be slow going as the developers are dealng with a host of issues such as methane control, groundwater/soil testing, proper drainage in this former Natural Wetlands site, preserving the old hangers, ect. This will not be a simple raze, bulldoze and slap up a develpment quick and dirty such as is done in the IE but a complex careful constuction plan on a former sensitive wetlands area.
The only remnants of the Ballonia Wetlands will be from Lincoln west to the sea, a very shrunk and reduced section.
This is perhaps the last large scale planned urban residential community to be put up anywhere in LA/OC prime coastal land.
You mean illegal immigrant families crossing the freeway to avoid the Border Patrol checkpoint.
It’s a border crossing but it’s way inland past SD so I used to call it the agricultural harassment station.
Ah, I remember the good old days in San Diego when I went to UCSD in the early 90s. I remember my drive from the west side of LA to San Diego. There were hardly any cars going south when you hit Camp Pendleton — just empty.
I hear the SurfRider Foundation was trying to stop a developer from ripping up the creek that feeds sand into Trestles. For those who don’t surf, Trestles is one of California’s premiere surfing breaks. Sort of figure the local polls would allow a developer to rip the creek up for some crap boxes.
Speaking of San Diego developers and their influence with polls, I always get a kick of how they want to turn Mirimar Ariforce Base private. Wonder why? More development! And then we can fly 747’s over UCSD and La Jolla all day long. ( not the occasional galaxy transporter or F-18 ) They can call it Qualcomm airport or something…
I don’t know where you heard that silly crap. San Diegans are overwhelmingly against privatizing or even sharing the Marine Corps air station at Miramar. Its the business boosters who want to boost growth that want this. So far they haven’t gotten anywhere
Josh
“The winner politely declined to give his name to a reporter except to say that he had been doing this for 11 years.”
And the winner is…. ultimately going broke. If this chump is playing the same game that worked for 11 years during the market run-up, he’s sunk.
To win at the game today the strategy has to be one that worked 17 years ago. Stay out until the buyers dry up. I guess he was the guy at the poker table looking around to identify the sucker. FACT -There’s always a sucker at every table. He should have brought a mirror…
If you’re willing to put in the time auction/courtstep homes can be a good deal. Even in a market that’s going up. Unfortunately it’s a full time job.
Here’s the problem. In a market going up there’s never enough you can flip for a profit. And in a market going down none have equity.
Can you help me try and understand what you are suggesting here?
There’s no way to know now how bad this bust will ultimately be or how long it will last. Any purchase made here will be upside down soon and there’s no way to know how far upside down.
Now is the time to WAIT. After that, WAIT SOME MORE. Wait until inventories show signs of tightening and prices stabilize after declining. Defaults have to be declining too. This bust won’t be over for a long long time.
There’s always some sob story borrowers will come up with about why they can’t pay the mortgage. And there will always be vultures waiting to pick at the carcuss. If you’re willing to put in the time to research you might find a deal.
If you wait you WILL find a deal. Is that better.
Some of us here are basing our predictions of (at least) 4 more years of declining prices on the ARM reset schedule (just Google “ARM reset schedule”). If the first wave of ARM resets, which peaks at the end of ‘07, doesn’t produce serious price delinces by late ‘08, perhaps no serious price declines are ever coming, and perhaps it will be safe to buy. If the first wave does produce serious declines, the second wave will probably produce further declines.
Urgency to buy real estate is so 2005.
Urgency to sell is so right now.
AS Bear Sterns, Merrill and the lot of investment bankers who want price supports in the housing market by any means possible, a continued stream of skilled voices will “bend the ear” of the Fed who continues to “lip service” the inflation issue…..Feds gonna lower, bailout the short term money, put more air in the bubble…..ahhhhh
Kool Aid for Everyone.
Exactly. This guy’s been buying since housing prices started going back up (or at least stopped going down) in 1996 in So Cal. I wonder how well his business plan holds up during a time when prices are falling? After all, his purchase just set the new comp.
There is some debate about whether Trustee sales ever make it into the market figures as comps. They would distort the figures and push them higher as most Trustee sales revert to the lender when no bid exceeds the loan amount. Think about OptionARM Trustee sales where loan amount will be 110%-125% of 2005 loan origination…
Trustee sales don’t count as comps in the resale market. The status of the sale is usually indicated in public records and appraisers weed them out. The only way they will count as comps is when the bank resales them to the general public.
Why do trustee sales count as real sales then. Trustee sales should be weeded out of the real sales figures also.
The guy who bought that property is worth over 12 mill. I don’t think he will be in trouble.
The market will take a long time before the prices come down.
Not necessarily a chump. I’m not a housing bull, but I’m sure there are reasonable deals to be picked up at foreclosure sales, 250K for a condo in LA doesn’t sound like a rip off to me.
except that they were 140k only 10-12 years ago
Well, with inflation at 3% per year, you would get to $190k alone, but we all know real inflation has been running higher, has it been running at 6.5% or more though? Maybe.
“until she could come up with more than her current nest egg of $5,000 for a down payment.”
$5,000 isn’t a nest egg. It’s barely a decent night with two double-jointed hookers.
Trying to work here! Quit making be laugh!
Don’t they have two hour escorts in NYC? $1200 can get you a nice looking “model” for a couple of hours. How else can Larry King get a date?
Looks like Jeff Dennis should be the new NAR chief economist. Everything is rosy.
“In Vallejo, sales dropped about 33 percent in 2006 over 2005, but only 30 percent so far this year, Dennis said.”
See? We’re near bottom! What the dingbat is trying to cover is that sales are off nearly 50% since the peak. . . And what the hell does he mean by “so far”. Anyone have the hard #’s for Solano?
Sales are down by 50% and builders have cut building by about 20%. Somebody tell me what that equals. It sure the heck isn’t a “balanced market”. But it sure makes NYCityBoy laugh at all of these morons and their rosy pronouncements.
“None of this is the end of the world. The predictions of the whole market going in the tank have been proven wrong.”
Sure, sure, if you say it to yourself enough times, it will come true. I love how people convince themselves that a multi-year price explosion will only be followed by a minor “correction” lasting a little less than a year.
Look out below…
I’ve had a number of conversations ending on just that comment: That houses prices went up so far, so fast was ‘awesome’, but housing prices falling as far is simply impossible. Why? Well, gosh, they can’t because it would a disaster. No logical reason - they just can’t. End of story.
These naysayers about prices falling back to affordable levels must be counting on the government to somehow get involved to prop up the price levels, say through some kind of a bailout. Other than that scenario, which cannot be ruled out despite the official disclaimers of politicians like Dodd, I don’t see how unaffordable pricing can survive the subprime implosion for long.
It won’t…
Frankly, GS, I have yet to find a single bailout scenario that I can’t find huge holes in. Every single one would ultimately aggravate the situation.
