No Signs The Downturn Will Abate In California
The Contra Costa Times reports from California. “The malaise in California home building will hound the state for a while longer, a top state government economist told an East Bay gathering Wednesday. Even worse, California is particularly vulnerable to ripple effects because the state depends on housing and home building for a greater share of its economic activity than other regions, said Howard Roth, chief economist with the state’s Department of Finance.”
“‘I see no signs that the housing downturn will abate any time soon,’ he said during an interview after his speech.”
“Alan Nevin, chief economist with the California Building Industry, said he has prepared a revised forecast that suggests housing construction will be even weaker in 2007 than initially thought. The revision is based a weak first quarter in home building in California.”
“‘It appears it will be difficult to reach the levels for housing unit construction that we had originally projected last December,’ he said.”
“Roth warned that the weakness could be even more severe based on the first-quarter home building activity. ‘To keep us out of recession, we need for consumers to continue to spend through the rest of 2007,’ Roth said.”
The Orange County Register. “Orange County real estate consultant John Burns says: ‘The housing market has softened much more than is being reported. We have been advising our retainer clients for more than one year about misleading national sales information, both with the Existing Home Sales and New Home Sales data.’”
“‘We are now going public with our concerns because we are concerned that policy makers are relying on national data to conclude that the housing market correction has not been severe.’”
“Here’s what CEO Ray Pacini of California Coastal Communities in Irvine is saying: ‘Conditions in these affordable markets (Inland Empire and Lancaster) continue to be very challenging. We generated orders for 13 homes during the quarter due to the problems in the subprime mortgage market, declines in consumer confidence and competition from large national homebuilders who continue to significantly discount their prices as they try to reduce inventories.’”
“‘This deterioration in market conditions has resulted in a $4.0 million impairment charge for our project of 87 remaining homes in Beaumont, California. We expect that these conditions will continue throughout 2007.’”
“That Beaumont writedown is noteworthy. That’s roughly $46,000 per home in a project selling, according to the company’s Web site, ‘from the mid-$300,000s.’”
“California Coastal Communities, Inc. reported a net loss of $3.0 million, or $0.28 per diluted share, for the three months ended March 31, 2007.”
“During the first quarter of 2007, net new orders decreased 55% to 13 homes compared with 29 homes during the comparable period of 2006. Cancellations as a percentage of new orders were 32% during the first quarter of 2007.”
“At the same time, backlog as of March 31, 2007 decreased to 15 homes compared with 60 homes as of March 31, 2006 and the average sales price of homes in backlog decreased from $835,000 to $533,300, reflecting the close out of the Ranch Santa Fe project at March 31, 2007.”
“The Company continues to actively evaluate pricing strategies and other sales incentives in an effort to sell these homes at an orderly rate.”
The San Francisco Chronicle. “Daniel Y. of San Francisco has a question that’s on the mind of many homeowners these days. Daniel wants to sell his condo and move into a bigger one in a nicer neighborhood. He figures the price he could get would pay off his first mortgage, but not a $50,000 home equity line of credit he took out last year to repay credit card debt.”
“Daniel says the shortfall could be $10,000 to $30,000 and wants to know what would happen if he didn’t pay it.”
“Daniel probably won’t be able to sell his condo unless he comes to some sort of agreement with the home-equity lender, says bankruptcy attorney Steve Elias. If the lender agrees to accept less than the full amount Daniel owes, he will probably owe tax on what’s known as cancellation of debt income.”
The North County Times. “In April, the median price of a single-family detached home in North County decreased by 0.78 percent from $640,000 in March, to $635,000. The median price for single-family detached homes peaked at $650,000 in June 2006.”
“For single-family attached homes, the median price fell by 4.88 percent to $390,000 in April from $410,000 in March. Year over year, the median price decreased by 1.7 percent from $396,650 in April 2006.”
“The number of single-family homes sold fell from 769 in March to 692 in April. That compares with sales of 767 for April 2006 and 1,117 for April 2005. For single-family attached homes, the median price fell by 4.88 percent to $390,000 in April from $410,000 in March.”
“As the real estate market cools from the superheated first half of this decade, agents noted that many would-be sellers and buyers are sitting on the sidelines. Sellers, who a few years ago might have tested the market, are deciding to wait awhile before listing, said Dennis Smith, a real estate agent in Carlsbad.”
“And with appreciation no longer surging at 20 percent a year, Smith said that investment and second-home buyers, who had been a major factor in the boom years, have retreated for now. ‘This is not bad,’ he said. ‘This is good. It gets the hysteria out of the market.’”
“With a drumbeat of news about increased default and foreclosures, many would-be buyers are convinced that prices have no where to go but down, some local agents said. ‘Buyers are waiting for the great bargain,’ said Dallas Woodring, a broker in Escondido and a 23-year veteran of the business.”
“‘A lot of agents are shopping the short sales’ to buyers, Wellborn said. ‘I just picked up a foreclosure for one of my clients.’”
“Wellborn said her client was able to purchase a foreclosed, single-family home for $450,000 in a neighborhood where prices had peaked at $530,000. The previous owners had paid $500,000 for it, held on to it for three years, then lost it when their low-interest teaser rate adjusted to a much higher one, almost doubling their monthly payment.”
“‘Definitely, it’s a buyers’ market. I have a lot of people out there looking for the deal,’ Wellborn said.”
From CNN Money. “Rising foreclosures will bring misery to many home owners, but bargain prices for some lucky home buyers. Dean Williams, CEO of auctioneer Williams & Williams, said his company is very busy.”
“Although many of the sales this year have clustered in the economically hard-hit Midwest, many of the homes coming to auction later this year will be higher-end properties from sun-belt states where the economies are generally strong, but speculative real estate investing has dried up, such as California, Texas and Florida.”
“‘In June, we’ll have 200 properties in San Diego and Los Angeles on auction,’ Webb said, ‘with an average value of around $300,000.’”
“Not all the auction properties are huge bargains. According to Williams, 12 percent of the houses he sells, most of which have already been marketed for an average of six months as conventional listings, sell at auction for more than the original asking prices.”
“But most of the houses do sell for less, and about 15 percent of time ’shockingly’ so, said Williams.”
“Daniel probably won’t be able to sell his condo unless he comes to some sort of agreement with the home-equity lender, says bankruptcy attorney Steve Elias. If the lender agrees to accept less than the full amount Daniel owes, he will probably owe tax on what’s known as cancellation of debt income.”
Six months ago, this article would have been unthinkable in the San Francisco Chronicle. After all, SF is “immune” from the subprime meltdown and everyone works for Google and makes a pile of money. Just wait for this to become a more common scenario. Someone can’t sell without taking it in the shorts. Once people here really digest the fact that RE can and does go down, watch out below. Not too many will be willing to pay these prices.
Just wait ’til the end of summer. Scary monsters.
But wait, there’s more.
On the Nightly Business News, they reported that Allstate just announced that they will no longer be writing home owner policies in CA.
Now do they really think we’re in for a series of catastophic events or are they afraid of a lot of fire sales? Probably the former but it’s an interesting question.
Now what happens if other major ins carriers quite doing CA business?
I feel like I’m back in LA during the the riots watching history unfold around me.
Lions and Tigers and ….. Bears! Oh My!
Yes, one everyone hears that a friend or a friend of a friend had lost some money selling their house, there will be few buyers willing to pay near listing price. One the psychology changes for the masses, this market will start dropping faster. It is moving slowly but will be accelerating.
I think you “c” key is sticking…onCe…
This idiot thinks he is a ‘move-up’ seller? What a joke, underwater on a cheaper condo, willing to stiff his second, and trying to buy something ‘bigger and better’?
I wonder if he really took his last RE agent’s statement, “get into something, and you can move up in a few years”, too literally.
