Every Day Is Like Halloween In California
The Recordnet reports from California. “After some hope that existing-home sales were on the rise, the market slowed again last month, leaving some brokers and agents expecting a long downturn. The median sales price also slipped for the third consecutive month in April. ‘Dead’ was how Mike Collins, of Century 21 Collins, Stockton, described to market these days. ‘It’s just not coming back. This might be as bad as I’ve seen it.’”
“He said his agents reported maybe six lookers stopping by to check out any of the dozen open houses over the weekend. He suspects that many would-be buyers still believe home prices are still sinking.”
“Vanda Martin, real-estate agent (in) Stockton, said homes are still selling, if sellers are willing to start out low or cut asking prices. ‘The consensus about the market right now is it’s all about the price,’ she said. ‘It’s not a bad market, but there are just overpriced listings right now.’”
The Sacramento Bee. “First it was houses. Now it’s cars. The sales decline was particularly bad in California and Florida, two states feeling the worst of the housing downturn. That was no coincidence.”
“‘Suddenly your homes aren’t selling; the last thing you’re going to do is go out and buy another truck,’ said Ron Pinelli, president of a market research firm.”
“‘Nobody can pull money out of their houses so nobody has the cash to buy a new car,’ said economist Chris Thornberg. ‘That was the game.’ Thornberg said there’s evidence the economy is tailing off. ‘Consumers have finally run out of steam,’ he said.”
The Merced Sun Star. “Skyrocketing foreclosures, dropping home prices and plunging real estate sales are a ‘major concern’ for Merced’s economy, according to a new report. Of the six Central Valley counties analyzed in the report, Merced stands out as the area hit hardest by the housing slowdown.”
“Economist Lon Hatamiya said the high number of homeowners with subprime mortgages is likely a major contributor to Merced’s extreme downturn. ‘The predominance of subprime lending is coming home to roost in the Central Valley and it’s starting to be a point of concern that we have to watch very closely,’ Hatamiya said.”
“In February, Hatamiya and fellow economist Tapan Munroe presented their 2007 predictions for Merced’s economy. They stopped short then of calling the housing slowdown a ‘bust,’ instead referring to it as a ’souffle with the air slowly leaking out.’ Hatamiya still stands by that assertion.”
“‘In certain parts of the state, we’re seeing a depressed market, especially in the Central Valley,’ Hatamiya said. ‘Statewide, prices have gone up so I’d hate to characterize it as a bust. It’s more of a correction.’”
“Merced’s median home price stood at $302,750 in March, down from $372,500 in March 2006, according to figures from DataQuick. Merced…sales dipped by 127.3 percent compared with February. 2007.”
“With sales in a slump, building activity has nearly come to a halt, according to data from the city’s building department. So far this year, residential builders have pulled 83 permits in the city of Merced, compared with 369 during the same period last year.”
The Fresno Bee. “Prices continued to fall in Fresno, where the median price of a new house declined 3.6% from February to $307,490. That was a 9.6% dip from March 2006.”
“Housing analyst Patrick Duffy said some builders are still saddled with large numbers of unsold homes. Stricter credit standards and the diminishing use of 100% financing and stated income loans also are cutting into sales.”
“‘Depending upon the location and price range, a tighter lending environment … is impacting 10% to 30% of sales,’ Duffy said.”
“Bakersfield reported transactions were off 46.7% from March 2006. Hanford and Madera…were off 24.5% and 39.3% respectively from year-previous numbers. New-home sales in Visalia fell 38.2% for the year.”
“After five years of robust sales, the area, said said Steve Lutton, regional VP of Lennar Homes, has slid into a deep slump. ‘Every day is like Halloween,’ he said. ‘It’s scary out there.’”
The San Bernardino Sun. “Not many people were buying new homes in March, and those who were generally got pretty good deals. That’s the word from the California Building Industry Association, which released its March 2007 sales and price reports.”
“Statewide, sales were off 37 percent in March from a year ago. The median price of a new home sold in California in March was $449,227, slightly less than a year ago.”