Knowing full well that politicians can’t leave well enough alone, though, I’m counting on them to do something (way too late, of course) that will guarantee the worst possible outcome.
The supply of new units coming online has created an oversupply. These new units were built with the expectations of never ending mortgages approvals to (as we know) less and less deserving clients. With credit tightening, there is now no way to sell the available units to anyone. Some will have to be destroyed. So that tells me where prices are ultimately going, to zero. Would the builder take zero, rather than go to the expense of tearing the place down? I don’t know, maybe.
“Not much can distinguish one one-bedroom unit from another in a condo tower, so owners are often at the mercy of what price their neighbors’ units sold, or auctioned, for.”
You mean the comps count when prices are falling!? Say it ain’t so!!
But their condo is “special.” It is where they raised their kids. They’re not just going to give it away. Maybe they should bake some cupcakes.
Any mention of the ‘cupcake woman’ gives me a headache. She, in common with Casey Serin and lots of other investor/fools did the old “I am such a RE god that I ought to quit my (real) job and focus on selling full time!” Good idea, cut out your income right when you are on the verge of detonation…
Any mention of the ‘cupcake woman’ gives me a headache
It was with expectations of a quick and easy sale that Cindy Schwanke put her Castaic home on the real estate market earlier this year. But six months and three Realtors later, Schwanke has yet to sell the house or even interest many buyers.
“I had an open house on Saturday and no one came through,” she said. “It just seems like no one is looking right now.”
Sorry, hard to resist, just like Cindy’s cupcakes.
“In Vallejo, sales dropped about 33 percent in 2006 over 2005, but only 30 percent so far this year, Dennis said.”
So 2006 sales were 33% below 2005 levels, and 2007 sales are ONLY 30% below 2006’s? I’m calling bottom!
“I’m calling bottom!”
Maybe you should apply for the new job opening as chief bottom-caller for the NAR…
I’m amazed at their ability to spin this…
Down 33% is bad…
But being down another 30% is a good thing… Slowing enough to buy…
Man… I think punching anyone who tries to spin news like this should be mandatory.
Got popcorn?
Neil
What he meant was: Down ‘only’ 30% is 10% ‘better’ than down 33%; so it’s UP 10% from before. eh eh?
So sales are “only” down more than 50% from 2005 levels. Nothing to see here…
I have a question?! I have a friend who is selling a house for 660K and the buyer asked for 10K in closing and 20K in cash back for incentives. Does anyone know the tax consequences for the seller as well as the buyer?
I really would like to know if they could write off the 30K as expenses.
They should sell it for $630k and call it a day.
Otherwise, IMHO, they should seek expert legal and accounting advice regarding what they are being asked to do.
I disagree. Internet blogs are the perfect place to seek out financial advice from strangers on sketchy deals that involve the IRS.
Experts and paid professionals will probably say ‘Don’t do it.’
I say, Go For It!
I agree. The point of the incentives was to lure people to buy. People who bought thought they were getting a “deal”. Just drop the price.
Oh, I forgot. We don’t want to upset the neighbors. (/sarcasm)
BayQT~
Have the escrow disperse the 10k and 20k through escrow and put it on the closing sheet. Seller doesn’t pay tax on it. It’s up to the buyer to do his own taxes. If the buyer doesn’t declare it ,it’s his problem if he is audited.
The 30K is subtracted from his saled price. Also subtract commisions, transfer taxes, etc to reach a net sales proceeds to use for capital gains, or for the owner occupied exemption on sale.
Considering the property tax consequences in CA, I don’t see why the buyer wouldn’t just want a price reduction, since the selling price sets the property tax level.
Because the lender lends based on the “sales price” and the buyer wants $30K to buy toys - he/she/they couldn’t care less about tax consequences - that’s next year. For many buyers the most cash they ever control in their life is the kickback they get from the seller at closing.
in India, I dont think backsheesh is taxable.
Pretty much all news on the housing front is bad these days. In spite of this, prices are very stubborn. I wonder how long this can last. Who is buying these foreclosures? Are they overpaying for them? There has got to be a point where prices take a drastic hit. I just don’t get it. Sales down, foreclosures up, inventory up, yet no serious capitulation on the part of resellers. In the past, were there always homes sitting for sale for 2 years? This stuff is nuts.
“There were six homes on the block this day…No one bid.”
Its not nuts. As many have pointed out here, the foreclosure process takes time and until the prices begin being set by these disasters, many sellers who have the wherewithal will keep their asking price up.
The question in my mind is, given the unprecedented lending in this bubble, with so many people going belly up so quickly, with so many “investment” properties empty, how long will this current phase (still sticky prices) last? And when it ends, will the capitulation phase be equally “unprecedented”?
I don’t see how it won’t but markets almost always surprise you. I see banks trying to wait out the market as well, not taking the hit on their books, hoping they fed will come to the rescue with another huge rate drop……..I don’t think that’s going to happen too soon.
So, the stickiness may persist for another 6 months but with 30% declines in sales, it won’t matter…..inventories will continue to grow and no one will be able to hide the empty houses. Not in this internet day and age.
I think the “sticky prices” has become a buzz word that people now believe despite significant evidence (enormous inventories, plummeting demand, tightening credit, etc…) for a quick collapse. My guess is the odds are 5:1 that a collapse will occur over a one year span maybe in 6 months, maybe in 18 months.
Robert Shiller is usually pretty accurate, and he says it will be a gradual decline over many years. This is where our opinions differ. I think it will be a short gradual decline, followed by a collapse, followed by a long period of stagnated prices.
I think the key is appraisals. Once they start coming in low, collapse will be swift- selling above the appraisal is virtually impossible, so sellers will either have to drop to the appraised value or else pull the house off the market. Foreclosures will be sold at appraised value. So, the question becomes, how long until the appraisals start showing serious declines?
In places where significant numbers of new houses are approaching completion, I think pretty soon sellers will clue in and decide they have to sell before lots of new inventory comes on line. This should force the hand of condo owners in larger cities to give up the ghost fairly soon.
“I think the key is appraisals. Once they start coming in low, collapse will be swift- selling above the appraisal is virtually impossible, so sellers will either have to drop to the appraised value or else pull the house off the market. Foreclosures will be sold at appraised value.”
Pardon my cynicism, but when did the practice of honest, accurate appraisals resume?
I would guess about a week after the first batch of appraisers are hauled into court for fraud, or sued for lack of due diligence. Send in the lawyers to bayonet the wounded, I say…
Motgage Fodder
“I think the key is appraisals.”
If information on comps were not hidden from view, I would agree with you. But I noticed recently that some of the comps from the past couple of years have mysteriously disappeared from the SD County Assessor’s web page, which used to make such information freely available. I expect the REIC to do what they can to hide evidence of falling home prices, including lies. It will not stop prices from falling, as there are not enough qualified buyers anymore to support 2006 price levels, but it will draw out the bust into a slow, painful death instead of mercifully letting it die a quick and relatively painless death.