I sure this is the same type of guy who rolls an upside down auto loan into a new car…
And what are the odds that this cockroach kicked that credit card addiction? He will run those up and let the next lender eat those, too. All class!
Starve, That’s what struck me once again as so incredibly ludicrous. He can’t afford what he has ,but wants to move up to something bigger he can afford less??
Just a small part of the “smug problem” here in San Francisco!
Being responsible just isn’t part of the culture.
Even if he does walk, he can’t buy something new without a down.
This Daniel Y reminds me of a friend who mused on email one day, “I finally got a decent job (this after about a year of unemployment/drug abuse/alcohol abuse/various “injuries”) and now my creditors found out and are after me. My question is, should I should file Chap 7 now or Chap 11 later?”
I advised him to do three things - 1) Not file any form of bankruptcy 2) Be honest with the creditors and come up with a plan to pay off his debt 3) Stop emailing me because I don’t want to associate with people that think nonpayment of debt is OK.
It still pisses me off that he was so nonchalant about walking away from financial repercussions of high living. The unemployment was a direct result of all the partying.
“Daniel probably won’t be able to sell his condo…”
Did anyone else notice that Daniel is an anagram for Denial?
so daniel asking this indicates he doesn’t mind stealing 30k from somebody as long as he can get away with it…
classy
Jesus H. Christ. Did I read this right? He wants to screw the lender AND move into a bigger house? Give him a CARDBOARD BOX!
Daniel wants to sell his condo and move into a bigger one in a nicer neighborhood. He figures the price he could get would pay off his first mortgage, but not a $50,000 home equity line of credit he took out last year to repay credit card debt.”
“Daniel says the shortfall could be $10,000 to $30,000 and wants to know what would happen if he didn’t pay it.”
He should get a cash advance on the cc and pay off the second.
LMOA
In this case I believe you. You are so busy laughing your oss aff that you failed to type lmao. Right?
Now, I’m laughing my off ass …….
You know, he could probably do this — lol !! If I really wanted to get in even more over my head, that’s what I’d do….but luckily I don’t want to get in over my head at all….
That seems right (cash advance on cc to pay off the secured debt) — what secures the cc debt? Nothing, right? (I have learned to love my mtg clients who file BK but reaffirm their intention to pay ME — usually they are stiffing hospitals.)
This is hilarious…Everbody is commeting on this P.O.S.
Chris
That is one sorry S.O.B.! He thinks he’s gonna stiff a lender and then move up into a nicer place?! WTF is wrong with these people? Just when I think I’ve heard it all. This guy spent waaaayyy too much time down on Haight-Ashbury. Time to lay off the blotter, bud. Someone needs to slap some sense into this ignoramus.
Back in 1993 - 96, When I worked in Loss Mit for Wells Fargo Mortgage - this was very common. People would go and buy a nicer house in a better part of town then the one the owned at the time. They would then request a short sale from us after escrow on the new property closed. This will happen again and on a much larger scale then before - they are still in the very beginning of the downturn in CA.
Did the banks agree to the short sale in such a situation?
Maybe we’ll see Universal Default Clauses in mortgage documents now.
“If you default or short-sell on any mortgage after this mortgage has been issued, the rate will rise from 7.9% to 11.9%”
This would keep people from playing the “buy the new one before ditching the old one” game, I think.
No, Wells Fargo did not agree to short sales in those type of cases.
Cardboard condo sounds good to me.
///Daniel Y. of San Francisco has a question that’s on the mind of many homeowners these days. Daniel wants to sell his condo and move into a bigger one in a nicer neighborhood. He figures the price he could get would pay off his first mortgage, but not a $50,000 home equity line of credit he took out last year to repay credit card debt.”
“Daniel says the shortfall could be $10,000 to $30,000 and wants to know what would happen if he didn’t pay it.”///
So this idiot pays off 50k of credit card debt,is negative on equity,yet wants to sell and move up???
My head hurts after reading this.
Thank god i left SoCal in 1996,of course Southwest Florida aint doin a whole lot better.
Chris
Wow, that’s quite a report. Hard to choose which part to focus on, but for starters, this is pretty good:
“Orange County real estate consultant John Burns says: ‘The housing market has softened much more than is being reported. We have been advising our retainer clients for more than one year about misleading national sales information, both with the Existing Home Sales and New Home Sales data.’”
“‘We are now going public with our concerns because we are concerned that policy makers are relying on national data to conclude that the housing market correction has not been severe.’”
Whew! From the mouth of one of the REIC. Do you suppose this is the reason we’ve been seeing all this crazy building continuing on in Cali and Fla? Are the builders relying on false data? LMAO! Nothing like taking a look at what’s happening on the ground. The media, reporting agencies, the govmin, etc. are all lying sacks.
Oh, and by the way, CNN had a story about the severe drop off in television viewing, about 2 million viewers. Wonder where they all went all of a sudden? Could it be they are tired of watching and listening to crap?
Some of the builders are like a squirrel on a wheel in a cage. They have to keep building and getting ‘those’ draws to stay afloat. If they stop, the alligator behind them will overtake and chew them up.
Always Be Climbing…out of the hole you dug for yourself.
No, it’s from “Dumb and Dumber”
“You’ve dug yourself in a hole, you just gotta dig your way out”
They’re all out working their 2nd jobs to pay for their 2nd mortgages, reset 1st mortgages & to put gasoline in their cars, so they don’t have time to watch tv. Besides, most tv is crap. Even the good channels such as Discovery & History have a lot of reruns. Rome ended on HBO, Tony Soprano spends his days at the strip club, and I’d rather spend my spare time exercising and playing Pogo games. Inexpensive hobbies.
“‘We are now going public with our concerns because we are concerned that policy makers are relying on national data to conclude that the housing market correction has not been severe.’”
What does theis RE “consultant” expect the “policymakers” to do? Make it a law that everyone must buy a home?
The market correction is not severe YET. I had a good friend buy a va repo in 1993. I dont remember the neighborhood but it was east of the 710 right off the 91. He paid .40 on the dollar. 2 weeks after i helped move him in his next door neighbor moved out. The guy next door couldn’t take the huge hit to his equity and turned the keys back into the bank….
Chris
…and then your friend’s place was worth .30 on the dollar.
LMAO! This is when the spin comes back to bite the REIC in the patootie. I love it. Spin, spin, spin until they get into trouble and then “Uh-oh, maybe we ought to stop the happy talk, we need the feral guvmin to do something”. Oh, the pain of it all. Even on the local level here in FLA, the REIC bi*ches about the politicians in Tallahassee not doing anything about taxes.
This is the amusing part, where the REIC starts changing its tune and screaming for help from the guvmin. Even a little over a year ago, they were willing to play Pied Piper and no rancor toward politicians. You oughta hear it now around here.
I remember Bob Toll saying bring it on to 7% mortgage rates and how it would not affect the housing industry - of course he was selling hand over fist.
That’s OK because the HBs were pretty much all implementing large-scale buybacks so that their executives could sell into the buying. I’m thinking that those HBs would like to have some of that cash now that they blew on earlier buybacks.
Should be interesting to see what happens with the HBs as they default on their covenants. I assume (but don’t know, so correct me if I’m wrong) that these covenants with their lenders are similar to those that mortgage lenders had with their Wall St. wholesale lines of credit (i.e., they can’t have two consecutive quarters of losses).
Interesting…I don’t know whether that’s right.
However, from past history, my understanding of homebuilders is that when they borrow money for individual subdivisions, the loans are generally a 12-month revolver (extensions if certain parameters are met).
I don’t know if publics had the same arrangements on their subdivisions, but I suspect small builders are going to be REALLY under fire. Very painful if banks require lots more equity to extend the loans, catastrophic if the banks simply refuse to extend and ask for their money back.
I guess this is why lots of small, private builders are going belly-up already.