“The Inland Empire has a large amount of inventory on hand, putting sellers in a tougher position. ‘Builders aren’t in the same position they were in the 1990s, when supply got way ahead of demand,’ said Jack Kyser, chief economist with the L.A. County Economic Development Corp. ‘They were better about building to order this time, but they still got a little ahead of themselves.’”
“With a large amount of inventory on the market, and entry-level loans much more difficult to get, the market is certainly somewhat stagnant.”
“‘I don’t think we will see the market start to sort itself out until 2008,’ Redlands-based regional economist John Husing said. ‘There is too much inventory on the market right now and we’re still waiting to see what happens with some of these foreclosures.’”
The Daily Press. “Sales of single-family homes in the Victor Valley slipped in April as prices remained relatively stable. Closings fell compared to the previous month and year, dropping 19.6 percent from March and plunging 47.1 percent lower than in April 2006, according to data from Century 21 Rose Real Estate.”
“‘Sellers still are not willing to reduce prices,’ said Dana Gordon, a broker in Hesperia.”
“The combination of stable prices and falling sales resulted in a dramatic increase in unsold inventory, which ended the month 50.9 percent higher than in April of 2006.”
“‘We saw fewer sales last month because buyers are still waiting for the market to hit the mystical bottom,’ said Gordon. ‘If you want to sell quickly, you might consider knocking 10 percent off the price,’ he added.”
From Reuters. “Twice a day, would-be real estate moguls gather on the local courthouse steps for the latest can’t-miss opportunity in California’s land rush: the foreclosure auction. Veterans and ‘newbies’ crowd around auctioneer Gary Oberdalhoff as he lists a property whose owners couldn’t pay the mortgage, one of thousands to go on the block in this sprawling, arid region 50 miles east of Los Angeles.”
“‘Do I have any opening bids?’ Oberdalhoff asks. It might be a scene straight out of the Great Depression, if you ignore the Bluetooth wireless headsets.”
“During the first three months of the year, 1 in 68 houses in the Inland Empire was in default or foreclosure, a rate surpassed only by Detroit and Las Vegas, according to RealtyTrac.”
“‘This is ground zero; this is where it’s all happening,’ says Juan Cruz. Cruz has his eye on a four-bedroom house in nearby Corona offered at $131,000. That figure represents the unpaid balance on the previous homeowner’s foreclosed mortgage.”
“When the bidding starts, Cruz has plenty of competition. The speculators bid steadily in hundred-dollar increments. Twenty minutes later the house is sold to a heavyset man for $286,000.”
“That’s less than it would have fetched last year. But veteran home buyers have grown more cautious as the market has cooled.”
“More houses are on the market now than at any time in the past eight years, according to the Multi-Region MLS database. At the current pace it would take more than 13 months to sell them all, compared with 7 months at this time last year.”
“Bargains are scarce on the auction block these days. Houses purchased in the last two years are often saddled with steep mortgages that can exceed the house’s market value. Sales are down from last year and prices have risen less than 1 percent, according to DataQuick.”
“‘Now your house has to be underpriced and spectacular to sell,’ says foreclosure investor David Schultheiss.”
‘For the 22 business days ending April 25, sales for all types of Orange County home sales decreased 26.5 percent. The median sales price decreased .6 percent.’
‘Problems in the San Luis Obispo and Santa Barbara areas could spell trouble in the long term for the local housing market, the driving force behind the North County’s economic health. That’s one of the conclusions of the 2007 North Santa Barbara County Economic Outlook.’
‘They noted…a large decline in home sales volume - a 37-percent drop in Lompoc and a 43-percent drop in Santa Maria in 2006.’
As the “undocumented immigrants” would say. “Santa Maria” to SLO and SB.
Why would they say, “Saint Mary?”
More like Hail Mary, dontcha think?
The North (SB) County article is really weird. An interviewee says the foreclosures in Santa Maria and Lompoc will take six years to clear, and in almost the same breath, he says the foreclosures are not expected to affect the rest of the RE market. Fat chance.
Where will people get money to buy new cars and other cr@p now that the housing atm is done,over with, kaput.