As long as wholesale lenders continue to let brokers control the appraisal process, there will be problems. The lenders do this for competitive reasons. When the losses get too painful and bad appraisals are determined to be the cause of much of this, it will change.
When sensible lending returns (if ever), 100% financing will be gone or greatly diminished and lenders will get a review appraisal (of their choosing) for all loans over 90% LTV.
Just yesterday a colleague at work related a sob story regarding an appraisal for financing on his now permanently anchored double-wide. He has it paid for, but now that it’s “real estate” instead of property he wanted to suck money out of it. The mortgage broker’s appraiser came in at a pretty good number, but the mortgage broker then handed it to Countrywide, who insisted on a reappraisal with their appraiser. Apparently the reappraisal came in at a significantly lower number which, according to my colleague, “wouldn’t cover the cost of the garage.” So there, I guess…
It’s funny that here we are in May 2007 and so many posters have so many different ideas on how this will play out. Remember that everyone was saying after Superbowl look out. Im not sure anyone knows how this will go down.
I agree with Shiller. Nominal prices will stagnate or decline slowly in many areas. My gut feeling is that this is going to go on for years. Large drops will occur in some places (Las Vegas, Sacramento exurbs, Florida), but most areas will see *real* price declines of 3-5%/year for several years. I also wonder if some of the huge amounts of $$ overseas that may flow into favored areas (e.g. SF Bay Area, Seattle) as prices decline, keeping them from free fall.
Just MHO.
You know what would be a brutal (but perhaps amusing) scenario… (1) Bank forecloses on McMansion, eats $100k (2) hires PI who discovers fraud and collusion among the appraiser, straw buyer, seller, RE agent and/or broker with possible other fradulent activities on other house sales in the past (3) Goes to court, calls them a criminal enterprise and sues under RICO (4) triple damages
I smell a movie deal….
July 4th 2007 is the start date of the panic selling. Not much longer to wait to see prices drop significantly.
Ok. Im going to hold you to this one. JULY 4th people. You read it here.
Not hard for me to remember. That’s my birthday.
BayQT~
The REOs haven’t put much pressure on prices, YET. Lenders are still hoping to get top dollar. Every market is different (at least as to the timing), but I figure that prices will stay relatively sticky until the bank auditors start pressuring the banks to get rid of their REO. Not sure how that process works, but maybe someone with some expertise can enlighten us as to how often the regulators look at the bank’s books and what factors they look at (total # of REO, time REO held, etc.) when deciding whether to pressure the lenders to sell.
BB relax! Wait till the invetory of REOs swells in late summer early fall. The lenders will have to make a choice: do they carry the costs on vacant uninsured housing for 5-10 years, or do they reduce the price 10% every three months until it sells?
These lenders WILL find the equilibrium price. If it takes 6 months or 30 months to find this equilibrium price, it will be found.Whatever this equilibirum price will be, it will be a whole lot better than carrying for 5-10 years.
Look at what is now happening with people still paying these outrageou prices as the final clean up of GFs. After this summer, there will be no more GFs with cash in hand for 10% down. The only people left will be folks like you and me. Plenty of cash, but very little fool.
Got 10% down?
They don’t wait 90 days to drop 10%. Good R.E.O. Managers will come in 10% below market. If it’s not sold in 30 days they’ll go another 10% without blinking an eye.
all the good ones retired…..now they are just idiots. remember the new paradigm, RE always goes up, until your foreclosed, then you have to try and support the market by pricing your REO too high….my market has a fair share, and they are all too high.
like I said, idiots.
Well, if they want to remain employed they better learn quickly.
Yeah, but remember the Resolution Trust Corp. They took forever to sell their properties (despite the fact that they were supposed to unload them as quickly as possible). Of course, this was (1) a gov’t response to the S&L crisis and (2) a secret way of the fed propping up the banking system. Still…
What will be really great is a lot of these guys are going to hold on till spring 08 looking for that bounce.
Its like watching the dam bulging while the guys are building at the top.
Then the second wave of the Tsunami hits late 09-10…
Your 10% will rapidly become 30%.
Ok, I guess we will have to wait till next superbowl….or the one after that…or the one after that.
cjs,
It’s not a matter of a specific date. Gotta figure it’s more like a snowball rolling downhill… starts out slowly, but gathers size & speed over time.
Cap’n, picking the start of the substantial decline is akin to picking the top or bottom. Namely, it’s just educated guesses. But prices will come down eventually, either quickly or very slowly over the course of years or decades. From an economic standpoint, housing is so far out of line with fundamentals and reality, that I don’t think any educated individual, save for the most bullish, don’t doubt housing is in for a correction.
Now, whether it be a slow one or fast one, that’s anyone’s guess. I hope for a rapid decline, but my money is on a slow and painful stagnation of prices spanning 5-15 years.
This is my town, Davis CA
The Cal Aggie article has been circulating at work all day. People are openly laughing at the idea of a market come back any time soon. Everyone knows that the Village West development broke ground this spring which has 500 units just for staff purchases and a gazillion student housing units.
Without pricing preasure from limited growth, the Davis market is hosed.
And in Woodland, the
Davis is no exception….the slide will continue when the Laws of Supply and Demand are obyed.
I was in San Diego last week…..viciously over-priced. There’s anger in the air over there…you can smell it and taste it. Major haves and have nots.
“Have nots” = owners of homes with unaffordable mortgages and declining market values. I can tell who bought at the wrong time in SD by the depth of the worry lines in the owners’ foreheads.
I don’t think they are the “have nots”, I think they are the “victims”. Just ask them.
There were many apartment projects foreclosed in Davis from 1991-1994. The reason? Stuck homeowners could not sell after the 1990 housing price correction started. So many homes came onto the rental market by 1991-94, what was a 2% apartment vacancy went to 15%. Apartment owners who bought in the late 80’s using 97% occupancy and ever increasing rents suddenly could not make their debt service. It caught a lot of people buy surprise, as everyone knew occupancy and rents would never drop in Davis.
Between the UCD project and Woodland building 4000 units as close to Davis as they can, the prices have to come down.
There is another issue Davis needs to take into account and that’s the swarm of retirees that getting ready to sell. Even my landlord is nervous and wants out now even though they almost have this place paid off.
I remember that. I graduated from vet school in 1992 and several of my classmates had bought houses that they thought they would be able to sell for a profit when they graduated; instead they had to eat major losses.One person lost $20,000 on the sale of the house. At that same time, I rented a bedroom for $350/mo for 4 years (which also allowed pets). That memory is one of the major reasons I have been skeptical of the notion that house prices always go up.