Another big danger for the HB’s is all the bonds they floated for both the business and for the subdivision improvements. You look around Sacramento at all the weeds growing out of the finished lots, then you remember they used Mello Roos financing for $300-$400/lot/mon. Those bonds usually only have 24 months of built in interest carry, then the debt needs to be serviced to the bond holders. Usually the new homes are built and sold and the new buyer gets to pay. Another 12-18 months from now, the builders holding 5,000 finished lots gets to start forking over $1.5 million per month.
Some Wall Street number crunchers think the obligations could exceed the net worth of a few HB’s already.
“Roth warned that the weakness could be even more severe based on the first-quarter home building activity. ‘To keep us out of recession, we need for consumers to continue to spend through the rest of 2007,’ Roth said.”
Great Howard, I’ll TAKE 6 medium houses with pools and HOLD the anchovies !
CHARGE THEM….to Ben
…as long as the credit cards aren’t maxed out. But when that happens, watch out.
I would like to track the credit card cash advance activity of the consumer… figure that would be a good metric to monitor how close J6P is to suffocating on his debt…
Along with cash advance tracking…I would like to track the pre-retirement “hardship” withdrawals from 401(k) accounts in 2006 & 2007.
How many FBers do you think are leveraging their future to tread water in the present?
Couple those stats with the ever declining, negative savings rate in the country…and a lot of people are very screwed.
Man, we gotta get ahold of those numbers…
I smell desperation,
MMAB
Good point and thinking.
Speaking of consumption–have people seen the y-o-y retail figures? WalMart same stores were -3.5%!! Worst result in . . . well, ever.
At last, a 1% down day in the Dow.
If people are worse off financially, wouldn’t it make sense (in a convoluted way) that Wal-Mart would see more business as people go to higher-end stores less?
True, but if they are really bad off, they will go to the thrift store or the dollar store instead.
From the article:
The first prediction called for 170,000 housing units being built in California during 2007. Nevin now thinks the number could be about 155,000. That would be 14 percent below the 2006 home building total of 180,000 units. The 2006 totals also represented a 14 percent decline from the year before.
Roth warned that the weakness could be even more severe based on the first-quarter home building activity. The units constructed in the first three months in California, if extrapolated over a full year, would lead to a total of 118,000 single-family and multi-family residential units in California for 2007, he estimated.
Consumers will have to continue to spend at a brisk clip to buoy the economy, Roth said.
Let’s see…170,000 revised to 155,000 based on a 118,000 annual rate. Anyone wanna bet monthly revisions are coming? By next year, it could drop to under 100K and the spinning will continue.
I see a pattern, a trend hmm.
And they are all going to be vacant!
Yep. It’s just another typical day for the typical California FB.
aaah, ….. the easy days of getting on and off the housing bus…….
‘To keep us out of recession, we need for consumers to continue to spend through the rest of 2007,’ Roth said.”
Other than what I have to spend for neccessities I have no frivilous spending planned for the rest of 2007. Uh Oh.
Bad boy! Spend til you drop. Remember Lereah’s comment that people with high equity are not managing their money well? So get with the program and HELOC your butt to the moon.
That way, I’ll feel that somebody has done their part, ‘cus I damn sure ain’t going to.
I am spending money- on foreign bonds and inflation hedges. But I’m not sure how this will buoy our economy…
AKRon, which fn bonds are you buying? AUD, Iceland krona, Brazilian real all up double-digit % since I started last fall, but I look for suggestions as I am a novice doing this seat of pants.
Oh, I am a novice at this too (and lazy). I use Intl. Bond Funds. Fidelity new Markets Income Fund has been good (lots of appreciation)- it has bonds from lots of places, the two largest are Russia and Brasil. I have eyed T. Rowe Price’s Emerging Markets and Intl Bond Funds (first one is Brasil, Argentina, Mexico and other emerging markets, the second is a Europe/Japan mix). Buying directly would be nice, but I don’t want to deal with the legalities. I also am keeping an eye out for a short-term Intl. bond fund (i.e. essentially a foreign-denominated money market), which would be more inflation resistant, as most of the rest of the world is also on some level or another inflating RE bubbles.
I do examine all bond funds (incl. US) to make sure that they are heavy into govt bonds if longer term, short term commercial paper, but NOT MBSs.
I have a site bookmarked that I have been browsing:
http://biz.yahoo.com/p/tops/ib.html
which is a listing of top-rated international bond funds. I am intrigued by your AUS investments (you have said before that they have appreciated very well)- are they in a fund, or are you buying bonds directly?
I actually do plan to spend. However I will expect to get about 20% more for my dollar, i.e. the Jeep Wrangler I’ve been wanting will now have to be sold to me for $16,000 instead of $20,000. Since I’m not competing with HELOC money the dealer can take it or leave it. Or maybe I’ll buy a slightly used one from an FB for $12,000 - that he paid $22 for last year.
Around here we have a two-dollar-a-bag thrift shop. Today I bought two pairs of slacks and a silk shirt. Total cost two bucks.
Cool and smart
I must wear business clothes. My last two blazers cost me: $7.50 and $8.50 respectively. And I am one of the better dressed. Not kidding.
Me, too, I love those stuff-a-bag thrift shop deals. I’ve been doing that for years. Amazing the stuff you can get for pennies. I do a lot of my shopping at thrifts, consignment stores, estate sales, garage sales and charity outlets. But I’m also in the “stuff” business, so I mix business with personal shopping. It’s a gas!
I was raised on thrift stores, so I must admit I have an unreasonable aversion to them. Luckily places like Marshalls and Nordstrom Rack have great 75% deals. I stay out of department stores except for gifts.
“But most of the houses do sell for less, and about 15 percent of time ’shockingly’ so”
What seems like a low price shock today is tomorrows mountain peak.
When the shine is off the apple, price doesn’t really matter…
What’s the old (new) saying, ‘If you’re not embarrassed by the offered price, you’ve offered TOO much?’ Still sound today as it was in yesteryear.
Few posts so far, everyone must be working. Oh well, back to work..
I’m here, it’s just nothing’s got me riled yet. Got my feet kicked up and the Joshua tree over in the corner. Let’s see what happens.
Ouch. The Joshua trees are going to be extra dry and scratchy this season
Hey those Joshua trees have sharp spines (or whatever they’re called) on them! They can puncture a tire! LOL
~Misstrial
and a housing bubble…..
I have beaver tails. Wanna play catch? I like your style.
It’s the weather, everybody is out house hunting……. Denver, 80 degrees and not a cloud in the sky. No worries, consumer spending is up, right?
FB’s got their equity lines and an unused credit card (although 7 out of 8 are maxed out). Hey, life is good!
“Daniel probably won’t be able to sell his condo unless he comes to some sort of agreement with the home-equity lender, says bankruptcy attorney Steve Elias.
I wonder if this is the Steve Elias of Nolo Press???
Anyway, here in S. NM, most sellers are not budging much from the asking. Reduction of $5k is about it. One realtorTM is very busy doing damage-control and telling buyers and sellers that “its the media’s fault for over-publicizing this situation and making it seem worse than it really is” (actual quote from a local agent to me.)
~Misstrial
Man that’s shameful. $5k now or 50K later. Decisions, decisions.
“Wellborn said her client was able to purchase a foreclosed, single-family home for $450,000 in a neighborhood where prices had peaked at $530,000. The previous owners had paid $500,000 for it, held on to it for three years, then lost it when their low-interest teaser rate adjusted to a much higher one, almost doubling their monthly payment.”
Is it just me or do these numbers not seem to make a lot of sense? It appears that the FB purchased in 2004 for $500K, but the article states that the price peaked at $530K (about 6% over purchase price). Seems like there should have been more appreciation than that. If that $530K peak is right, then buying for only 15% off of peak price is not a deal - just another knife catcher.
