Supply Is Outpacing Demand In California
Inside Bay Area reports from California. “While the industry is defending itself against claims that the high-risk subprime loans were irresponsibly made to borrowers who shouldn’t have gotten them, a Burlingame-based mortgage broker is siding with the critics. And if that weren’t enough, Steven Krystofiak is also raising alarms about mortgage fraud, which he claims happens a lot in California.”
“It’s not just the subprime mess that angers Krystofiak. He also has concerns about mortgage fraud. ‘I could play the (mortgage fraud) game if I wanted to, but I decided not to,’ Krystofiak said. ‘In California, (mortgage) fraud has become acceptable.’”
“Not if you ask Jack Williams, president of the 4,800-plus member California Association of Mortgage Brokers. ‘There are the bad apples, but I think he is way overstating it,’ Williams said. ‘Anyone who does fraud as a mortgage broker, we are definitely going after them. We’re going to make sure they are investigated.’”
“About 20,000 mortgage brokers are licensed and overseen statewide through the Department of Real Estate via a real estate broker’s license, according to department spokesman Tom Pool. Real estate sales agents also can work in the mortgage industry under the supervision of a broker.”
“The department investigates complaints about mortgage fraud. If a complaint is upheld by the department, a broker or agent could end up having his or her license suspended or revoked, Pool said.”
“‘We don’t have the authority to unwind the (loan) or void a contract,’ Pool said. ‘Ultimately, only a (civil) court of law can do that.’”
The San Francisco Chronicle. “‘It’s usually a win-win situation,’ says Lon Parmelly. ‘I had a client who walked away with a $600,000 debt forgiven.’”
“What? Your mother forgets you owe her $60. But who forgives you for a debt of $600,000?”
“As more people are facing the possibility of foreclosure, losing both their house and their credit in a process fraught with humiliation, a little-known transaction known as a ’short sale’ may seem like a dream come true.”
“How prevalent are short sales? It’s difficult to say. In the Bay Area, the MLS has no special box to check divulging whether a sale is a short one or not, though many agents write it into the comments.”
“Parmelly says she has noticed that lenders have been ’staffing up” their loss-mitigation departments, but they are still extremely understaffed. Indeed, according to real estate agent Damion Matthews of Prudential, San Francisco, the increase in short sales has led to a problem. Many lenders are so busy that they don’t respond to short-sale offers.”
“Last month, Matthews put an offer on the short sale of a Rincon Hill condo on behalf of a client and waited three weeks for an answer. ‘I called the lender over and over,’ he says. ‘There was no way to get ahold of a human being. Later, I heard that they never got around to looking at the offer. The condo went into foreclosure and was auctioned off.’”
“Some local cities and counties are seeing dangerously high foreclosure rates. According to Realty Trac, Oakland currently has the 22nd highest foreclosure rate in the nation, with one foreclosure for every 146 households, almost double the national average.”
“Other smaller cities also reveal escalating problems for many homeowners. Realty Trac currently has 1,902 foreclosures, default notices and bank-owned sales listed in Antioch, amounting to one in 15 of its 29,466 households.”
“Short sales do have one downside for sellers: Lenders claim whatever debt they’ve forgiven as a loss on their taxes and issue a 1099 form to the seller for the amount. ‘It’s taxed as earned income,’ says Parmelly, adding that, depending on the loss and the seller’s tax bracket, it could amount to a significant increase in taxes.”
“I accept that whatever banks, regulators and homeowners can do to stave off foreclosure is probably for the good of all, but forgiving a $600,000 loan? Whatever happened to personal responsibility?”
The Los Angeles Business Journal. “Delores Conway, director of the Casden Real Estate Economics Forecast at the USC Lusk Center for Real Estate, said that the decline in sales volume may represent a more normal market as the higher levels of the past few years were inflated by the activity of investors who sought to make a quick buck.”
“‘In 2005 and 2006 there was quite a bit of investment buying,’ she said. ‘Once those buyers left, that reduced volumes tremendously.’”
“‘We’ve seen stability in sales. We’ve not seen any major price erosion anywhere in the state,’ said Robert Kleinhenz, deputy chief economist for the California Association of Realtors.”
“But Kleinhenz warned that it was too early to tell if the market has bottomed out, given how the collapse of the subprime sector may have some lingering effects on the psychology of buyers.”
“One sign of that, he said, is the average time a house for sale sits on the market in Los Angeles County. That time has crept up recently to 9.6 months, which is…higher than the country’s long-term average of about 8.3 months.”
The LA Times. Downturns in the housing market are heartbreaking for homeowners. As real estate sales decline and prices stagnate, middle-class homeowners stop splurging…they stop using their houses like ATMs or even slot machines. Such a housing-related slowdown may already be underway, judging by this week’s economic indicators.”
“For a sneak peek of what may come to Southern California, keep an eye on the Inland Empire. Gung-ho developers have built acres of new homes east of Los Angeles County over the last decade.”
“But supply is outpacing demand, and many houses are losing value. In March, home sales year over year in Riverside and San Bernardino counties fell 47.3% and 46.6%, respectively. Prices are likely to fall further as developers continue building.”
“More than a quarter of the mortgages originating in the Inland Empire since 2002 have been sub-prime loans. The region has the third-highest foreclosure rate in the U.S.: More than 10,000 mortgages there went into default in the first quarter of this year.”
“Even as ‘for sale’ signs clutter the landscape, government finance officers and economists say that disaster has yet to strike. Hopefully they are right. But if they’re wrong, the Inland Empire’s experience might prove a cautionary tale about where we’re all headed.”
The Merced Sun Star. “Explosive growth has earned Merced County a new title, the 10th-fastest-growing county in California, according to new data from the state Department of Finance.”
“The population estimates are based in part on the amount of new housing units constructed, which means the data could be skewed by the number of new homes now standing empty.”
“In Livingston, for example, Livingston Union School District Superintendent Henry Escobar said he’s learned that new houses don’t always mean new people. While the city has seen more than a dozen new subdivisions over the last few years, the school district has added a grand total of 50 new students since 2004, said Escobar.”