Has anyone seen this yet? I’ve been reading it all day long… Looks like this site has finally made the papers. (Front cover of the Boston Globe RE section…):
http://www.boston.com/realestate/news/articles/2007/04/29/brokers_in_blogsville/?page=1
“Meanwhile, at the other end of the spectrum are sites such as thehousingbubbleblog.com, and Bostonbubble.com, which, as their names suggests, dedicate commentary and information to what its hosts and supporters believe are overpriced real estate markets, and the consequences of such high housing costs. Contributors routinely lampoon and otherwise pick apart the typically rosy utterances of real estate industry leaders, and the language on such sites is often blunt.”
WTF? Blunt language? What they should’ve said is we don’t mince words.
Well put.
LATimes, OC Register, Businessweek and WSJ have all covered this blog before.
LA Times was first with a big time article. That really brought out the trolls before Ben had software to manage them.
I think they mean “not smoking a blunt”.
Blunt language? Us? The VERY idea…
The newspapers are rather late to the party,
Bens Blog hit the papers a few times.
The other blog I visit is from the Wall Street Journal. They have a couple shills (realtors). The bears keep giving these bulls (realtors) a good wacking! Its rather funny reading…
http://discussions.realestatejournal.com/RealEstateJournal%20Discussions/1
Hey, ANECDOTALLY… this 1920’s 2BR house in the OC that sold for $500k about 5 years ago (I sneered) and was listed last fall for $1 mil, dropped to $850 this spring–had a For Rent sign in the yard this mornig: $2050 @ month. Yeah, that should cover the payment…
That’s hilarious. What an idiot.
So where did that $350K disappear to?????
Inquiring Minds want to know!
So many examples of this, in all parts of the US. Asking prices 35x the annual rent, when by traditional standards the price should be 8x-10x the annual rent. Have posted before, I am a tenant in a place where the asking price last fall was 47x the annual rent. Recently the asking price was reduced to 43x the annual rent. WhoopTheHeckPee ! So far, one showing since last November. It will be interesting to see what happens In Season.
Reminds me of the house that I always talk about.
550 sq. ft on (maybe) a 750 sq. ft lot in Hollywood (although listed as WeHo)
It’s basically a glorified living room with a tiny bedroom (not sure a bed can fit)
Listed for $530k 2 years ago. sold, flipped, plants put in front yard
3 months ago, 4 for rent signs put in front yard.
Now, listed for $699k!!!!
http://guests.themls.com/profile_page.cfm?mls=07-179671
Just love the jail cell door in the kitchen.
That’s just the guest house. Wait till you see the main house.
That’s just the guard house. Wait till you see the guest house.
Got 10% down?
What a joke. Nobody is going to pay anywhere near that. That place isn’t even worth $200k.
I just caught something hilarious in the write up.
“includes a bonus room, great for a plasma tv”
The bonus room is a step down little square off of the living room. It’s more like a little closet you could store a few boxes in.
They should go as far as to list in as a 2 bedroom. Might as well, right?
They specify “plasma” because any other TV would take up the entire space all by itself.
Here in Santa Barbara the 46 unit three story condo project looming over my shop has come to a virtual halt. This thing is maybe 50% complete, with all the framing still exposed. There are maybe ten guys working on this huge project, half of them foremen. At the rate they’re going it won’t be done for a year. Condo prices and sales have hit the skids in SB. I doubt that the investors in this project will be able to recover their construction costs.
Half of them foremen? Reminds me when I used to work at the old Chicago Main Post Office on tour two (fed beuraucratic shpeel for second shift). Half the people on the workroom floors where supervisors and supervisors’ supervisors.
Got 10% down?
Oooo, is that the one off State St. close to the beach? Visible from my favorite coffee shop by the viadock?
It’s on the corner of Chapala and Gutierrez, next to the Salvation Army homeless shelter. It’s easy to find, just follow the trail of urine and vomit to the shelter and the condos are next door.
Now THAT sounds like my kind of neighborhood! How do I sign up to buy one of those condos?
The project is called Chapala One and their website is http://www.chapalaone.com. Try to get the condo that’s above the ditch where all the bums crap. Better hurry, their not making any more bums.
The Main post office is in the S. Loop, kind of a classic building from the 1930s…very large.
That was the old MPO, the one with Congress Ave going through it. The new one is now across the street on W Harrison. I wonder what the old MPO is being used for, or is it now vacant?
I’ll bet they could easily recover their construction costs- it is the cost of the land that they won’t recover. If I were a builder, I’d hit up the nearby homeowners for ‘protection’ money- “pay me $10,000 or I finish my building and sell 30% under your list price”
I’m sorry, the project is actually 4 stories high. The ground floor is retail, the upper three stories are condos. Underground parking, the largest above ground level concrete pour in Santa Barbara history and at least 50 concrete columns 60 feet long driven into the ground to provide support for the second story concrete floor. Mucho dinero in this baby.
Is that the one on castillo?
No, Chapala. Just as any wino, they’ll give you directions.
There was a hotel being built here in the High Desert but building came to a stop and it sat then for some strange reason it caught on fire and burned to the ground at 2 AM in the morning.There’s been a lot of strange fires in my neck of the woods. Beer Me !!
Don’t scare me, man. There’s a lot of wood in this thing and it’s only 300 feet away.
Something like this?: Flames engulf vacant Golden Hill house
http://www.signonsandiego.com/news/metro/20070430-1251-bn30fire.html
Luque said the house is up for sale and has been vacant for a couple of months.
Rich… not 2AM in the afternoon?? WTF? -
I was up in SB last week on business and took a long lunch at a spot on State St. There sure were a lot of empty stores up and down the main drag, more than I’ve seen in years.
I’ve always thought of SB as the interface between the hippie NorCal set and the loco SoCal set. The interface seems to be widening; what’s going to fill the vacuum?
I don’t know.
People here in Santa Barbara and California are caught up in some kind of socialist crusade and they get bent out of shape if you tell them you want to be allowed to have private property and low taxes. Business owners take it right in the nads.
It’s mostly the landlords raising lease rates dramatically. One of them managed to clean out basically an entire half-block on one side singlehandedly. The corner one’s only becoming an Old Navy because it was a bankrupcy lease buyout.
Another store that’s been there twenty years on the block down is going out because they wanted to triple their rent.
It’s a combination of things. You’re spot on about rents.
“One distressed unit, is a 1,249 square foot penthouse. The owner, Carlos Espinosa, is a real estate agent himself and purchased the unit for $983,000 directly from the builder in June 2005, covering the entire cost with mortgages. He also owns another unit in the building, which he has listed on the MLS for $1.6 million.”