Maybe not. There are people who can afford that 450K price, and at least for now feel they got a deal. But should the neighborhood see 20, 30, then 40% value drops, that good feeling morphs into RWE - Reverse Wealth Effect - and the purchase brakes get tapped more and more often. And God knows this country can not economically survive if people actually reduce their debt load. As it is right now a 2 to 3% drop in consumer spending would drop us into the BIG R tommorrow.
It’s not, “reverse wealth effect”, it’s called WD-Wealth Destruction. God, why can’t anyone come to grips with this term? Is it that painful a concept?
I’d say both unrealized gain and unrealized loss are “effects”. When the house is sold for a profit or loss then you have “creation” or “destruction”.
Most of these sheeple knife catchers will be future fleecings in a few short years, maintaining a declining stream of foreclosures for years to come.
Enjoy your above market house rentals, all ye sheeple! And pat yourselves on the back for doing the “American thing” and generating the 6% wealth transfer tax to the REIC! The NAR is so proud of y’all!
Got 10% down?
It appears that the FB purchased in 2004 for $500K, but the article states that the price peaked at $530K (about 6% over purchase price). Seems like there should have been more appreciation than that. If that $530K peak is right, then buying for only 15% off of peak price is not a deal - just another knife catcher.
——————————–
Actually, San Diego was ahead of the curve, on the way up and down. We haven’t had much appreciation since 2004 in many areas (some never appreciated after fall of 2004).
This article shows that some buyer got a house which sold for $500K in 2004, for $450K today. IOW, the “value” of that house is DOWN 10% ***from 2004 prices***. We still have a long, long way to go.
The homes which are now selling for $450K should really be priced at around $250K-ish.
Patience…this is a knife-catcher’s market.
Pass the malainaise please, Howard?
“The malaise in California home building will hound the state for a while longer, a top state government economist told an East Bay gathering Wednesday. Even worse, California is particularly vulnerable to ripple effects because the state depends on housing and home building for a greater share of its economic activity than other regions, said Howard Roth, chief economist with the state’s Department of Finance.”
For those of you who don’t know.
California Dept of Finance is a pretty powerful and connected agency in the state.
They knew it was a bubble and have been tracking it the whole time!
Just a little late to be a crusader rabbit, dontcha think?
“‘We are now going public with our concerns because we are concerned that policy makers are relying on national data to conclude that the housing market correction has not been severe.’”
“California Dept of Finance is a pretty powerful and connected agency in the state.They knew it was a bubble and have been tracking it the whole time!”
I remember seeing a tiny, four line mini-article in the SF Chronicle Biz section, burried towards the back, that they were “warning” the state government NOT to rely on increasing property tax receipts, etc. due to the strong likelihood of a housing downturn.
A better metric (anecdote) of how much house I can afford. Forget about the last 7 years or so for sake of argument. I’m relative young (early 30s), and I’ve always been taught that you should only buy a house that is three times your annual income (pre tax). That means if you make $40K, a $120K house is the maximum that you can buy. If you can buy a house for less than 3X your annual income, more power to you. However, I’ve listen to people in the past elsewhere and in this forum, and they gave conflicting advice e.g. your mortgage should be 3X your income, or the cost of the house is 3X your income after tax. Can anyone clarify this point for me?
3X pre-tax. If you spend more, you are essentially supporting somebody’s lifestyle with your future earnings and savings.
Money will over time inflate (reducing the real size of the mortgage) and your income will( or damn well better) increase leaving you more discrectionary dollars. But the current inflated house prices are simply a future tax on you and your family’s future. Rent, bank the difference, and wait it out. When the time comes pounce like a cat and don’t look back. Kind of my story from 20 years ago.
mortgage or the house, or whichever is smaller amount..
Money does’t always “inflate” over time. Go to Japan and ask someone there about it. Since their real estate and stock bubble popped in 1991 they had DEFLATION, or as they put it, ” price distruction”. This means a mortgage or any debt becames a greater burden over time. Inflation has only been a constantant since 1938 ( the end of the so called Roosevelt Resession) in the US economy. We might be at the start of a long deflationary cycle.
That’s the real point, the deflating house prices. Lots of us who could buy a whole house outright for cash are not doing so. Because we don’t need the non-deductible capital loss. Or any capital loss, even if it were deductible.
We might be at the start of a long deflationary cycle.
————————
BINGO!!!
You should really look at the current interest rate for this formula to work. I bought back in 1991 and my interest rate was 10.5%. It should really be more of a factor if debt vs income. Your PITI should be between 25% to 30% of income and total debt should never exceed 40%. Some people that are very frugal can do well with these limits and others that dine out often, drive gas guzzlers, have 3 or more kids, etc etc would get killed with these limits. It really depends on alot of factors. The 3x is just a ballpark number.
Thanks! I think your total debt number makes a lot more sense. I have a student loan and that is it. Although, I must admit 40% is quite high.
If that is the case, I can’t even buy a 2/1 shack tear down in West Sacramento and yet CW gave me a GFE of 320K a few weeks ago. I don’t get it.
Didn’t they give a strawberry picker a loan on a $700k house?
It’s not just about interest rates.
You should never spend more than a certain multiple of income, even if low interest rates permit it. The higher your DTI ratio is the harder it is to make up the difference when upside down. Leverage is a bitch on the downside.
“He figures the price he could get would pay off his first mortgage, but not a $50,000 home equity line of credit he took out last year to repay credit card debt.”
“Daniel says the shortfall could be $10,000 to $30,000 and wants to know what would happen if he didn’t pay it.””
He should just put it back on his credit card.
Let’s see, run up credit cards to the tune of $50,000, transfer the debt, then hope to walk away as if nothing happened. Yup, it’s getting harder and harder for me to teach my kids to be responsible when stuff like this is going on.
actually it’s great to have an example of this kind of idiot to use as a model of what NOT to do in your life. Use these boneheads as examples….especially the eventual outcome.
Paris Hilton doesn’t seem so ‘hot” to my boys anymore.
digressing…Paris Hilton is the opposite of Daniel, our example today. She actually gets pay to wear designer clothing, perfume and other luxury good. She also gets pay to show up at nightclub etc. She is making a living at being a celibrity. She is cash positive!
If she’s the last of the “famous for being famous” crowd for her era, i’d be a-ok with that.
I wouldn’t ne surprised if PH is bleeding cash each and every month. These people have 5 percenters that they have to pay (lawyers, agents, asset managers, etc…). Between these 5 percenters and taxes and penalties and interest on unpaid taxes and their lavish cars and lifestyles they are negative. (Why pay a lawyer 5% of your total income to not pay your taxes on time? Stupid, but this is what these celebrities do.)
Got 10% down?
there was a story in the LA Times about storage units being sold in auction because the rental fees were not being paid. And one person was reported to have bought one of Paris Hilton’s storage units in auction. She apparently had accountants or business managers that were suppose to take care of paying the storage bills.
And as it turns out the guy that bought the unit is trying to sell the stuff back to Paris at a very inflated cost about 1 million dollars or so.
A Fitting end…
From the files of smart people making stupid financial decisions:
I have a buddy who moved back to So Cal after several yrs in Dallas. He and his wife moved out to Dallas for his job after living in the South Bay in 2004. They pocketed some nice $$ after selling their home in the South Bay but did not make anything on the Dallas home.
Now the guy is well educated (Univ of Chicago MBA) and appeared to be in a pretty safe carreer (M&A for a boutique shop). Well, the reason he left his company in Dallas was his hiring boss left. His new boss was a complete ASS and was making his life miserable. So buh bye job. Him and his wife decided they missed SoCal. Now she got a nice transfer package with her company (makes $125k or so and works / travels in spite of 3 yr old at home).
He landed a job with another company but took a 25% pay cut ($125-150k=new salary)- to live in SoCal - doh. Well, him and his wife decided to buy a home 2 mos ago - no way they were going to be renters. They decided on Palos Verdes. They found the “perfect” home - 2200 sg ft, 3 br, 2 ba - $1.4m. They felt it was a little out of their range but friends told them to stretch into it. Now granted they had $400k to put down but damn a $1m note on $300k max combined salary - if they both stay employed.