“‘We were ready to deal with this growth and we began to plan for it,’ said Escobar. ‘We have a new school site, we have everything ready to go, except for the kids.’”
“County Supervisor Deidre Kelsey said she too had some doubts about the new population estimates, given Merced’s unique housing situation.”
“‘I do think the numbers are probably up, but I don’t think they’re quite as high as what the Department of Finance is predicting, just because of the known fact that we have a lot of out-of-town investors that have bought here and are now sitting on those houses,’ said Kelsey.”
‘It took two hours of discussion and a handful of votes, but the Tehama County General Plan Advisory Committee slashed the number of homes proposed for the north Interstate 5 corridor from 100,000 to just over 25,000.’
‘When Michael Cullen used the stove at his new $1.5 million penthouse in San Francisco’s trendy South Beach, the ventilation failed and his condo filled with smoke. When he filled his spacious new bathtub, it leaked, soaking subflooring beneath bathroom tile and damaging wood paneling.’
‘It’s really disheartening to pay this much for a brand-new home and to have all this stuff happening,’ said Cullen. ‘It’s been three years of absolute hell fighting … and I don’t see any end in sight.’
I will never buy anything that was built or remodeled between 2001 and 2006!!
I’m going to use Mr. Cullen’s words as a screen-saver to remind myself of the absolutely shodding building standards of this period.
Like I said before, meth-homes, built by meth-addicts. What do you expect from a crew thats all tweeked out.
people said the same thing in 1990 about properties built in orange county in the mid to late 1990s.
some things never change
I like 50s and 60s construction the best - just mho…
pre WWII, when houses were built to last generations, and the owners viewed them as such
not that manyof those in my area - either historic -like circa 1750-1850 - then 1950 on - weird…..
I believe the old homes are better quality. They were build to last generations. Real foundation, walls made from brick and rock, not this gypsum carton now. This is one of the reason, why i decided not to buy, since these houses will not last the term of the mortgage. When hurricane hit SC, the old homes had little damages, but the new homes were totally destroyed. This is world wide problem. In my old country flood destroyed bridge build in 1990’s, while old stone bridge from build around 1250 only 150 meters from it survived intact without damage.
Also, US cars built after about 1978 - they began to improve in the mid 80s - much of this was this was related to labor problems and asymmetrical inflation expectations
‘It’s really disheartening to pay this much for a brand-new home and to have all this stuff happening,’ said Cullen.”
You didn’t buy a home, you bought a trophy and a poor one at that. A house only becomes a ‘home’ when someone invests their time and family into the house and the community.
can’t someone complain about shoddy construction work around here? you people go too far some times.
It is not an issue of complaining, but rather an observation that construction standards take a nose dive during these bubble periods.
Many of us have seen it before and expect it. Now that the market is tanking, shortcuts will get much worse, as projects already on the outs need to get finished so the builder can get paid and pay his subs.
‘It’s really disheartening to pay this much for a brand-new home and to have all this stuff happening,’ said Cullen.
That’s what cheap labor will get you.
That’s what cheap labor will get you.
si
It’s not cheap labor, it’s cheap standards that did it. The cheap standards bred the cheap house, regardless of the expense of the labor to build it.
This is true, but for a residence valued in the 1.5 mil region, one expects a high level of craftsmanship. By hiring illegals, IMO a contractor is already displaying a willingness to violate the law and ethics violations which I doubt stop at cheap labor and employment violations. Think about it … If he is willing to break one law…. why not cheap out on materials as well.
Remember, everything is built on the lowest bid.
“Short sales do have one downside for sellers: Lenders claim whatever debt they’ve forgiven as a loss on their taxes and issue a 1099 form to the seller for the amount. ‘It’s taxed as earned income,’ says Parmelly, adding that, depending on the loss and the seller’s tax bracket, it could amount to a significant increase in taxes.
‘I accept that whatever banks, regulators and homeowners can do to stave off foreclosure is probably for the good of all, but forgiving a $600,000 loan? Whatever happened to personal responsibility?’”
Cool! The deadbeat gets to enjoy one federal tax season as a $600,000 / year earner!
It’s unclear to me whether a debt of $600,000 was forgiven or whether the mortgage amount that was shorted was $600,000. If the latter, wouldn’t the liability be the difference between what the lender can sell the property for and how much is owed?
I took the “$600,000 loan forgiven” at face value, but I believe you are correct — if the lender could recover $400,000 in selling the property, the 1099 form figure should be $200,000. That still would generate a pretty hefty tax bill considering the income and assets of your typical NINJA loan FB.
You know GS, for some reason it never hit me until this post just how big these tax bills could be. If your house value drops 30%, and was bought at 10x your income, you’re hit with tax on 3x your income in a short sale. That’s huge! I wouldn’t be surprised if forgiveness of this tax ends up being the major type of bailout. (I know some people here have suggested that it SHOULD be.)
I’d actually like to see the IRS go after every dime of those 1099s to reduce the national debt. It would be brilliant and who ever is in office at the time can get the credit for cleaning up the deficit.
Great idea. The IRS will put them on payment plans, with interest and penalties!
forgiveness seems a bit of a moral hazard, but giving payment terms + ~5% pa to the FBs seems perfectly reasonable.
Question: Would this income level of $200k then generate the AMT (”Alternative Minimum Tax”)? So then there would be tax on top of tax?
~Misstrial
A 1099 could easily push someone into the AMT territory. Imagine being a realtor with no business for months then getting a 1099 that puts you in the AMT range? I see our suicide rates going up.
OK thanks Gwynster. Btw, I really like reading your posts.
~Misstrial
depends on the deductions they claim, e.g. dependents, etc…
True but we’re starting to see shorts for 150K. My understanding is that a lot of those deductions go bye-bye once you hit that AMT kickover amount. I’m sure I’ll be corrected within 15 min if I’m wrong.