It is funny how the govt doesn’t track housing prices in their infaltion numbers.Over 100% appreciation in home values and inflation is just peachy.Artificial asset prices are the only thing keeping this economy afloat.Seems like china is makeing most of our consumer goods while we live it up on free money from increased asset prices.Prety soon china will be flooding our markets with cheap cars too.
how the govt doesn’t track housing prices in their infaltion numbers.
Shows ya how truely bogus government number are.
Food, clothing, energy, & SHELTER have always been the basics.
Throw in health insurance, transportation, and higher ed for shites and giggles.
Anybody with the data have a real inflation number derived from these items?
Gotta be in the 12% range.
The gov’t, more specifically, the BLS does track housing when calculationg inflation figures. But its a funny calculation. They attempt to turn housing prices into rents through a process or figure called “owner’s equivalent rent.” Then they plug that into CPI (and it’s the largest component of CPI - I think about 38%.) It hasn’t really picked up the appreciation in housing prices that occurred in the first part of the decade (obviously) but they do attempt to account for housing.
“Where will people get money to buy new cars and other cr@p now that the housing atm is done,over with, kaput.”
I remember when I first started reading this blog, a while ago, when the Housing ATM was still a “suspicion” but not really confirmed, so many posters wondered WTF everyone was getting all this money. Nothing but a big turd of debt. And there won’t be anything to replace it.
AG made it incredibly easy and cheap for the consumer to go massively in to debt, and J6P took the bait. And then some.
Uncle Sam took the bait, too.
There are not enough jobs in SB County to sustain the growth that’s been going on there. Never has been.
‘For the 22 business days ending April 25, sales for all types of Orange County home sales decreased 26.5 percent. The median sales price decreased .6 percent.’
I think I can hear a giant sucking sound of subprime lending leaving The OC.
Actually, that’s the sound of the air escaping the souffle.
Man, I’m hungry!
More layoffs…Lending Tree…Don’t know if this posted yet.
http://blogs.ocregister.com/mortgage/
Look at this quote from the article about Lending Tree layoffs (thanks, krills):
“Anderson said the company is getting more consumer interest, but less of that is being translated into loans funded. She said the subprime correction has now spread to all credit categories of loans.”
“Our margins have been squeezed across all loan types and all products,” Anderson said.”
====================================
Another article from the same site:
“Losses are mounting at Impac Mortgage Holdings of Irvine as it struggles with delinquent loans and a loss of appetite among investors for loans in the credit category above subprime.”
“The real estate investment trust reported late Thursday a first-quarter loss of $121.7 million, compared to a profit of $85.6 million a year ago. In the fourth quarter, Impac reported a loss of $59.5 million.”
“Impac has been struggling with a rise in the number of homeowners not paying their mortgages. The company said it “liquidated” $52 million in delinquent loans in the first three months of the year. At the end of last year, Impac reported $1.1 billion in loans that were 90-plus days past due and on other real estate not earning a dime.”
etc
“…He said the company has “aggressively” settled demands by its financial backers to buy back problematic loans. ”
In other words, the only way these companies are staying afloat is by trying to push the losses onto the CDO holders, etc.
That would equate to 440 layoffs, including 147 or so in Irvine.
It’s the second large layoff announced by an Orange County lender this week.
This week! Says a lot, don’t you think?? -
Every day is like Halloween?
Al Jourgenson and Paul Barker approve of this headline! Now, the question is, will there be a New World Order? Or perhaps California has turned into The Land of Rape and Honey…
Also: 90+ comments before I finally made this reference. I am ashamed of nearly everyone reading this blog. Bunch of uncultured savages.
that’s what I just thought, 2 hrs to this thread and already 100+ comments. HBB really gaining momentum.
Oh, c’mon, MB… You Know What You Are…
Everyone knows the NWO will be HQed in Colorado. All you CA people enjoy living in the silo bunkers under Denver International Airport.
Man, I need a beer.
And I understand that three people have disappeared while venturing too close to the automatic baggage dispenser(s)at the Denver airport and are nowhere to be found. Almost like the old Kingston Trio song about the subway in Boston.
NWO cannot be under Denver International…Charles Johnson and his lizardoid minions lives there already!!
We should all be reported to the Ministry of real estate…
Caveat,
Are you referring to the great song “Everyday is Halloween” by Ministry. Frickin’ great song BTW.