Checked out Carlos (J) Espinosa on foreclosure.com. He has received 3 notices of default:
W Beech St (Aqua Vista), Zillow estimate $836k
Melrose Ave. Chula Vista, Zillow estimate $491k
Surfbreaker Point, S.D. , Zillow Estimate $839k
And in addition to this, he “owns” a $1.6M unit in Aqua Vista? Nice to see some RE-agents take their own medicine.
that’s so crazy.
I pity this man. Yeah, he wanted to be like the Donald, but I still pity him.
I know. He’s a real estate genius. Just a victim of poor timing. Oh, my heart aches for thee, Carlos Espinoza. Lucky for you, though, that you got your degree and have a great backup plan on how to get filthy rich in a short period of time.
How can you pity a man who has created real damage for the rest of us who are looking to buy? We are all paying for his “big shot” attitude.
They were being sarcastic. No pity for Mr. no-money-down Trump-wanna-be.
“At least half of the owners currently in foreclosure eschewed down payments and used mortgages to cover the whole purchase price. For many in the project who financed 100 percent, it is proving difficult or impossible to refinance or sell without losing money.”
Assuming he’s one of these 100% financed owners, is there much doubt he (and they) are going to walk from all these properties? The only chumps left now are those that made a down payment.
“Melrose Ave. Chula Vista, Zillow estimate $491k”
Melrose Ave houses feed into Castle Park High School. It’s the school that people transfer OUT OF, if at all possible. A small portion of my students come from there, and it just takes one threat to send them back to clean up their acts.
Disclaimer - I grew up in Castle Park’s neighborhood back in the 80’s, and transferred to Chula Vista High.
From their SARC (School Accountability Report Card):
Percent of students achieving at the Proficient or Advanced level (meeting or exceeding the state standard)
2003 English 21% Math 9%
2004 English 22% Math 6%
I figured Mr. Espinosa was a multiple bag holder, as this has been the MO of so many RE insiders. He may have even more foreclosures in the works. I suppose if you borrow enough millions then that makes you a RE mogul.
Got 10% down?
“‘The people that bought (in Acqua Vista) came late to the party,’ Napoli said. ‘They thought, like everybody, that things were going up. They thought they would make a killing.’”
Basically nothing more than a legal pyramid scheme. Oh sure all is nice as long as there are new buyers coming in at the bottom, but eventually the thrill is gone.
Interesting that you make the connection between these San Diego condo towers and a legal “pyramid” scheme.
When I was traveling down Market St. last summer, I was marvelling at the collection of huge condo towers — they very much reminded me of the Egyptian pyramids. Without the translation of hieroglyphics with the aid of the Rosetta stone, we would still be visiting Giza, wondering why the pyramids were built.
In much the same way, I was wondering what the purpose was for all of those condo towers in San Diego. Why would anyone pay 1/2 mil and more to live in a glorified hotel room? It’s not as though there’s enough of a night live in S.D. to sustain that kind of activity.
“The unit in foreclosure, has been listed on the MLS for 250 days with an asking price of $999,000 to $1.15 million.”
Does this guy realize that no one puts down a price range anymore? HMMM, I think I would like to pay over asking price on a troubled condo project. Sign me up!
California related, so it belongs here: Casey Serin can’t come up with tomorrow’s rent, so he’s contemplating moving… to his car.
You can live in your car, but you can’t drive your house.
A larger car/SUV and a membership to 24 hour fitness and most people would never know you are homeless.
Gee, I wonder if Carlos is advising his clients to take their properties off the market until prices “stabilize”?
The Times Herald. “The local real estate roller coaster’s descent may be slowing, so now may be a good time for buyers to hop on, some local experts say. Home sales in the Vallejo area and statewide are still falling, but at a much slower rate.”
Uhh, thanks but no thanks. I never felt it smart to get on the rollercoaster in mid stream. I perfer to sip my soda, watch the girls, and wait till it reaches the gate.
local experts = shameless liars
Italics OFF.
Based on their being referenced in two of the stories as credible sources for the market going back up, I have concluded that “Local expert” must be an oxymoron. Kinda like “military intelligence”
Reminds me of my trip to Italy. We toured a bunch of cathedrials. Everywhere we went we heard “it is Christian Tradtion that…” It soon became appearant that this phrase could be swaped with “It is a complete lie that…”
It is Christian Tradition that these are the steps from the court of Pontious Pilot that Jesus had to climb to get his sentance of death. However, this is local marble and there are construction records that show the marble was taken from teh temple of Zeus during the excivation of the old Roman Forum.
It is Christian Tradition that those two busts hold the heads of Peter and Paul. However, these are gold clap, copies of the originals. The originals were stolen and never recovered. Not to mention that the originals were made hundreds of years after teh death of Peter and Paul at a time the bodies had been LONG ago displosed of.
It is Christina Tradition that this tomb holds the bones of saint… some-dude.. I forget now. However, when examined a few years ago, they were found to be of a woman, and she is 1000 years too young to be him.
There were literally dozens of these “Christina Tradition” things.
Odd that these “Local Experts” that keep predicting a bottom are real estate agents and mortgage brokers and such. While the people not at immediate risk of losing their income say things like “No where near the bottom”.
Acqua Vista:
Cheap men’s cologne?
Funny. Aqua Velva. “There’s something about an Aqua Velva man.” It’s amazing how that stupid commercial line just popped into my head. LOL!
Don’t worry if you don’t know what I’m talking about. It’s a boomer thing.
BayQT~
Actually, I remember when we got our “care package” provided to us when I first moved into college dorms - uh - 10(?!) years ago. There was a little trial bottle of Aqua Velva in it. Must have been though of by you old folk.
thought, not though
late ? remember CA foreclosures hit a peak in 97 ?
and the economy was rockin by then
wow this takes a long time
test
itt off
“One distressed unit, is a 1,249 square foot penthouse. The owner, Carlos Espinosa, is a real estate agent himself and purchased the unit for $983,000 directly from the builder in June 2005, covering the entire cost with mortgages. He also owns another unit in the building, which he has listed on the MLS for $1.6 million. The unit in foreclosure, has been listed on the MLS for 250 days with an asking price of $999,000 to $1.15 million.”
Maybe, just maybe, some GF will swoop in and take away his alligator for $999K. Or he might get amazingly lucky and find a really stupid GF who will overpay by an additional $151K over a price tag where it has not sold for 250 days!
My guess is the GF is not getting his financing to be a GF anymore. Now the GF is a Lucky Fool due to tightening credit.
JimmyB,
That tightening credit is going to save a generation. They’ll moan and groan about saving up 5%, 10%, whatever… but it will cushion them from the loss.
Bummer for most of them that they won’t save and have “dry powder” during the best buying window. Cest la vie.
I still believe in the darkest depths of this downturn that the MBS buyers will have such a sore arse that they will demand a 25% minimum down payment.
In other words, qutie a few people will go FHA.
Got popcorn?