Thanks Mistrial >; )
I don’t know if the 500k deduction ( married lived there 2/5) is a preference item. Could cancel out the gain. I’ll check Lassiter.Looks like none of the gain is taxable if you net the gain (mtg relief) with the marital exclusion?
“For a sneak peek of what may come to Southern California, keep an eye on the Inland Empire. Gung-ho developers have built acres of new homes east of Los Angeles County over the last decade.”
“But supply is outpacing demand, and many houses are losing value.
- That ‘Sneak Peak’ will soon reveal the Inland Empire leading the nation in foreclosures. Can anyone say ‘illegal alien?’
“For a sneak peek of what may come to Southern California, keep an eye on the Inland Empire. Gung-ho developers have built acres of new homes east of Los Angeles County over the last decade.”
Try thousands and thousands of acres. 640 acres equals one sq mile. Seen half a dozen new planned communities in the IE about a sq mile in size(DOs Lagos in Corona for example). One new leveled HB construction site in Banning was also a mile sq.
It is not just all those 10’s of 1000’s of new McStuccos put up in the IE; Entire new communities/regions such as Romoland, North Fontana, Menifee, Sun city, S corona, Devore, Perris, Norco, West/Northwest shore Lake Elsinore, Large parts of Temecula, ect sprang up out of nothing and suddenly blossomed spankin new subdivisions, schools, malls, new city/road grids, ect.
These areas are what i call completely driven by development corporations( HB’ers), due in part to millions of acres of cheap idle worthless scorched barren scrubland characteristic of much of SE rivrside county. These places will become dirt-cheap to find REO 4/3’s 3000+ sq ft McCrappers for $100,000-150,000 by 2008. Think twice about paying even that in Romoland, which may as well be on the MOOn, being essentially a barren frypan 3-4 hrs from LA/OC.
I sold an elderly relative’s house in Menifee in May ‘06. Got out just in time! Good thing because she needs the money to live on (for long term nursing care).
There is a development close to Perris Lake that was having trouble selling during the peak. Had rows and rows of vacant houses. I’m sure in about a year you’ll be able to pick them up real cheap. Nice houses, right on the border of Perris and Moreno Valley. It was insane driving through there at night one to three houses out of a 15 house block with lights on.
Some of those Housing tracts might be really nice, with their artificial lakes but the areas they are located in are pretty barren and isolated. Saw one such development in Menifee off the 215. Driving 1/2 hr from Temecula thru 20 miles of flat, brown empty fields and suddenly this spankin new planned developmemnt with it;s own little lake sprouting up in middle of nowhere.
The drive along the 74 from L Elsinore to Hemet should be called the CA “unscenic route”, Ugliest stetch of hwy in CA.
Future ghosttowns.
Yes, future ghost towns and will only be be good for salvadge…houses will go under the hammer for 3-5K just for the lumber, materials in them. Build 100 miles out of a city and dependent on 5 dollar a gallon gas to commute.
Do the math. This is not going to last much longer.
I hope you’re right. I bought for cash in Romoland for $169,000 in 2002– middle aged nice house on acreage. If it goes that low, I’ll buy more. I love living here, in a rural area, slower pace of life. Plus lower prices get rid of the lah-di-dah types who are buying only for investment, not for a home they intend to enjoy for years.
California is in for a world of hurt, and nobody, not the feds, not the state, not the cities or counties, is doing anything to prepare for the upheaval.
Hundreds of thousands of construction jobs are going to vanish. Out of state real estate investment money will dry up. Banks and lending institutions will lose billions.
And our elected officials, federal, state and local, are denying all of it.
As millions of uneducated illegals lose their jobs crime will explode. Demands for welfare will skyrocket. And yet no effort is being made to deport these people before they become one huge mob of locusts.
We either act today or lose everything tomorrow.
Too late to act. No offensive moves here, only defense.
The best defense is an aggressive offense.
I agree.
To be more clear, I agree with both of you in general. As an individual, I think the best I can do at this point is defensive posturing by avoiding problem areas and voting for those whose approaches to solving problems seem reasonable. I think CA, FL, and other areas have problems. Unfortunately, only time will tell if the problems are addressed effectively.
If only. . . I have never seen a candidate propose a reasonable plan that was carried out once they got in office. It’s usually a bait and switch.
Was talking with two LAPD officers last week. I said watch out with construction declining there is going to be a lot more crime(illegal alien) .
One LAPD officer said: I am already seeing a large increase in crime by the illegals!
Crime is going to escalate and not just by illegals. There is going to be broad spectrum pain across all the social classes. Even the most law abiding people will resort to crime it means putting food on the table. The difference between the social classes will be in the type of crime.
“Even the most law abiding people will resort to crime it means putting food on the table. ”
Let’s make that people with good paying jobs, family and friends who bought several houses and toys resorting to embezzlement to pay for their lifestyle. It’s already happening here in the bay area and we are talking six figures.
“Even the most law abiding people will resort to crime it means putting food on the table.”
There will be lots of future sandmen around…
http://en.wikipedia.org/wiki/Spider-Man_3
I have always been concerned about the costs of illegal immigration. But you’re right. If the illegal aliens don’t have enough U.S. anchor babies to support them via welfare, they will steal to make up the difference, now that they have lost their construction jobs. Jobs, which according to some politicians, Americans won’t do ?
Even as ‘for sale’ signs clutter the landscape, government finance officers and economists say that disaster has yet to strike. Hopefully they are right.
The key word is “yet”.
“‘We’ve seen stability in sales. We’ve not seen any major price erosion anywhere in the state,’ said Robert Kleinhenz, deputy chief economist for the California Association of Realtors.”
Say what??? This guy is as bad as Lereah. Do any of these guys have any credibility left?
He’s not lying…
He’s just not telling the whole story, or the reporter is not digging for the right info. If he keeps that same story 2 months from now then he’s a liar.
“‘We’ve seen stability in sales. We’ve not seen any major price erosion anywhere in the state,’ said Robert Kleinhenz, deputy chief economist for the California Association of Realtors.”