“More houses are on the market now than at any time in the past eight years, according to the Multi-Region MLS database. At the current pace it would take more than 13 months to sell them all, compared with 7 months at this time last year.”
“Bargains are scarce on the auction block these days. Houses purchased in the last two years are often saddled with steep mortgages that can exceed the house’s market value. Sales are down from last year and prices have risen less than 1 percent, according to DataQuick.”
“‘Now your house has to be underpriced and spectacular to sell,’ says foreclosure investor David Schultheiss.”
This prbably gives FB false sense of security since very few panic sales in BA.
> “‘Now your house has to be underpriced and spectacular to sell,’
i.e. cleaned, painted, and sturdy enough to pass a rigorous inspection.
The New Munroe Doctrine?
Comparing houses to souffle?
Another e-CON-omist, sadly.
“air escaping a souffle” you’re a chef …not an economist!
“soft landing with long runway” you’re a airline pilot…not an economist!
“air hissing out of a ballon” hmmm…you are a clown …not an economist!
Boom and Bust…that’s the appropriate vocabulary for an economist.
What drives me nut is that these economists love to use the word “boom” but so far, they have avoided using “bust”
This bust will make Dollie Parton’s look small.
NYCB, lol…
“The combination of stable prices and falling sales resulted in a dramatic increase in unsold inventory, which ended the month 50.9 percent higher than in April of 2006.”
“stable prices and falling sales” I read in the paper that California hemp farming bill passed so these two must be tied together.
Ethanol for the gasoline engines, hemp oil for the diesels. One is drunk, the other is stoned. Nice
Car owners will be sucking on exhaust pipes while GFs will be sucking on shotgun barrels.
You had to go there…
“After five years of robust sales, the area, said said Steve Lutton, regional VP of Lennar Homes, has slid into a deep slump. ‘Every day is like Halloween,’ he said. ‘It’s scary out there.’”
Yes, all these kids dressed up like the Power Rangers and Sponge Bob really creep me out.
-Richie
I’m a buyer it’s not scary for me, and every day into the downturn it starts looking more like Christmas.
shadash : a fool and his money are soon departed
I agree…
And I fully intend to part some fools from their money
The whole housing-bubble bust feels a lot like the Bill Murray movie “Ground Hog’s Day” - we do get up every morning and read ALMOST the same thing we read the day before. Sellers still stubborn, MSM still upbeat, etc, etc. The one real Event people have noticed is implosion of subprime lending outfits. Every day will be Hallowe’en until prices and rents are in their traditional proportion.
Lenders are trying to sweep all the bad news under the rug by not reporting earnings or “creative” book keeping. Eventually they won’t be able to hide the monster where people won’t find it. Once that happens there’s going to be a lot of sad face home owners.
They lenders just have to hide it until the CEOs and other officials have dumped their stock and exercised their options. The SEC site is an eyeopener in this regard.
How far down is the Bay area? I made a note in previous thread - a friend there just bought a $1.4M 2900 sq ft home in San Jose. I think that was a really dumb move, and it will fall a lot in value. Any thoughts?
Check http://www.viewfromsiliconvalley.com
There’s alot of people who look at what is happening country-wide and think that will play out in their desired purchase location, regardless of the local forces.
If you’re in Manhattan or Palo Alto, forget about it. There’s simply not enough supply to keep up with demand even at the ridiculous prices simply because of the daft incomes of people in those areas. Relatives on Wall Street have been taking home multi-million bonuses; friends from graduate school get option grants worth millions; and this has been happening every year for the past 6 or 7 years for them.
How old are you?
San Francisco didn’t see 1990 prices go higher until 2000 (and the latter part of that period included a lot of dotcom funny money; imagine without such…).
Q: How long will it take 2006 prices to be exceeded again?
http://mysite.verizon.net/vodkajim/housingbubble/san_francisco.html
A: A long time.
To quote Forrest: ” Stupid is as stupid does”.
Still buyers here. Saw a house in Fremont, CA - 2550 sq. ft., great schools, go for $ 1.35 Mil in two weeks. Crazy still in some places. We need some pricing relief, it is way too expensive.