Well guess what. Several weeks he shows up for work on a friday and they inform him there has been a RIF and he is on the list. 2 weeks notice and see yah, thanks for moving your family out here. Oh and I looked them up on title and he got a variable loan (probably a 5 yr int only). He also took out a $200k heloc - maybe in case of an emergency?
Damn smart people, people with good job and a lot of cash, making dumb financial decisions. It truely is “keeping up with the Jones” mentality out here. Troubled times ahead for people up and down the “classes”…guaranteed.
It’s all over but the foreclosin’.
In this case, these are smart people who stretched and will recover given some time. What about all the ignorant and dumb FB’s out there with ARM’s and no savings? It will get very ugly out there in the IE and Central Valley. The coast will get hit too because no matter how much you make, if you are overextended you have no room to maneuver.
“What about all the ignorant and dumb FB’s out there with ARM’s and no savings”
BK, he who turns and runs away, will live to fight another day. Nothing lost except for a credit score.
Oh yea, F__k the company that gave your friend notice. Oh well,
that is how it is in the corporate world.
Like I said in another post, housing has become a great equalizer. Many families in many socioeconomic classes will manage to make themselves equally miserable because of the wonders of leverage. It’s not the amount of the leverage that matters, it’s the multiple of leverage to your liquid asset base and cash flow, and so many (poor, middle, upper middle, etc) have similar leverage multiples.
Of course, the better off ones like the family mentioned above are much more likely to get back on their feet than a lower middle class type, but still, for a brief period of time, they will both be worth the same on paper.
0
Are they REALLY that SMART? I’m not so sure. I think ego’s at work here. And I don’t know why they had a kid… trying to prove the plumbing works?
You’re right, you don’t know why they had a kid. Do you have any kids? If not then shut the f@ck up about the reasons people have kids. If you don’t have any then you have no clue about what a life change and awakening it is. I have a 17 year old daughter who wasn’t planned and came at a pretty inconvenient time and I have to say that ANY inconvenience was worth her existence. She has become the reason I exist and the light of my life. If you haven’t experienced it stop being such an @sshole.
Say what?
I’m just saying that there is no point making snide remarks about things you don’t understand. What does the fact they have a kid have to do with anything? ‘Prove the plumbing works’?? WTF? I don’t think mocking people you don’t know about things you don’t understand should pass un-noticed. MacAttack may be right, they may not be smart, but he really doesn’t know why they had a kid.
SteveH, agree with you. As the father of three, at times they can be a royal pain in the @ss, but I wouldn’t trade any one of them for all the gold in the world!! Until you are a parent ( and we need more successful/stable people to be parents) you have no clue about raising children. And I don’t want any B-llsh$t from any DINK’s out there, my kids will be paying your SS, or at least providing services to you in your old age!!
‘Scuse me, but what is your problem? I don’t have children, sadly. But I pay my taxes through the nose because I don’t. And exactly how long have you been in CA. ?
Oh really. And who paid for the schools and roads ? I am not a DINK, just a widow trying hang on in SoCal. Fourth generation native Californian, I may add. And working, paying for your parents SS. Do you have a non-hostile, fact-based reason for you rant? Otherwise, what’s your point? Kids are great, agreed. So who are you blaming here??
Did I stutter? How long have you been here?
Oh, by the way, I helped raise my niece. Got Popcorn?
“But I pay my taxes through the nose because I don’t. And exactly how long have you been in CA. ? ”
You’re joking right? The tax savings from a kid SOOOOOOO doesn’t come close to the cost. In fact, I pay $969 a month child support in mine. Tell you what, you pay my $11,628 child support, I’ll let you have the $1750 in tax savings.
There’s nothing wrong with having kids as long as you can afford them. I hope to have a couple after I am done with my graduate studies.
Somebody misses my point (and yes, I have one son whom I love dearly). When we were raising our son, Mom worked part-time and we lived modestly but happily. I see far too many yuppie parents who are more enamored with their new SUV and giant house than they are with the kids. Ever hear the term, “latchkey kid?” That doesn’t just apply to po’ folks, you know.
Perhaps I struck a bit close to home?
Hey jtie, what are you so angry about? I said I loved my kid and that she was and is the light of my life. What’s wrong with that? And I don’t live in California. I hate the place and won’t ever live there again ever. I live in New Zealand where I’m a wine maker. There is more to life than money and you should enjoy it while you can because it’s all we’ve got. Peace.
I also get greatly annoyed at the anti-child comments. That attitude is why the Mexicans are taking over the USA and the Muzzies are taking over Europe. Those ‘athiest-ier than thou’ types are going to be damn surprised in 30 years when they see who is laughing last.
If we don’t make our own lower class, we’re going to get somebody elses, and they might be a nastier bunch.
people who have kids should pay more taxes
to jtie post @19:11:06.
I am only 2nd generation Californian. I am an ex-Californian, ie. I left the state ( I was a small business owner and paid PLENTY in taxes to the State Of California while I had my business there). The majority of my family still lives there. My children are all California natives and they have you beat by a few generations. My wife’s family came to California in the 1860’s. Many of them own large swaths of property around the state. Unfortunately my children are in a branch of the family not in line to receive the spoils. My point about DINKs is that many ( NOT ALL) of them whine about how children ( behavior, costs of schools, increased crime, etc.) in general subtract from their personal lifestyle ( ie. taxes for schools, crying in public places, etc.) and yet don’t seem to appreciate these very children will be the next ” worker bees” that help keep society functioning. I have no problem with any people choosing not to have children, and feel sorry for those that cannot procreate and desire to do so, but if you do not have children of your own I think it is better that one not comment on the motives of others that do have children. Peace.
correction of my last post: reply to jtie post @ 19:41:06
Testify, Brother Steve! If people chose to go through life childless, all power to them, but I can do without some of the snide comments insinuating kids just aren’t worth the expense & aggravation. My kids have given me tremendous happiness and fulfillment, a fantastic sense of purpose, and motivation to go forth and conquer. If everyone waited to have children until they were financially secure, we’d all be in our forties - and it’s better to have them before you turn 30, for biological rather than financial reasons.
Not to menton that the odds of many birth defects increase greatly with age.
Recent studies link the growth in autism directly to age of the father. If the dad is over 40, it is like 8 times more likely the kid will be autistic than if the dad is under 40.
It totally sucks that the human body cranks out kids best when we’re too young to really be ready, but that is the case.
I second the opinion of the kid-lovers here.
It’s wonderful when people realize they don’t like kids, and then make a conscious choice not to have them. Much better than those who don’t like them, but have them anyway.
That being said, there are those of us who love kids, are responsible for them, and raise them to the best of our abilities.
Too many arrogant “no-kid” types on this blog who like to rant against those who have different values.
Let’s embrace, and respect, our differences.
thats terrible,
glad Im not that poor schmuck.million dollar house on a 150k salary…..jack @$$ of the highest order and an MBA.
Just want to point out that if he does M&A, $150k might be his base but his income with bonus is probably many times that.
But since he currently doesn’t have a job…
Friendly advise (feel free to take it or leave it)….It may help if you just explain what it means when you say “he does M&A”. What’s obvious to you may not be obvious to others. Just a thought.
BayQT~
M&A = Mergers and Acquisitions. Business brokers. Get a base salary to draw on, and a percentage of the deal value. He MIGHT make a lot in some years, little in others.
My point about them having a kid came from this:
“Now she got a nice transfer package with her company (makes $125k or so and works / travels in spite of 3 yr old at home).”
Do you now see my point? It is that the children maybe should be more important than traveling for work.