While this might be (unfortunately) true for many communities that touch the sf bay, it is most certainly a huge lie for other areas. I was in Roseville (outside SAC) and prices have been slashed 100-250k on new construction in the 400-800K range. I was in open houses in a nice gated community where existing house prices are down 20% and still not selling…they’re still reducing! And this is a nice community. Hell, all you have to do is look at the RE sections of the Sunday papers. It’s like a clearance sale at a furniture store.
The fact that we haven’t seen this in the BA really sucks. I can tell you that nicer, desirable townhomes, condos and homes are moving at a steady pace in communities like Fremont, Millbrae, Burlingame and the city. Some are down maybe 10% from the peak but a colleague just sold a 2bd/2ba 100sf condo fairly priced in an ok but not great area, got 7 offers the first day and sold for 75K over the asking within 3 days at 775K. He is not alone and I’m sick of it.
Guess I’m rambling and venting a little here…sorry! Just frustrated cause I’ve got the bucks…been saving handsomely for all 7 years in BA but simply refuse to take on that much debt at this stage.
I feel the same frustration, but as we’ve all said, “debt-management” is not the same as the ability to pay off a debt. Folks may make more in the bay area, but not enough to keep prices at $700K+ forever…
Somebody at some point has to pay off the debt or sell, the game cannot go on forever (though I admit 7+ years does seem like forever…)
To East Beach,
Are you not in Santa Barbara? Condo and home prices are measurably down from 2005 15-25%.
I have opened escrow numbers for April. Closed escrow sales volume and price numbers in May will please you.
Hi Cleareview,
Yeah I’m in SB. Prices are definitely down 10-20% in my area (Noleta) and not a lot of sales. All good signs of course, but it’s still frustratingly slow when plain-jane SFHs still sell for $800K… when they should be 400K max (based on rents).
Since you are knowledgeable about the local market, what’s your opinion on what the downturn has in store for prices here? I’d love to settle in the Shoreline park area one day, but not for $1M+ that’s for sure..
East Beach,
When this whole thing has shaken itself out by 2009, here’s what you can expect:
Goleta SFR’s- $375/square foot
Goleta condos- $300/square foot
Downtown/San Roque Santa Barbara SFR’s -$450/square foot.
Downtown/San Roque condos- $350/square foot
They are already selling some homes and condos at those prices, maybe a couple a month.
As far as the Mesa, Rivieria and Samarkand are concerned those places will be much more expensive.
Shoreline Drive will take mucho bucks to buy into.
If you are making, let’s say, $6000K a month you should be looking for a 1000 square foot 2/1 condo in the North La Cumbre-North Goleta area in October of 2008.
Holy cow - no wonder UCSB can’t retain staff. Most of the campus can’t afford a home at those prices.
Thanks cleareview,
I make more than that, but I’m certainly not waiting around for a condo, that’s for sure. Hopefully things tank a lot harder than your estimates. My company is still losing well-paid 20-30 somethings at a rapid clip, and those prices wouldn’t slow the exodus.
And not to argue, but I still don’t see how your projected prices jive with going rents of 2500-3000 a month for SFHs. Boomers and greatest-gens have to die sometime, and they don’t all have live-in children.
Give rental costs a year to adjust downward.
You must be patient, Grasshopper.
Zack, no need to apologize for the rant. There are still a few FBs left out there. What is sad is that some still don’t see the oncoming train or the sinking Titanic. At this point, unless you live under a rock, you should know there is a problem in the REIC.
Also, let all the othe meatballs overpay. You hang in there. With all the debt in this country, it is not too long before CASH WILL BE KING! Look, if a depression hits and even if the the dollar tanks somewhat, we need some sort of medium of exchange. Gold? Always possible. However, still a good idea to keep some of those greenbacks liquid, rather than take on more of them in debt. Hey, if a gallon of gas goes to $10/gallon, at least you’ll have the cash to buy some, if need be. These FBs sure won’t!
LOL…true enough. Overall, I know I’m doing the right thing. I’ve always been a saver, have no debt, live in a nice, gated apt. complex in 1100sf, beautiful landscaping, indoor/outdoor pools, great rent rate…still several hundred $/month lower than it was in 2000. No taxes, no dues, no maintenance, no headaches, no worries. Unlike many folks I save & invest what I would be putting into a house . So, the difference between what I have gained and the equity I’d have had I bought 5 or 6 years ago is actually not all that much. Haven’t ever bought gold itself but I do have some investments in precious metals funds that have done really well the last couple of years.
New construction in crummy outlying areas is a totally different market from older properties in SF or LA. There has been no new building of houses in LA, for example, because there’s no room. Just some condo developments here and there, which just jacks up the price of houses even more because they become all that more rare. I’m still not sure we’ll be affected all that much. So far, the market has slowed a little, there are price reductions of maybe 5-10 percent, and you can at least find apartment buildings around 9 times gross again. It’s a start.
LAIG
You need to get access to some current forclosure data… real raw data not the candy stuff on the net. Forclosure in Santa Monica Multi-Unit. Absolutely no reason for this if your line of thinking was correct. We’re a few months behind but it’s definitely coming and in a big way. Get some sheets take a look…
Great, do you have anything that you can post, either listings or data? I’m going by listings I get off Loopnet.com, Marcus & Millichap and a local SM agent…I’ve seen price reductions for sure, but so far small ones and off inflated prices. What are you using, dataquick?
This is real data from SM/Venice, at least in terms of listings, not closings:
http://us.f533.mail.yahoo.com/ym/ShowLetter?MsgId=1783_13633120_1126757_1556_6006_0_36869_34037_2813877937&Idx=14&YY=86493&y5beta=yes&y5beta=yes&inc=25&order=down&sort=date&pos=0&view=a&head=b&box=Inbox
Your link didn’t work… There’s a forclosure on the 1200 block of Norton the seller went down with 1.1 million in paper on it, 5 units. The one in Santa Monica I don’t have in front of me… But it’s out there. I received my info from a title company but dataquick would be a good source.