That is just annoying. What it’s going to take here is a good old-fashioned credit freeze. There are too many people out here who actually have $50,000 in the bank, so they figure they have enough money to ride out a dry period. As long as they are convinced that housing only goes up (as many are), then they have no problem paying neg-AM IO for 5 years.
We need to orchestrate a credit freeze!!!
A mere requirement of 20% down will work wonders.
Plenty of sheep still lining up to buy tear downs in Willow Glen area at a million a pop.
That’s because they’re stupid.
So sales “dipped by 127.3 percent” in a year in Merced?
Is math not a prerequisite any more?
I always try and give 127.3%…
What idiots…. There were 10000 sales, now there are -2730 sales??? friggin idiots!
Repeat after me. Sales were 127% higher but that does not mean they are now 127% lower.
Maybe they mean there were no “traditional sales” but there were 2730 transactions where the seller paid the buyer to take the house. Given current housing woes, that just might be the only way to get out from under the mortgage.
IAT
it’s new math!
“From Reuters. “Twice a day, would-be real estate moguls gather on the local courthouse steps for the latest can’t-miss opportunity in California’s land rush: the foreclosure auction.”
Bull trap.
More pigs to the slaughter. If these guys aren’t confident they can get 50-60% off retail AND re-sell the house within 2-3 months, they’ll be on the other side of this game soon.
Auctions have been busy for years now, this is nothing new. It won’t be until there’s only 5 people, including the auctioneer, at these auctions that it makes sense to participate.
The trouble with foreclosures is that while you may get the house at 50-60% off retail, you may find yourself with a money pit that has you spending all the way back up to retail — or beyond. After all, someone has to take care of the repairs and deferred maintenance.
And in this market, you have to be AT LEAST 10% under market value. But I’d also argue that right now “market value” doesn’t even mean anything. Values have been skewed for so long that who knows where things will settle.
Was that Neil saying that he’s not even on the sidelines, he’s up in the pressbox? Well, I’m outside at the tailgate party.
meant to say: “AT LEAST 10% under value when you sell.”
I agree with the sentiments expressed. These are foolish buyers paying way too much for properties. There’s quite a ways to go before foreclosures are anything to get excited about purchasing.
>
I wonder how the bidding started that low and ended that high. My guess is the HELOC & Second lienolders were present bidding it up until it covered all the outstanding debt, or one of the secondary creditors got it. If not, why didn’t it sell BEFORE auction.
Unless, the ultimate buyer OVERPAID. That’s my conclusion.
‘Statewide, prices have gone up so I’d hate to characterize it as a bust. It’s more of a correction.’”
I would characterize it as a “busty contraction”.
“Statewide, prices have gone up” - I would characterize that as a statistical illusion !
or “booby trap”
LOL!
I think aside from the housing and the money many will loose and the potential deals some may gain the effect on overall economy is what is worrysome. Perhaps it isn’t until everyone is affected by unemployed relatives and failed businesses that we will start to deal with what are we going to next. If it were only the housing that is affected all we would have to do is to sit on the sidelines and wait for the deals of a lifetime but I am wondering that in the end are those deals really gonna be that sweet?
bingo- it’s only good if you’re a gov worker, otherwise everyone is going to get hit
Parasites die once they kill the host.
Sweet? No, this is going to be painful.
The deals will be killer, but only in retrospect. When the time comes, you’ll be scared silly to buy *anything*, regardless of price. Of course, that’s how you’ll know…
I guess yesterday we were worried about inflation- NOT
Stocks rebound as inflation worries wane
the STAG is here folks
“It might be a scene straight out of the Great Depression, if you ignore the Bluetooth wireless headsets.”
No comment, really. I just loved this quote.
I know they are supposed to be useful, but a Bluetooth just makes me want to smack their ear really hard.
Can anybody just walk around without yaking non-stop all the time? Or texting while driving? What is with this obsession to be connected all the time?
What’s worse is when they walk everywhere WITHOUT talking on it. They must think they’re friggin’ cyborgs or something.
i hate those damn things as well. (bluetooth that is)
my bil wears one in the house i just want to smack him in the head. how did we live without all this tech stuff?
i remember and it wan’t that bad. i love computers and the web but these gadgets keep getting more features by the day. is it really needed to this extent?