Neil
Taco Bell Jeff speaks:
Today at 09:19 AM
——————————————————————————–
Quote:
Originally Posted by rlc
Jeff
where are you?
PS: We like your smile.
I have been ill…
I can’t sleep, I can’t eat, when I do eat it comes up. This morning I started the day with a shower and threw up in the shower…
I am barely functioning, I try to read everyone’s posts…
To those of you that insist that these houses were a mistake, you were right.
To those of you offering constructive advice and support, thank you.
I try to read everything but the words are just swimming, I’ll try again later…
__________________
The first burrito is the hardest…
By the way, I tried to post on Casey’s blog on the green pool thread. He declined to publish my comment
Tell me this is a hoax, txchick. Poor b@st@rd…
Nope, and what gets me is that he’ll post his problems on the internet. No shame apparently.
Eventually, he will turn himself into the feds so he can get a room and 3 sqaures a day. Funny how life and a perspective can change in such a short time.
Dude even has a wiki entry:
http://en.wikipedia.org/wiki/Casey_Serin
And this is another one of his sites:
http://ablebuyer.com/1/welcome-to-able-buyer/#comments
I’d say he’s had more than his 15 minutes of ‘fame’. Do you think he submitted the information for his wiki page, or perhaps someone else did?
BayQT~
“The first burrito is the hardest”
ROTFLMAO, you’re killing me.
Is he the same skinny white guy that used to be in the Taco Bell commercials? I think that actor plays Kenny on My Name is Earl now.
“‘Every day we talk to people who are under water in their mortgage,’ Chernock said. ‘How can you expect home prices to rise with a record number of homeowners going into foreclosure? With rising interest rates and adjustable mortgages skyrocketing, people will need to get out of their homes, and they won’t be able to sell them.’”
And, many of these people will not be purchasing again.
Lereah steps down!!
http://money.cnn.com/2007/04/30/news/newsmakers/bc.usa.subprime.lereah.reut/index.htm?source=yahoo_quote
Oops! should have known this was old news on the housing bubble blog.
Here today, gone tomorrow.
If there’s any lesson I’ve learned from the HBB, it’s be careful who you listen too, and be wary of how their bread is buttered. An additional item to note is that they may not be around to when their predictions actually matter.
That would be analogous to those touters of the last financial bubble, the internet dot com’s of the late ’90’s. Two that come to mind are Henry Blodgett and Mary Meeker, two photogenic ‘analysts’. It was Blodgett, formerly of Merrill Lynch, that was charged by the SEC for fraud, and ultimately banned from trading securities for life.
“Home prices in Davis, which saw a steady decline during the past year, have leveled off and are anticipated to increase, local real estate experts said. ‘They seem to have leveled off over the first three months, but we’re seeing inventory starting to rise a little bit,’ said local realtor Joseph Whitcombe.”
Doesn’t rising inventory normally presage falling home prices? Or is it different in Davis?
More choices makes you want to pay more. Get with the program, Stucco.
txchick57 …I was anxiously awaiting your post on the SDCIA site regarding Jeff’s “investment troubles”. What happened, you go soft on us?
They have my IP address blocked on there. No problem, I have ways to get around that. You’ll have to look quick though because I’m sure Greg will delete anything I post quickly.
Take heart, Chick. Your IP address is always welcome here.
LOL, wearin’ em’ out huh?
They have my IP address blocked on there. No problem, I have ways to get around that. You’ll have to look quick though because I’m sure Greg will delete anything I post quickly.
There she goes again, Terrorizing the neigbhorhood, little Casey and the FB’s.
BEN….take her MOUSE AWAY !
Ooops…there’s A WAY around THAT too
Help me out here, but what in God’s name does one say to a guy like Jeff, “No the moon isn’t made of blue cheese”. “The world isn’t flat.” Seriously, the guy reminds me of something my father said about being drafted into the Army. My father said that he never knew that there were such dumb people out there in the world. When pressed to explain, he said that despite everything they were told, there was always some guy who would do the equivalent of pulling the pin out of the hand grenade and then watching to see if it really would blow his arm off.
The sad thing is he thinks he is doing the noble thing by holding out and HELOCing his personal residence to keep the Florida houses, and is trying not to sell his SLC houses. What he is really doing is screwing his bank over- the longer he holds out, the less the bank will get when they foreclose on his a$$. And I’ll bet he holds the SLC properties (he claims they are appreciating 20% a year) until they go down the crapper, too.
In other words, I think he would do better both for himself AND for his creditors if he tried to sell now, before the housing values fall further.
“Lenders, stung by a surge in defaults, have rediscovered the virtues of caution over the past few months, eliminating many of their no-money-down loan offerings.”
This is where some politicians would like the FHA to step up to the plate, with 0%-downpayment taxpayer-guaranteed financing to fill the subprime lending vacuum.
Yeah, let’s keep the bubble inflated another year using tax payer money. NOT!!!!!!
I just really doubt it, Get. I think Senator Dodd’s Adventure’s in Populist Land set the bar for all the wannabe Joad’s of the world. Too big, too much money, too many with dirty hands in the cookie jar to attempt to find the worthy few. Besides, when it all implodes he gets to say ‘See, I told you so!’!
Won’t help GS unless they increase the max limits, well it won’t help California I should say.
Jeff (the first million is the hardest) on SDCIA is sacrificing his family’s financial future, but not in vain. His actions have helped increase the nations housing supply and contributed to inevitable low prices. Thank you Jeff.
His actions have helped increase the nations housing supply and contributed to inevitable low prices.
One small problem…
See Florida 1926.
Got popcorn?
Neil
Jeff needs an intervention, like quick. I fear for him.
He used charts to make his decisions. Us old time real estate investors laugh at people who try that.
Speculators seem to be leaving the party in my hood (Rancho Bernardo W 92127). The median ziprealty.com list price for SFRs on the market has dropped by $95,000 since I began tracking it a couple of months ago ($1,395,000 down to $1,300,000 as of just now). Of course, given the current evidence of a high inflation rate (rampaging gasoline and food prices), the real price decline is larger…
6.8% down in a couple of months? My 93552 zip median asking price is down 3.6% in the last 4 weeks. Here’s hoping this will set a new standard.
Virtually every SFR in 92127 listed above $700,000 was built post-2000, which suggests to me that flippers are clogging the local market’s exit door. Too bad that in 92127, there are so many newly built homes or homes currently under construction to compete with them.
I just double-checked my figures, and the 92127 median SFR list price (which is somewhat volatile) went as high as $1,445,000 (as of 2/17/07) before reaching it’s level of $1.3m as of today. It is hard to separate the noise from the signal as of this stage, though a $145,000 drop seems substantial at a glance. More telling is the gap between the $850,000 median SFR sale price in 92127 and the median list price; clearly this gap is not sustainable, and I have a hunch that the convergence will mainly be driven by a falling median list price.