TO Lainvestorgirl,
Last I checked The SFV seems to be having quite a few foreclosures, which seems to be spreading from the crummy Northeastern parts too the better Southern and western parts such as Encino, Woodland hills, Sherman oaks,ect. I also read that SFV has become basically flat in YOY as of end of april.
The aforementioned sOuth upscale areas of the SFV are close enough to the LA Westside and almost equal in income, democraphics, types of homes, ect. There is a foreclosure epidemic in North Hollywood, which impinges upscale valley village, studio city, toluca lake. These areas are just up a short jaunt down the hollywood fwy from the westside.
The massive LA Dwtn multi-unit construction wave will affect Westside Condo prices, which should see furthur downside price adjustments.
SFH’s are an abberration on the Westside: it;s all about Multi-units, apts, condos and Twnhomes, which the Developers are squeezing into any available open plot all over the Westside/LA County.
If there is a foreclosure epidemic in N. Hollywood, and I have no reason to doubt you (although I would love to see a link), then it’s on.
“If there is a foreclosure epidemic in N. Hollywood, and I have no reason to doubt you (although I would love to see a link), then it’s on”
H Hollywood has 51 foreclosures and 174 NOD’s. 25 of the foreclosures in the ragged 90605 north zip area. This may not actually be an epidemic yet, but we are still in the first inning.
The N Hol area closest to westside,90601, has 11 foreclosures. Next to it valley Village zip 91607, an area which has some hi-end estates owned by entertainment folks, has 10 foreclosures/44 nod’s. The still higher-end Studio city.Toluca lakes zip 91602 still OK but for how long?
All these areas hav seen tremendous volume of New Apts/Twnhmes.condos, entire village complexes, going up. This is one of LA Hot zones for Multi-units, both existing and new. The trend is more pronounced north of the 101 in the more shabbier sections of the east SFV, which get more shabbier the more north you go. North of Victory/VanNowen it becomes pretty much ‘hispanizised’.
All info from Foreclosure.com Just type in city and presto, the foreclosures/nods pop up. Can also type in by zip.
WHY Westside RE prices will adjust downward as the Entire LA county RE housing prices tank!
Any one who pays outlandish prices of more than a million for Plain jane ordinary 3/2 1500 sq ft fixers in Santa Monica, Venice, Mar vista, Rancho park,Mid cities,Fairfax, W HO,Culver city,ect is overpaying!
I expect that similar properties will be available for average $100,000-300,000+ off in such upscale/Half-way decent SFV areas as Encino, Sherman Oaks, Studio City, Valley village, Toluca, Burbank, Glendale, some parts of Van Nuys, and even in lessor but still quality parts of Canoga Park, Winnetka0, Northridge, Reseda, ect.
These areas are close enough to Westside to impact prices. Though they might be short but hellish commutes down the 101/405, potential Westside lookers would perhaps make a decision to get a property at $100,000’s of dollars off and make that extra 1/2 to 1 hr commute. The weather in the SFV is miserably hot and baking in the summer compared to the coastal westside communities but that is a small sacrifice(get AC) to pay if one can get a 3/2 1500 sq ft for $500,000 in say burbank in a decent street/hood compared to paying $750,000-900,000 for that exact same property in say Santa Monica or Venice.
Ditto for West Torrance, Long Beach Eastside-Bixby, Downey, Lakewood, Gardena, Carson, Redondo Beach or other halfway decent, MOSTLY KEPT-UP middle class areas within one hr of the Westside .
The only things that will keep the Westside RE market from stagnating or going into a moderate/severe RE tailspin are:
1 The Fed/stupid politicians interfere with the natural/inevitable RE correction thru stupid FB bailouts.
2, Fed continues to inflate away the economy thru printing gobs of money. monetizing all debt,lower rates(unthinkable but not impossible),PPT,basically screwing savers/the middle class.
3.The Economy does not go into a moderate/severe recession , which will hurt the Westside Entertainment industry.
I remember during the DOt-com bubble collapse of 2000 that Westside business/economic activity was noticably lighter than usual.
just a note, recessions are goog for hollywood — escapism
How about condos in LA, lainvestorgirl? I have a niece who foolishly bought in N. Hollywood in 2004 with interest-only/adjustable rate. They didn’t listen to crazy old doom and gloom auntie. They insist that the market is holding up. Is that true?
If they bought in 2004, they aren’t under water yet, I would say.
I really don’t care, because when the music stops, it will be more painful for the last idiots. They have no excuse because the MSM has been all over the RE and mortgage problems since February. Only intense pain will teach these idiots a lesson they will never forget. We need more bankruptcies, foreclosures and huge losses for MBS investors.
I remember when the dotcom crash started in March 2000. Nortel and Cisco kept chugging along until September before they finally started to crash. Seven years later they still have barely retraced compared to the highs of the dotcom era. The RE industry will face the same results.
I’m seeing the same thing with the area I’m watching. The spring surge has hit my favorite condo development, and the 5 units listed this week are back at 2006 prices.
“Not if you ask Jack Williams, president of the 4,800-plus member California Association of Mortgage Brokers. ‘There are the bad apples, but I think he is way overstating it,’ Williams said. ‘Anyone who does fraud as a mortgage broker, we are definitely going after them. We’re going to make sure they are investigated.’”
GREAT…I’m 110% behind a TAXPAYER funded grant for $4,800 pairs of PLASTIC HANDCUFFS to solve THAT Problem.
How about 2,400 pairs and we make two trips?
Better yet, chains, guys on horses with shotguns and a angry FB with mirror SUNGLASSES.
I’m sorry but there isn’t any way that a front line loan agent would not be aware in most cases that the loan package was fraudulent .The management/underwriters failed to underwrite and double-check commission sales people .Loan management /underwriters/appraisers closed their eyes on purpose because they were passing on the risk .If a loan broker failed in their duty to prevent fraud than they helped the crooks commit the loan crimes .
Do you really think that the bulk of these sub-prime borrowers would even know how to fill out the loan application or how much it would take to qualify without the help of the friendly lender on commission ? The front line people of the REIC dealing with the borrower know it when the borrower can’t really qualify and needs to commit fraud .