Understand what you are saying, thanks for the expansion. Your snarky initial posting really came across to me as uncalled for, but I see your point. And by the way, to respond to an earlier post of yours, no you didn’t hit a nerve. I work for my living, am happily married with one child, who is greatly loved and loves in return, and support my family well. I hope you understand how clueless you first comment sounded, which is why I reacted to it.
“and works / travels in spite of 3 yr old at home”
I can’t resist pointing out that MacAttack seemed to imply that the woman in the couple should not be working full time and traveling, since they had a three-year-old. It’s more than possible for a couple who both work full time to do a good job raising children. It’s just more tiring. I wouldn’t have had time to read this blog until my second child was in college! But to support MacAttack’s attack, those two knuckleheads had no business taking out 1.2 million in loans - even their high incomes don’t support it.
MBA….the most worthless of all “higher degrees”. For people who couldn’t cut the harder cirriculums.
MBA….dime a dozen. Means nothing.
Methinks that MBAs from the University of Chicago who get into M&A are, overall, a bit more expensive than a dime a dozen.
Thanks. I disagree.
“For people who couldn’t cut the harder cirriculums.”
Do you have an MBA? =o)
I do. I actually pursued it because my accounting degree program was narrowly focused, and I wanted to explore marketing, finance, and operations management. I am a high-school dropout who went into manufacturing at age 16, and I have always been very curious.
Sorry about the earlier comment. One of my high-school classmates was mentioning in an interview that it was wonderful to watch her nanny giving her daughter a bath… I rolled my eyes. Also, in the neighborhood we raised our son in, there seemed to be the pursuit of “stuff” at the expense of almost everything else. The kids were very much left to fend for themselves.
They should take away his MBA and award it to some HBB poster. Don’t know what he was being paid for, exactly, but $150K salary for your BUSINESS expertise is an awful lot if you’re dumb enough to get yourself into that kind of pickle.
I think he was lost the debate with his wife who wanted a nice house to show off to her friends just like she sees on HGTV and Bravo
Why do I keep defending this woman? Sorry jerry, but you don’t know that it was the woman’s fault. MacAttack might be able to shed some light on that.
“Rising foreclosures will bring misery to many home owners, but bargain prices for some lucky home buyers. Dean Williams, CEO of auctioneer Williams & Williams, said his company is very busy.”
I think this will rely on much more than luck alone. A great deal of patience and intestinal fortitude will be necessary to wait until the inventory correction takes its toll on for sale prices, and sellers work past the denial stage through anger, bargaining, depression and finally, reconciliation with the end of the bubble. At that point, I am expecting to see homes selling for 100-120 times rent on comparable homes, just like at the end of every other real estate bust in U.S. history.
Many of the foreclosed homes are in bad shape as the angry debtors will strip any valuables and ransack their ex-home before leaving. It’s like the Soviet scorched-earth policy of WWII. Leave nothing behind for the enemy to use
GS, just keep repeating this so we don’t weaken.
A great deal of patience and intestinal fortitude will be necessary to wait until the inventory correction takes its toll on for sale prices
Patience yes, but intestinal fortitude? You make it sound as though it’s easier to buy than to rent. Unless you really hate renting, there’s no reason to even consider buying until prices have dropped substantially and then remained flat for a couple of years, as they always do after busts. After all, the lifestyle of a renter is much more straightforward and unencumbered than that of an owner/debtor, and most importantly, for the next 5+ years, it’s financially SMARTER as well. Let us celebrate this era in which we can have our cake and eat it too!
Also 5 years from now hopefully we’ll all have saved piles of extra cash and be in an outstanding position to buy houses (if we so choose) at what will surely be once-in-a-generation, if not once-in-a-lifetime, bargain prices.
By contrast, anyone buying now or in the near future is going to get maybe a 10-15% discount from once-in-a-lifetime PEAK prices, which is no deal at all.
You are absolutely right, jbunniii (what is the source of your screen name?) I think that Get Stucco told us the other day that his wife really wants to buy a house, hence the source of his intestinal problem. Maybe, GS, you should have your wife log on and we wives on the blog can talk some sense into her. In my experience, waiting to buy our first house until the bottom of the last bust meant extra money to invest, meaning that we could offer our children more in the way of educational help, and eventually, financial help when they need it. Not to mention the possibility of early retirement, if we so desire.
“Not all the auction properties are huge bargains. According to Williams, 12 percent of the houses he sells, most of which have already been marketed for an average of six months as conventional listings, sell at auction for more than the original asking prices.”
In that case, I guess the market has not run out of GFs who show up at the auction with a box of stupid and a bucket of money.
Remember, the lender often buys the house from himself at these auctions, keeping the original price, or even inflating it, thus keeping the comps up, giving the impression that all is well, and deceiving the government stats and the public in the process. Also, this buy-back is listed as a sale, further skewing the statistics. I suspect many of the median prices we see are a direct result of such phony sales, and that if they were taken out of the picture, the true figures would horrify the real estate industry.
Trustee Sales do not count as comps and are not counted in regards to sale data
Trustee Sales do not count as comps and are not counted in regards to sale data
Trustee Sales do not count as comps and are not counted in regards to sale data
Trustee Sales do not count as comps and are not counted in regards to sale data
Get it now…
Do short sales count? If so, as the short sale price, or as the short + repay forgiveness?
As the short sale price…
These are private auctions, not trustee sales, so the lender is not going to be buying it from itself (and paying the auction fee to boot).
And, even at trustee sales, I don’t know any lenders that bid more than the debt owed. They don’t really want the house (they aren’t in the business of owning houses), and any amount paid over the outstanding debt (including foreclosure costs) would have to be paid to the borrower. In many locations, in fact, they buy the house back for the minimum $100 because there are no other serious bidders and the transfer fee that the bank has to pay is based on the auction price (so other bidders don’t bid unless they are going to seriously make a run at the property at a price at least close to the outstanding debt).
You sound like you know what you’re talking about. Just curious, but are ‘auctions’ like we are starting to see sort of fixed, in the sense that there are reserve prices versus an absolute auction? Seems like a lot of the articles I read about auctions talk about the negotiations that take place afterwards. Are we going to see real absolute bidding where value is really set? That would be a real eye opener - although people at auctions certainly overbid. Thoughts?
I’m no expert, but I do have some knowledge of this (caveat: a little bit of knowledge can be a dangerous thing). I’ll answer your questions as best I can. First, you have to distinguish between trustee sales (i.e., foreclosure auctions) and private auctions.
Foreclosure auctions are how banks foreclose on a property when the FB defaults on the loan. These are technically absolute auctions, in the sense that the opening bid is usually $100 and the house will be sold for whatever the max bid is (with no reserve price). However, the foreclosing lender typically will put in a “credit bid” for the amount of the outstanding debt owed to it (except as I discussed in my comment above, as certain jurisdictions will charge a transfer fee based on the foreclosure price). A credit bid is a bid, it just means that the lender doesn’t actually pony up any cash because it is already owed this amount. So, for another person to buy the property, they need to bid higher than the credit bid. Because of the presence of the foreclosing lender, you don’t see a lot of bargains here (if the property was worth more than the outstanding debt, presumably the FB would have sold the house and paid off the debt, keeping the extra for himself).
Private auctions (houses being sold by private individuals, including HBs) can be either reserve or absolute auctions; it is up to the seller how he wants the auction to be conducted. (The auctioneer is paid to conduct the auction in whatever form the seller wants). Up to this point, most private auctions have been reserve auctions, where there is a minimum reserve price that must be met before the seller is obligated to sell for the max bid. Absolute auctions, as you noted, have no reserve bid - the property sells for whatever the max bid is. The negotiations you here about are usually those from reserve auctions where the reserve price was not met; the seller may contact the person with the highest bid to see if they can reach a deal. Sometimes the negotiations may also take place because the winner at the auction did not go through with the purchase, so the seller contacts the next highest bidder to see if they will purchase the property.