Aqua Vista:
“‘When a market turns, quality can still get you some value,’ he said. ‘But poor quality will plummet.’”
Amen, brother!
Initially planned as an apartment building, then converted to condos during construction.
Limited parking means they have to have valet parking which adds hundreds of dollars to the HOA dues.
No thanks! Things can only get worse in and for that building.
Kudlow & Co:
One guy hit it on the nail, you have the housing economy & the rest of the economy. Housing is in trouble currently rest of economy is doing well slightly hot. Will Feds raise rate to slow rest of economy or will they lower rates to help housing and set rest of economy on fire?
Hot? They just forecast a 1.3% annual GDP growth. Go team.
15,000 views of Taco Bell Jeff’s thread. Incredible! People love a train wreck!
That they do, txchick.
Fitting that his “First Million is the Hardest…” line is still his signature. All the train wreck watchers are watching him figure out just how hard that 1st million can be, what with all his “throwing up in the shower” etc. Reality bites when it comes back to town.
Actually, I’d say the “hardness” H_mil of the “first million” could be something like
H_mil = 1/(i * p)
where i = intelligence and p = patience. Unfortunately for Jeff, both i and p were (are?) quite low so the H is astronomical.
Oh, that said, I’d like to add:
JEFF, if you are reading this, please don’t hurt yourself! I’m serious! Financial distress comes to most people at some point. There are always new opportunities for you that you can take advantage of with your newfound wisdom.
Some people handle this kind of thing and others don’t. Last thing we need is some guy offing himself because of a bunch of silly bubble blog posters rubbing his difficulties in his face! The anonymity of online forums can make for a very mean and impersonal experience.
I have a confession to make. I have been telling people I know in the financial world about Jeff. Today I had a Wall Street housing bubble denier laughing so hysterically that he accidentally hung up. When he called back I could hear his colleagues in the back ground reading posts out loud.
My nomination of Jeff as best housing bubble lab rat still stands.
“Home prices in Davis, which saw a steady decline during the past year, have leveled off and are anticipated to increase, local real estate experts said.”
What evidence or emperical data makes these local “real estate experts” believe prices will start to increase any time soon?
“What evidence…”
Didn’t you know that rising inventories lead to higher sale prices?
Didn’t you know that rising inventories lead to higher sale prices?
yep…………NYCityBoy said so..(wink)
Am I crazy or has there been some new world been established?
Black is now white, and white is now black.
Bad news is now good news and good news is even better news well most of the time.
Debt is a good thing and saving is an out of date practice.
What was that movie again?…….ah yes.”The Gods must be crazy”
The U.S. Dollar Myth
“What a weaker dollar may do is provide temporary relief. But unless the U.S. turns into a society of savers and investors, a weaker dollar will only be a pause to an even weaker dollar as imbalances are built up yet again.”
- Axel Merk, Investment Director at the Merk Hard Currency Fund
At 10:30 a.m., Travis Toth, an auctioneer hired by other trustees, stepped up to market a foreclosed condominium near La Cienega and West Jefferson boulevards in Los Angeles. The opening bid was $259,592, which was the sum owed on the mortgage plus about $20,000 in processing fees.”
“Right away, two men and a woman produced cashier’s checks to identify themselves as serious bidders. With cellphones at their ears and hands cupped over their mouths, the bidders bumped up the price in $1,000 and $100 increments.”
“Whatever his identity, he appeared to have scored a bargain. The final sale price was $267,500, more than $100,000 below its estimated value.”
TO all the Westside LA bloggers! what is your opinion of this deal? What do you think about the general area? Was it truly a bargain at $267,000. I think that area generallly sucks. It is a High crime area within stones throw of Baldwin village, a real gang-bangers nest. Unless that area went thru a major renovation and complete alteration recently, i remember it in the past as extremely seedy and generally a rundown ragged industrial strip zone along jefferson blvd east of La Cienega.
I drive through that area every day. Look, it’s very convenient to get around major areas of LA from there, it’s a lot better than south of the 10, and if you just drive up La Cienega not even that far there are some really nice areas, plus there are jobs all around, so I can see why some low-middle income would buy there for 250K, why not, you can’t rent anything under 1000$ any more.
Of course, these people aren’t buying to live there, they’re buying to flip at a much higher price, so that’s a whole ‘nother story, whether it’s worth the 350 or 450 they’ll be asking.
Of course, these people aren’t buying to live there, they’re buying to flip at a much higher price, so that’s a whole ‘nother story, whether it’s worth the 350 or 450 they’ll be asking.
To Lainvestorgirl
Not questioning that areas accessibility to prime LA Westside locations, Just that particular area east of Jefferson and south of the 10 fwy. Never liked the stretch along jefferson blvd along the old railroad tracks-it is/was an old industrial strip zone and the surrounding area somewhat resembles Inglewood.
It is only a 2-3 block walk from there across the national blvd bridge to the hi-rent upscale entertainment/industrial zone in Culver City but you would not want to make that walk even in daylight.
SCentral LA 90011 zip is less than a mile from LA Dwtn/USC but how many white collars/students/middle-blue collars would buy/rent a condo or purchase a home in that particularly nasty hovel section of LA.
If i was in the game looking for a condo for under $300,000 I can pick out hundreds of deals in dwtn Long beach close to the beach, Harborwalk,pike shopping, dining entertainment along pine ave, ect. And be within i hrs drive to LA Westside. I do have problems with dwtn long beach(Problems with riff-raff just like in The Jefferson/La cienega area), but a lot nicer Urban shoreline scenery.
BTW;10 minites drive up La Cienega from jefferson gets you into the fairfax district. I would look at apt investing in the zone north of the 10 to pico or Olympic and between La Brea and la cienega. Some decrepit areas mixed with some decent areas and better clientele than south of the 10. Probably still way over priced in this zone.
BTW Jefferson LaCienega is 1/2 mile south of the 10 fwy.
At one time this was “Car Jack Central” and was ground zero for the Rodney King riots.
TO all the Westside LA bloggers! what is your opinion of this deal?
I don’t think it was $100,000.00 below its estimated value, I think its value is what it sold for.
That part of La Cienega from Adams all way to Rodeo Drive a pretty nasty stretch. Corner Jefferson and LaCienega right in middle. Your only option is to get across that National street bridge as fast as possible to Culver City. Only the Ballonia Creek Moat separates the Culver City refuge/stronghold from the Fiendish Orc’s holed up in their den’s in Baldwin village.
Joking aside, i think that $267,000 plus condo fees is about right for that hi-crime area. Better have top=notch perimeter fencing and full-time guarded entrance gate for that area.
what is the link to Taco Bell Jeff’s postings?