In the bay area you still have one family with gramps and grannie moving in with the kids to help make the payment. I see orientals that still see dropping prices as quick equity without any understanding of financials. I see RE quietly going into foreclosure and RE signs being taken down to make the picture look rosier but you can’t play this game forever. I rent and I get one or two phone calls daily from MB’s asking if I want to refinance my loan which tells me the surface may be calm but underneath the current runs fast.
“…I see orientals…”
FYI asians hate being called orientals. I’m surprised you being in the bay area wasn’t aware of that.
Just trying to prevent a flame
wasn’t =weren’t
Trying to prevent a similar flame.
Thanks, that spelling nazi “WE Rent” is a real bear about things like that.
No kidding. I’ve been reemed more than once.
Try learning from mistakes.
“Thanks, that spelling nazi “WE Rent” is a real bear about things like that. ”
“No kidding. I’ve been reemed more than once.”
Spelling Nazi’s sometimes can’t help but correct the spelling of others–in spite of the fact that everyone knows what was being stated in the “misspelling.”
Here’s to all you pain in the rear “spelling NAZI’s”. Statistically, many who misspell here have far superior critical thinking skills than you. That’s a fact. Higher I.Q.’s Too. So wrap your head around that for minute…if you can focus long enough.
Either grab a piece of humble pie and stop correcting everone, or do us all a favor and grab your micrometer and go back to measuring your stools. OCD symptoms (even mild in nature) inflicted on others is a real pain.
DOC
It’s spelled “reamed”, not “reemed”.
With due respect, why is that?
Asians include Chinese and Israelis and Russians and Turks and Iranians and Pakistanis and Indians….
Orientals seems more specific, never had a derogatory connotation in English, and simply comes from a word meaning “Eastern,” and is opposed to Occidental, meaning “Western.”
Please help me understand.
Try calling a Hispanic a Mexican (I know ’cause I’m married to one…which of course gives me immunity to say all the Mexican jokes I please.)
If they’re actually from Mexico, what is the insult?
Being Mexican isn’t intrinsically insulting except to chauvinists.
“With due respect, why is that?
Asians include Chinese and Israelis and Russians and Turks and Iranians and Pakistanis and Indians….”
I agree about there not being a name that applies for the “far eastern races”. China, Korea, Japan, Indo-China, etc.
They don’t consider themselves a single race. It is my understanding that the Japaneese consider themselves as far from Vietnameese as from Indians. That Vietnameese consider themselves as from from Koreans as from Middle Easterners.
They share some culture elements and the same general place on the globe, therefore it is okay to call their art “oriental” or the food “oriental”. However, it is not okay to call them as people “oriental”.
As my Korean friend says - “don’t call me Oriental…I’m not a %#cking carpet!”
Have heard the same thing, maybe said more diplomatically, from other Asian friends and aquaintances.
I have a friend that is English. If I refer to him as English he does not say, shut up, I am a human, not a sheepdog.
Must I tiptoe around the gentleman from Denmark, lest he think I refer to him as a pastry?
It is a long tradition in English that a modifier refering to the geography of origin can also be a noun referring to people from that geography. All this for hundreds of years without any insult- that’s just how English works.
It would be an interesting idea to see how notions like this get started. People choose to be insulted about the most innocent things. Sort of like how we dare not call San Francisco “Frisco,” just because of some Herb Caen column 50 years ago.
How about “Ornamentals?”
Lived in the far east for three years and have ‘oriental’ or asian friends and none have ever objected to the term when used in conservation. One good friend did object however when applying to a University for an advanced degree and was told that if he wanted to attend he would have to apply as a ‘minority’ to which he replied, ‘I’m not a minority, I’m an American!”
Must be an L.A. thing then, When I was younger I was told by an acquaintance and a few friends since, that “oriental” was the description of objects not humans and that the phrase asian was preferred…
They were asian so I believed them…
It’s no just LA. You’re right. wiki…
“Random House’s Guide to Sensitive Language states “Other words (e.g., Oriental, colored) are outdated or inaccurate.” This Guide to Sensitive Language suggests the use of “Asian or more specific designation such as Pacific Islander, Chinese American, [or] Korean.” [4] Merriam-Webster describes the term as “sometimes offensive,”[5] Encarta states that when the term is used as a noun it is considered ” a highly offensive term for somebody from East Asia” [6] However, the same reference also defines the adjectival usage as “relating to East Asia (dated)” or “high quality”.”
http://en.wikipedia.org/wiki/Oriental
“not just LA”
MrIncome:
I agree, born and raised in SF, no way most asians like the “oriental” label any more. They mainly say “oriental is a rug”.
Many don’t like the term because it comes from the colonial days. (occidentals from the west, orientals from the “far” east)
obviously many people don’t care one way or another, but I’ve seen some uncomfortable scenes at a party. (interestingly, most asian immigrants don’t mind it, I think due to language/culture issues… it tends to be educated Asian-Americans who get upset)
It’s kind of like the word “colored”. Most people of color aren’t fond of that anymore, although it once was the way to say it
My understanding of the objection from the asians tends to be related to the fact that “Orient” means “eastward” and thus, is another way of calling someone an “Easterner”. Much the same way many people from Texas don’t like to be called a “Southerner”.
its agreed… we’re oriented towards using the term asian
LOL yea, my response to him was a lot tamer than the response I received for using that term. When I saw it my shin started throbbing.
The term “orientals” is objectionable to some not because of what it means literally, but because of what it implies. Whether the user of the word intends it or not, he is subtly suggesting that these people are somehow different from the rest of “us”, that there is a quality of otherness about “them.” Asian Americans, especially those born and raised here, resent that implication because they often feel just as American as anyone else.
Great web site, I’ve learned a lot about the RE market here, just trying to share my insights into cultural perceptions.
“As real estate sales decline and prices stagnate, middle-class homeowners stop splurging…they stop using their houses like ATMs or even slot machines. Such a housing-related slowdown may already be underway, judging by this week’s economic indicators.”