We’re still pretty early into this bust, so we’re likely to continue to see mostly foreclosure auctions and reserve auctions at this point. Absolute auctions may become more prevalent as the bust progresses, but as you can see there is a danger for a seller to do an absolute auction (as the sales price could be ridiculously low). In order to make absolute auctions work for the seller (to get close to a fair market value), the absolute auction needs to be fairly well attended; this usually requires quite a bit of advertising, which can be expensive. Thus, as a seller you normally need quite a few properties to be sold at an absolute auction so that the cost of the advertising can be split among a lot of properties.
Hope this helps.
“Alan Nevin, chief economist with the California Building Industry, said he has prepared a revised forecast that suggests housing construction will be even weaker in 2007 than initially thought. The revision is based a weak first quarter in home building in California.”
I forecast further downwardly-revised forecasts for the foreseeable future.
Boy, that Alan Nevin… earnin’ every penny.
He’s about three years too late with that 2007 observation.
KCRA 3 IS AIRING ANOTHER BIG MORTGAGE FRAUD INVESTIGATION TONIGHT (( THURSDAY )) AT 11.
I HEAR THE PAST PRESIDENT OF THE CAL ASSOC OF MORTGAGE BROKERS IS CALLING FOR A FEDERAL INVESTIGATION.
THESE GUYS ARE NOW DOING BUSINESS AS ESNIAN MORTGAGE AND REALTY NETWORK.
IF YOU MISSED THE FIRST THREE PARTS TO THE INVESTIGATION I POSTED LINKS BELOW.
PART 1 http://www.kcra.com/kcrainvestigates/13226878/detail.html
PART 2 http://www.kcra.com/kcrainvestigates/13237304/detail.html
PART 3
http://www.kcra.com/kcrainvestigates/13248473/detail.html
ot - walmart’s slowest retail period in 28 years…. dow down 147 pts….if ppl aren’t going to Walmart, where are they going????
Dollar General?
as much as i detest walmart, the avg joe goes there to save $. if they are not there, do you all think people have just stopped shopping altogether?
Yes. A depression is coming.
Or darn near.
Hedonic inflation, food prices go up - inflation; people go hungry -less inflation - good for economy.
Unlike the housing excuse, I really do think the big retail drop could be weather related. In Colorado they had many snow days. Noreaster hit the east coast hard.
If you look at what didn’t sell, it was clothing lead. You don’t want to buy spring fashion when it is snowing.
They are saying late April was better and May is better as well.
OK. I drove to a store to get what I wanted, and there was no snow in SoCal yesterday. However the parking lot was virtually empty and I was the only one in the store. Maybe it was too hot.
There are always excuses as to why people aren’t spending money. If retail sales back in May, perhaps they are right, April was a fluke. If not, and the excuse changes (weather, May Day celebrations snarled traffic, gas prices too high to drive anywhere, etc.) …well we all know what’s REALLY happening.
Yeppers
MEWWWWWWW!
I go to the Dollar Tree. It’s a lot closer than Wal-Mart, and it has what I need when I need cheap stuff.
I love Family Dollar. Miss it here.
ALCO or Pamida or Dollar Tree
Garage sales and eBay
That was my thought too. I know a few people who go out to the retailers to see what the want in person, get advice etc, then go home and watch ebay.
“Orange County real estate consultant John Burns says: ‘The housing market has softened much more than is being reported. We have been advising our retainer clients for more than one year about misleading national sales information, both with the Existing Home Sales and New Home Sales data.’”
I’ve seen the same thing, no way is the MSM reporting accurate and it’s not just in the OC. However, who is this guy and why now is he sqawking. Is it CYA or has he always been on this side of the fence?
Well it doesn’t matter because he is spot on. i was wondering how long it was going to take before someone caught on who had the exposure to bring it too the press.
The Running (Away) of the Bulls.
http://itulip.com/forums/showthread.php?t=1314
Two things:
(1) Also, upkeep for the average home typically costs five to ten percent of the price of the home, annually.
(a) if your house is worth $250k, annual upkeep is $12.5-25k? Bull. Gas for lawn mower and fertilizer = $50. Rock salt for driveway coss $10. Windex and paper towels for windows cost $5. Unless they mean something else by “upkeep”, then I don’t know what they mean.
(b) This also implies that if the price of my house doubles in 3 years, then the price of upkeep will also magically double.
(2) Crap, I forgot my point #2.
I think that means 5-10% of the yearly mortgage cost - $24K in mortgage means another $1-2K in maintenance. Sounds right to me (new pool pump motor last week - $300!)
I think you need to work the age of the house into that formula somewhere. I’m in a 30y/o house, and it is way more than $1000 a year.
Last year, solar water heater ($800), solar control ($300), new flooring in the family room/living room($2000), 1 sprinker valve died and the rest were close behind so replaced the whole control system ($100), tree roots were causing problems so it had to come out, redo of fireplace($200), some work on the evap cooler($100).
This year, pool replaster ($3500), new pool sweeper ($250), solar panels on the water heater are shot(???), replace main water shut off valve ($300). Some electrical panel work ($180). And it is only May.
The press board kitchen cabenets are literally falling apart. Need carpet in the kids rooms. Windows SOOOO need replaced. Insualtion in the attic sucks. Tiles are starting to come off the master shower.
I know where you’re coming from, my last house in Seattle was built in 1931. But having said that, most of the repairs you are talking about don’t really have to do with your house, or at least the age part of it. Pool stuff? Would you really include that as an old house problem? I found that the structure of my house was great. Oversized dimensional lumber in the walls, roof, cieling, etc. Really solid floors, etc. The thing that bit me was plumbing (mostly replaced). Sure, some of the windows needed to be replace and were, but they were the single pane aluminum stuff that had already been replaced once. Fantastic leaded glass in the front windows and door, high ceilings, a real basement. Kitchen sucked, but I sold it before tackling that. On the other hand, we are seeing lots of stories about really poor quality new construction. I currently live in a house (Napier, New Zealand) that was built in 1929 and survived the 1931 earthquake. If wa redone just before I bought it. Cedar (actual boards 6 feet x 1.5 feet) wainscotted front lounge, original remu throughout, remu floors, original wetback fireplace (plus two others), actual total solid wood under the plasterboard walls, etc. etc. I could have this built for love nor money. The materials don’t exist anymore. The trees have been cut down. The cedar was brought from British Columbia as logs. Yeah, we get and we give. Enjoy your house (but hopefully your home).
The term “money pit” is apt. But if you’re happy and can afford it, it’s ok. Luckily we have no taste for cars and can spend the money on paint, shrubs and repairmen.
http://www.azcentral.com/blogs/index.php?blog=164&blogtype=Bizblogs
“The median income of a U.S. Realtor fell to $47,700 in 2006 from $49,300 in 2004, according the National Association of Realtors.
The industry group attributes the drop in earnings to the 23 percent jump in the number of Realtors nationwide. The drop in home sales during the past two years also has to take its toll.”
Imagine what it will be like when houses are selling for 30-40% less in a year or two.
Was this posted today? Orlando listings up again,and Price down 3.1%
http://tinyurl.com/356vpm
People there are saying we’re at the bottom, so it must be true.
Let’s all run out an buy.
NOT!
Daniel Y. of San Francisco has a question that’s on the mind of many homeowners these days. Daniel wants to sell his condo and move into a bigger one in a nicer neighborhood. He figures the price he could get would pay off his first mortgage, but not a $50,000 home equity line of credit he took out last year to repay credit card debt.”
“Daniel says the shortfall could be $10,000 to $30,000 and wants to know what would happen if he didn’t pay it.”