Jeff’s postings at SDCIA. It’s over 16,000 views right now.
http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=1854186
BayQT~
http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=1854186
“In Vallejo, sales dropped about 33 percent in 2006 over 2005, but only 30 percent so far this year, Dennis said.”
Typical phases of a bubble: high volume at soaring prices, low volume at flat prices, high volume again at collapsing prices
Completely OT, but interesting:
http://observer.guardian.co.uk/business/story/0,,2067653,00.html?gusrc=rss&feed=24
Heather Stewart
Sunday April 29, 2007
The Observer
America has evolved a ‘garrison’ economy, with more than a fifth of its workforce employed as security guards, prison officers or police, protecting goods instead of producing them, according to US economists.
The proportion of the population involved in this so-called ‘guard labour’ has progressively increased over the past 200 years, according to Samuel Bowles of the Santa Fe Institute and Arjun Jayadev of the University of Massachusetts, in a polemical article for the online journal Economists’ Voice.
They find that the larger the share of the workforce employed in these roles tends to be, the more unequal a society. Britain has almost as many guard workers - 20 per cent - as America.
Only Greece, with its heritage of military government, has a higher proportion of its population involved in discipline; while in Switzerland, Iceland and Sweden, just 10 per cent of the population are guard workers.
Part of the explanation for this, Bowles and Jayadev believe, is the professionalisation of the job of maintaining order. ‘In the US when the neighbour’s party is disturbing sleep, it’s often the police who will get the call, not the neighbour,’ they say. By 2012, the US government predicts there will be more security guards than high school teachers: and there are already more police keeping order at home than soldiers fighting abroad.
Within the US those states that have greater income inequality, such as New York and California, have more guard workers than more equal states, such as Iowa and Wisconsin.
it’s on topic as we are trying to figure out what growth components are in effect
MIC is transfer payments and really provide no growth
Snippets from a couple of interesting articles (forgive me if these have already showed up)…
Bank of England’s Inflation-Targeting Loses Luster
http://www.bloomberg.com/apps/news?pid=20601109&sid=azKW.ik2JECg&refer=home
By John Fraher
“April 30 (Bloomberg) — The Bank of England, confronting a record-breaking real-estate boom, is finding there’s more to monetary policy than just keeping consumer prices in check. ”
“A decade after the central bank won its independence from government control, surging U.K. property values are throwing into question the inflation-targeting approach of Governor Mervyn King and his colleagues, which focuses on consumer prices as the lodestar of policy and gives lower priority to asset values, money supply and credit growth. ”
“The bank’s approach isn’t broad enough to tackle asset bubbles that can burst and lead to recessions, says Tim Drayson, an economist at ABN Amro Holding NV in London who formerly worked at the U.K. Treasury. ”
…..
“While that allowed King, 59, to slash interest rates to the lowest levels since the 1950s, he now faces what Claudio Borio, head of policy analysis at the Bank for International Settlements in Basel, Switzerland, calls a “paradox of credibility”: The more a central bank succeeds in keeping prices stable, the more likely that signs of an overheating economy will show up first in asset bubbles. ”
“As in the U.S., a combination of stable inflation and low interest rates triggered a real-estate boom in the U.K., where house prices have tripled in the past decade. In the last year alone, London values jumped 16 percent, reports HBOS Plc, the U.K.’s biggest mortgage lender. ”
“At 200,000 pounds ($398,000), a parking space in London’s affluent Kensington and Chelsea district costs as much as a two- bedroom apartment in Berlin’s fashionable Prenzlauer Berg area.”
===================================================
Housing? What Housing? I Don’t See Any Housing: Caroline Baum
http://www.bloomberg.com/apps/news?pid=20601039&sid=aKHxvJuBB3FE&refer=home
By Caroline Baum
“April 30 (Bloomberg) — Excluding housing, the U.S. economy is doing just fine.”
“That’s the latest rationalization of a select group of operators who think that the Bush administration’s 4.6 percentage point cut in the top marginal tax rate and 5-point reduction in the top capital gains rate can protect the economy from any and all ills. ”
“To say that ex-housing the economy is doing just fine is tantamount to claiming that, ex-Iraq, Bush’s Middle-East policy is a rousing success. ”
“How valid is the claim that outside of housing everything is hunky dory? Let’s go to the videotape to see how housing- centric the U.S. economy’s weakness really is.”
“The Commerce Department reported Friday that real gross domestic product rose 1.3 percent in the first quarter, the slowest pace in four years. The year-over-year growth rate slipped to 2.1 percent, also a four-year low.”
“Investment in housing, the purported culprit, fell 17 percent, less than in the fourth quarter. Residential investment, as it’s known in the GDP accounts, subtracted from growth for the sixth consecutive quarter, something that hasn’t happened since 1980. ”
“The first quarter’s sluggish growth wasn’t confined to housing, however. Exports declined, inventories were a small drag, and capital spending (investment in equipment and software) rebounded 1.9 percent — better than expected based on monthly data on shipments but nothing to write home about after declines in the second and fourth quarters of last year.”
….
Hey all you folks wanting to buy a home: even the Realtors will tell you that you REALLY don’t want to buy from a realtor. Why?
Because it will cost you an extra 16%. That’s like paying $700k for a home that you could have bought for $600k. It’s like giving up a cool $100k of “instant equity”.
How do I know? It’s simple to prove. Here’s your link:
http://www.realtor.org/pac.nsf/pages/fsbo
And I quote:
“Sellers who use a real estate professional make 16 percent more on the sale of their home than do sellers who go it alone.”
So if I were you I would stay the hell away from realtors if you want to buy a home. But when you’re selling, by all means use a realtor.
Also check out Freakanomics, which details a study that shows real estate agents work hard to maximize the sales price when selling their own property, but when selling someone else’s property, they work to make the sale as quickly as possible (thereby potentially sacrificing some additional profit for the seller).
One distressed unit, No. 1703, is a 1,249 square foot penthouse. The owner, Carlos Espinosa, is a real estate agent himself and purchased the unit for $983,000 directly from the builder in June 2005, covering the entire cost with mortgages from Deutsche Bank. He also owns another unit in the building, No. 1701, which he has listed on the Multiple Listing Service for $1.6 million.”
Another idiot broker being forced to take his own medicine. As they say “salesmen make the best clients”
“Mr. Mixon recently had to advise one of his clients, a young woman with a good job and credit record, to put off her dream of buying a $300,000 condo in Laguna Niguel, Calif., until she could come up with more than her current nest egg of $5,000 for a down payment.”
No doubt it took years of scrimping and saving and doing without luxury items - to save such an impressive “nest egg” of 5000 dollars
Who would have guessed such a cash horde would be insufficient to take part in the american dream?
The horror of it all is just too much to bear
See how all the failed flippers like Taco Bell Jess always say they were lied and taken advantage of, when things don’t go their way?