———————————————
get ready for deflation
got cash?
When they can no longer payoff their CC bills with HELOC money we’ll see things speed up. I think the play for us bystanders now is to figure out which businesses have been bouyed up by these fast spenders and start shorting them in the market.
it’s too late by the time we figure it out>
get ready for inflation
got choppers?
Stucco,
Maybe if we do the magic dance, we’ll get deflation. It’s what crazy savers like me are praying for. If it’s inflation, we’re hosed.
hey, do tell. If you make 100.00, how much do you save - all sources - to be a CRAZY saver???!!!!!
Me? I save about 1/4 of my personal take home, same with the DH. That’s after the 401K deductions. I think I’m the last person I know that damn near maxs out my 401k.
Those may be low ratios but I don’t earn nearly as much as most people on this board. I’m just a government mid-wage earner who wants a small house close to work and to not have to eat beans out of can on street corner when I retire.
If you are a government worker you should have a defined benefit plan that will give you cost of living raises of 2-3% a year. On top of that you’ll get your SS money. But the beauty of your maxing out your 401K in addition is that when you hit high periods of inflation the interest on your 401K will help maintain you buying power. Good going!
i also max out my 401k, but can’t do an = amt after that post tax- only about 8%… we really don’t know what avg salary on this board is, so you could very well be better off than most!
“cost of living raises of 2-3% a year”
Rofl
I know most people don’t know what’s been happening but CoL raises are never a sure thing for us. Not sure how the state does it but UC employees went without for years and I’m sure we’ll be back to no raises going forward.
We also haven’t received our merits in at least 7 yrs. Anyone who was hired in 00′ or later is basically frozen at step 1 and therefore gets a lower raise then someone who has been employed at UC for 10 or more years. Thankfully I seem to going to a retirement party once a week and the career opportunities for promotion are really ramping up. That’s the only way to get a real raise in the UC system now.
401k has been moved out of stocks and into a straight UC savings plan, some bonds, and treasuies. The saving I don’t toss into 401k goes into staggered CDs and treasuries for easy reach.
I’m young enough that I have zero faith that I’ll ever see SS money. Thank god I’m on the UCRP plan and not CalPers or I’d never be able to sleep at night.
Crazy,
We have a cheap rental and we bike to work. We have zero debt other 1 last student loan. My only extravagence is my Treo. I grew up with stories from my mother of the depression in Germany which scared the crap out of me. All debt is evil our universe.
I’m also an artist and any time I sell a painting or sculpture, that goes in my play money stash but I wasn’t counting that.
I too heard D-era stories and I try to live below my means. Still, I feel uneasy…..
Gwynster and Crazy Credit: you will be the delight of your grandchildren someday. Most other Americans will not be as happy as you. And I’ll bet you have just as much fun as people who live beyond their means.
the long bond- those who back up their opinions with massive cash, e.g. the smart money- is not signaling inflation
And not just the long bond- 30 year fixed mortgages are well under 7%. I want to hear how those lenders are just naive.
“And not just the long bond- 30 year fixed mortgages are well under 7%. I want to hear how those lenders are just naive. ”
The lenders aren’t naive, but that doesn’t mean they’re acting smart either.
mortgage rates can stay low in a hyperinflationary standpoint if there is so much money created that it starts searching for returns. That is what is occuring.
There is too much money chasing too few goods. thus, it pushes UP the price (in dollars) of bonds and mortgages, which pushes DOWN their yield. (in other words, mortgage rates fall).
the lenders don’t care, because they make the loan, take a bunch of fees, then sell it to the investors (who are the ones funding these loans). if the loan goes bad, the lender isn’t hurt, the investors are. only now the investors are “waking up” to the risk, and forcing the lenders to eat those bad loans ,hence the subprime explosion.
We could get hyperinflation if money keeps being created at such a fast pace, OR we could get deflation if people become to lend or borrow money. It is a balancing act… on a razor wire tightrope. With a 20 lb trout smacking you in the face. (courtesy of TxChick. it’s now 20 lbs, not 10 lbs, due to trout inflation!).
HIC to the extent that deflation would require adropping in prices I do not see that happening. Unfortunaately the world does not care what the price of oil, corn, copper, steel etc are in the US as long as their country has these raw materials. There are ~$8T floating overseas looking for something to buy. This will keep raw goods up and prevent deflation in the US.
By the way, I was in The Minneapolis airport this last weekend and after most of my jaunts land in Chicago or Milwaukee I was really surprised. Everything worked! In Chicago the walkways are rubber and work half the time (Minneapolis’ are made of steel) and much as I love Milwaukee - not pretending to be an international city. It had been a while since I had been in Dinky town and was very impressed - it looked and acted like an international city. Must be fun working there.
FYI, Brad, lenders were naive in the 1970’s-1980’s. They had a bunch of loans that were ~5% lower than the inflation rate which lead to the S&L crisis. Banks and lenders aren’t always on the right side. That’s what gov’t bailouts are for.
you won’t get an inflation signal from the bond market until inflation is undeniable. right now, interest rates are low BECAUSE there is inflation. there is so much money floating around out there that it’s going into bonds. just see all the petrodollars buying bonds. the price of oil has skyrocketed and a lot of the money is heading into bonds. commodities are definately signaling inflation. the last inflation report was 7.5% annualized.
interest rates were low too in the early 1970s.
“Downturns in the housing market are heartbreaking for homeowners. As real estate sales decline and prices stagnate, middle-class homeowners stop splurging.”
“Heartbreaking”? I can understand “disappointing”, but Isn’t that kind of a strange term to apply to the inability to stop splurging?
What’s heartbreaking is prices not coming down to reasonable levels faster. I’ll give up a decades worth of Coach bags and spa pedicures for that.
“heartbreaking…….inability to stop splurging?”