Hey, I don’t feel like buying that steak I just ate, nor the wine I just had…it was a bit, let’s say, unsavory-for the price…I believe I will be stiffing you…
Neil, got popcorn?
un-effing believable
crush
“Daniel my brother you are older than me
Do you still feel the pain of the scars that won’t heal
Your eyes have died but you see more than I
Daniel you’re a star in the face of the sky”
US Q1 growth likely to be revised to 0.7%: we are already in a “growth recession” range. And Q2 started even worse than Q1.
Based on a variety of data that have come out after the first estimate of Q1 US growth at 1.3% it is now likely that US growth in Q1 was actually below 1% (probably close to 0.7%); we are thus already into a “growth recession” territory. As discussed extensively in this blog a US hard landing can take two forms: a “growth recession” i.e. a period of time when growth is well below potential and in the 0% to 1% range; or an outright recession, i.e. two consecutive quarters of zero growth.
http://www.rgemonitor.com/blog/roubini/
Growth is decelerating, the same way home price appreciated last year before it recently went into reverse.
23 miles across the sea, Santa Catalina is burning near the sea…
My favorite place….hope it is put out quickly and nobody gets hurt.
I thought it was 26. Never mind.
3 miles is a long way to swim
luv ya
it was 26 in the song, that’s for sure
If this hasn’t been posted already (from Business Week/Hot Property):
http://www.businessweek.com/the_thread/hotproperty/
“I’ve been thinking about the diverging fortunes of big banks in the business of mortgage lending and lowly American homeowners. At a stylish midtown Manhattan hotel I recently sat down to breakfast with a CEO of one of the top 10 largest banks. “So what is going on with all these mortgages and the housing market?” I pressed. “How is this all going to shake out?” This particular bank has, like others, been expecting losses post-housing boom and has stepped up reserves to make up for the problem loans. “Oh, I’ve seen this all before,” said the career banker. “We always have some losses, but it’s contained. The banks are going to be just fine. In fact, I see business picking up by summer.”
“I rephrased the question: “I’m not talking about the banking industry,” I clarified. “I’m talking about the people. What’s going to happen to all the borrowers?”
“The borrowers?” replied this button-downed banker. “Oh, they’re screwed.”
“Second-quarter earnings reports are streaming in from Wall Street firms and big banks, and they’re for the most part reporting that the mortgage mess is contained.”
Comments like this makes me want to watch the Big Banks go straight down the toilet…
Do you mean the Big Banks that will gladly make mortgage loans to illegal immigrants? Even when it is illegal for said illegal immigrants to work in order to pay the mortgage?
“Orange County real estate consultant John Burns says: ‘The housing market has softened much more than is being reported. We have been advising our retainer clients for more than one year about misleading national sales information, both with the Existing Home Sales and New Home Sales data.
We are now going public with our concerns because we are concerned that policy makers are relying on national data to conclude that the housing market correction has not been severe.’”
What do you know? It looks like the REIC’s pathological collective tendency to routinely lie is going to bite them in the back of the neck.
In the complete Orange County Register article, Burns attributes the difference between his conclusions and NAR’s to “methodology” and states that he does not believe NAR is intentionally distorting anything. Ha ha, I don’t think you believe him. I don’t either.
“…NAR is intentionally distorting anything…”
That would be a first, right? (Sarcasm off)
Does the Fed “get it?” Because they keep hinting that the punch bowl of the real estate boom will magically respike itself at the end of this year.
Have any FOMC members driven around the southwest desert to see all the deserted McMansion tract home developments? Because respiking will add to the share of the national wealth baking into waste in the hot desert sun.
Maybe the FED does get it and is party to one of the greatest transfers of wealth from weak hands to strong hands in history. Who stands to benefit if even more of this fiscal fiasco occurs? Who are the bag holders when the music stops? Let’s see, Daniel Y does a short sale, the bank eats 10 to 30k, but can take a loss on income and offset this one. How many losses can the banks take? And what about PMI? txchick posted an article about PMI refusing to pay on loans they deemed fraudulent. Did Daniel state his income accurately? Will PMI cover the bank’s loss on the short?
Who wins and who loses? If we step back and look at this we may see why the FED is acting as it is. My question is this, how much actual control does the FED have over this market if the psychology has already turned from frenzied optimism to guarded pessimism?
“‘This deterioration in market conditions has resulted in a $4.0 million impairment charge for our project of 87 remaining homes in Beaumont, California. We expect that these conditions will continue throughout 2007.’”
…will continue throughout 2007 and 2008 and 2009 and 2010 and by 2011 we will file chapter 7.
I live in SF and caught the tail end of the David Loo-ray interview on KQED tonight. Did anyone catch the full interview? I heard something like, “Well in hindsight we can see that investors had gotten away from the fundamentals. But how could we have known.” I actually yelled, “You f—-ing liar, Loooooo-ray!!!”.
Perhaps the large coffee before leaving work was a bad idea. But holy s–t, this dude belongs in a pillory or a dunk the clown tank filled with excrement. Or the eighth circle, fifth or six bolgia. Bald-faced liar and hypocrite.
Sr. Bubble
From a poster on the OC Register blog
“Things are definitely softer in the resale market per OC MLS and MRMLS. Check this out for the April 8 through May 7 time period:
Orange County: 15,813 active listings
2007 1,649 sold / down 35% vs. 2006
2006 2,554 sold
2005 3,903 sold
at current rate of sales the OC has almost 9.6 months supply available
Temecula/Murrieta: 3,090 active listings
2007 183 sold / down 40% vs. 2006
16.9 month supply available at current sales rate
Corona: 2,235 active listings
2007: 106 sold / down 52.7% vs. 2006
21.08 month supply available at current sales rate
Victorville/Apple Valley/Hesperia: 2,550 active
2007 102 sold / down 36.6% vs. 2006
25 month supply available at current sales rate
Posted by: ws at May 10, 2007 07:49 AM”
http://blogs.ocregister.com/lansner/archives/2007/05/housings_softened.html#more
just receive a desperate email from KBH trying to sell condos in San Jose. LAST CHANCE!!! shouts the add. As I’m shorting the company, I thought for a second about calling, just to check how much they would bargain. But… somehow, cannot do it.
So here it’s the info, in case you want to bargain or in case you want to buy their homes…
email subject: “Last chance to own at 2 great KB Home communities”
http://www.kbhome.com/Community~CommID~00650431~c~e.aspx
$550K for a 2 bedroom townhome? Only a phuquing idiot would buy a place like that at the price they’re asking for it.
Chop the price in half and maybe it might be worth considering.
From The San Francisco Chronicle…..(re-write)
Daniel Y. has a question that’s on the mind of many homeowners these days:
Daniel doesn’t want to pay this unthinkable “new” credit card debt which he has amassed over the last several years….. and has successfully metastasized to the un-payable former loan on his condo. Failing to recognize himself as a societal thief, he contemplates reneging on the $50,000 home equity line of credit he took out last year……
I wants to know what would happen ifs I didn’t pay it……”?
Bankruptcy attorney Steve Elias says the home-equity lender will need to comes to some sort of agreement with Daniel, since the BMW he bought with this ill gotten money, has been successfully sold to his cousin, Daniel Z., and additionally….. it has been in two collisions on the Bay Bridge and now isn’t worth a tank of gas.
“A bill recently introduced in Congress would eliminate the tax for some homeowners with canceled debt income. But it probably wouldn’t help Daniel because he borrowed money for something other than his house….”
Not if Daniel Z installed a sink in it for 50k.
the statement:
“Daniel probably won’t be able to sell his condo unless he comes to some sort of agreement with the home-equity lender, says bankruptcy attorney Steve Elias. If the lender agrees to accept less than the full amount Daniel owes, he will probably owe tax on what’s known as cancellation of debt income.”
add new meaning to the Ben Franklin quote: “A Penny Saved is a Penny Earned”. And Ben had some other great quotes regarding creditors and lenders.
Cal. is so far gone and out of touch that the whole place should go broke and start over the right way something is didn’t do since 1950 with such poor zoning laws.