A lot of people have been “splurging” on things like college tuition for their kids…so yea, it could be heartbreaking
pha! In my town they splurge on buying the kid a 3/1 condo while they go to school. Low instate tution = one f@cked up RE local market. I’s love to see them loose the HELOC moola and get hit with rising college costs.
Besides - working while in college and paying back student loans builds character.
I wonder if any of these college students are enterprising enough to rent out the other 2 bedrooms? Must be nice - being entitled to an entire lifetime of economic outpatient care. The bank of mom and dad will give them the 20 or 25 % down payment they will need to get their loan in a few years when they are out of school, but they will be the first ones to insist they are getting everything on their own.
Got 10% down?
“Heartbreaking.” That’s laughable to those who aren’t materialists. Heartbreaking is when a loved one gets cancer or dies. Heartbreaking that you can’t buy a BMW, not so much. Shows how shallow these people are.
If not being able to splurg is heartbreaking, what will it be when they can’t buy their kids shoes from Wal-Mart because they’ve been out of work, and the entire welfare check only covers rent and food.
Tip of the iceburg, people. Tip of the iceburg.
Warren Buffett says don’t worry about subprime problems:
http://news.yahoo.com/s/nm/20070505/bs_nm/berkshire_subprime_dc
But his assessment came with the requisite qualification:
‘As long as unemployment and interest rates did not rise significantly, Buffett said “it’s unlikely that that factor triggers anything of a massive nature in the general economy.”‘
Since the U.S. economy fell into recession every previous time since 1955 when residential construction fell off by 25% or more, and residential construction has already contracted by about 40% off peak, a recession is not out of the question by any means. And unemployment generally goes up by 2% points during a recession (roughly 2.5m jobs off current employment level of 1 1/4 m).
I’m so frightened at the prospect of a depression that a recession will seem like a cause for celebration.
Ditto!
I think stagflation is the best possible outcome.
I’m worried about the fed over-stimulating the econmy and causing run-away inflation. I’m worried about them worrying too much about inflation and causing a depression.
I think the best is to stay in the middle. High, but not crazy, inflation. High, but not crazy, unemployment.
me too
How can any male over 14 years old be “frightened” by anything? Being scared, being frightened - it has nothing to do with anything at all that’s being discussed on this blog - it’s just a sign of materialism and bad religion.
Why are you so sure that’s a male..?
I’m so glad that I’m a female and that I’m allowed to be frightened.
But once again, Paul, someone on this blog caught me exaggerating. I’m rarely frightened. I’m getting to old for that.
“Warren Buffett says don’t worry about subprime problems:”
Aughhhh,…what does he know about money…..
Is the $600K being forgiven for the Hollister strawberry picker? Did they shortsell his home and realize that anything in Hollister should be priced around $120K?
7051 Crest Rd, Rancho Palos Verdes, 90275
Status: ACT MLS#: P942280 $1,700,000*
List Dt: 02/27/2007 PType: SFR-D Orig Price: $1,995,000
Image this. Someone could have paid full price just 2 months ago. or waited until this weekend and saved 150k per times 2 plus or minus
150K here, 150K there, it starts to add up to real money…LOL
When we lived in RPV, I was always amused @ the local ladies who seemed to be dressed in tennis togs or horsey fashions, all too often…
Upper class “see me-dig me” clothing.
This is amazing - I just checked my phone messages here at work (just stopped by to do some cleanup), and an automated message was left by some sort of mortgage research company saying that my “payments” could be reduced. WTF????
I don’t own a home of any kind. And being as how I work and live in San Jose, I seriously doubt I ever will be able to own a home of any kind. Well, not here at least.
These knuckleheads are hitting my cell phone.
Kinda illegal.
they are randomly dialing - I got that too - I’m in CT and my # is u/l
Well, if you guys are on the Do Not Call list, those FMBs (F’d Mortgage Brokers) are looking at $10,000 fines for each call (i.e., the feds do have real penalties - they are just often selective in applying them). I read a thread on their blog and they were scared as h3ll about calling those numbers - I guess some of their shops (as they like to call them), have gotten some unsolicited calls themselves from Uncle Sam.
I got a Treo with my new job and immediately started getting the MB calls. Signed the number up on the DNC list and the calls stopped within 3 days.
Now that David Lereah has to sell his house and move to CA, what kind of loss is he going to take? Especially since he bough it just last year.
David Leareah is the 2007 version of that old poster of Richard M Nixon with the new caption of… “Would YOU BUY a Uesd House FROM this MAN ?” …or his little REIC Friends.
I am sure whatever loss he takes he will “appreciate” the irony of it
He will probably put it up 100k over market, then take it down, rent it out at a loss, and wait for the “spring bounce” in ‘08.
If that organization is smart, they’ll find someone to buy the place at a good price, and then re-sell (when no one is looking) at market prices - letting DL say he was right all the time. So, for those who watch him, keep an eye on his place, even after he “sells” it.
Seriously a good idea for the NAR. The publicity of their chief economist losing $100k+ or being unable to sell the home would hurt. Expect to see it sold to the relocation company for a small profit.
Got popcorn?
Neil
Didn’t a deal like that land our San Diego Congressman in jail last year?
Either way you slice it: A forgiven debt vs. a default on the loan — the bank suffers. So we’re still looking at the same vast financial problem to the banking system. Ultimately there is only one way to protect the system, and its called “inflation”. Got gold?
A good recession actually might make some people appreciate the simpler things in life, and start focusing on what they have instead of what they don’t have
Husband and I went looking at model homes today to get some decorating ideas. Did you know there are houses about 4,000 sq feet, $950,000+, in BAY POINT (aka Gun Point, Dodge City)?
Steven Krystofiak, that name rings a bell.
I seem to remember him posting on behalf of something called MBARL a while back?
(And they actually had a pretty good set of broker guidelines IIRC.)
I think investors were anticipating a genius like David Lereah moving over to Move.com, that’s why they sold the stock. Down 50% since February.
These guys keep saying, “…the flippers left…”
I think the last wave of flippers got caught holding the bag and they are alive and not so well. They are still here and will be the first wave of implosion as they default or sell at a big loss.