At first I didn’t know what those things were. I couldn’t see the headsets and I wondered why all these crazy women were running around talking to themselves.
I work in an industry on the cutting edge of technology, but I swear all these devices are going to turn me into a Luddite.
If you’re “connected” you’re “important”…..
Its a mob thing.
Now there’s some crazy device called Twitter where you can IM a whole bunch of people all at once with photos of wherever you are.
This gives me the creeps - a mass-market photo app. I don’t want to see someone’s pics of the Grand Canyon, shouldn’t they just be enjoying the canyon without taking time out of their vacation to tell / show everybody where they are at the moment they are there?
It’s all overload to me. There’s also the pervasive “I am so popular, I must share this with all of my groupies and fan base” self-delusion.
Getting away from it all should include leaving the tech crap at home.
It always reminds me of “Locutus” from the Borg…
Myself, I keep thinking about the Cybermen episode(s) from the newest Doctor Who series whenever I see a bluetooth earpiece. The victim’s brain was removed and replaced with a direct link to an outside guiding force. In fact, that doesn’t sound too far off…
“What is with this obsession to be connected all the time? ”
I have been doing research at the library at the local university in my town. I’m surrounded by so many college kids yakking away on their cell phones, that sometimes I think I’m doing research in a phone booth.
At our local libraries in San Diego cell phones are not allowed. I take great pleasure in telling the librarians who is not following protocol. I have also asked people to “take it outside” from time to time.
They always look stunned… like they are surprised anyone could hear their conversation. It’s a LIBRARY for Chrissake, not your living room.
A person’s phone belongs outside of their home about as much as their toilet belongs outside of their home.
Can I get an AMEN?!? I detest people that walk around with these things in their ear like the Borg.
Amen to that brother!!!
I’ve been especially conscious of them in airport terminals.
I see one hooked up to somebody and I automatically assume…
ZERO LIFE!
How about people in the workplace who answer the phone on the sh!tter?
Personally I make a point to flush twice.
I would not throw 7 of 9 out of bed for wearing one.
The worst is the Bluetooth headset AND Blackberry junkies. Having a cell phone is one thing, I don’t want email following me everywhere too!
I wouldn’t mind so much if they were actually saying something important.
Running joke in London, a couple of years back, was the classic cell-phone conversation of someone coming home on the Tube (London Underground Trains) in the evening rush hour:
“Hi…I’m on the Train….I’M…ON…THE…TRAIN…..” etc…
World shaking stuff, there.
Might be the reason why people can’t think anymore .
I know that I have to have quiet time to think daily and sort out the BS from the real . I don’t like to be brainwashed by words that I don’t have enough time to discern .Its bad enough how brainwashed people get from movies and TV shows and the advertising .
What do I really need as a human being to be happy ?
Figure on the Telecoms suffering big when the depression hits.
All those extra features — texting, ringtones, downloadable music, etc. — will become “non-essential” as soon as money gets tight. I doubt parents will be readily subsidizing their text-happy teenagers, too.
Today some dip$hit was on the train up to Westchester and mindlessly yapping on his cell phone. I heard the loser say to the unfortunate soul on the other end of the line, “now I’m just shooting the $hit. I’m on the train so I have nothing better to do.”
All I could think was, “look out the window and daydream, you mindless f-cking drone.”
exactly - people no longer think critically - or imaginatively…
just follow that herd
“‘Nobody can pull money out of their houses so nobody has the cash to buy a new car,’ said economist Chris Thornberg. ‘That was the game.’ Thornberg said there’s evidence the economy is tailing off. ‘Consumers have finally run out of steam,’ he said.”
I have always liked Thornberg…he very early on made the connection between the plethora of highway Hummers and the house ATM.
A real bonafide Economist, fancy that?
he has eyes and is not afraid to SEE
Oh, so now we buy cars by pulling money out of our houses first?
He suspects that many would-be buyers still believe home prices are still sinking.
Just like rising prices, falling prices are a self fulfilling prophecy. If enough buyers believe it, it IS true.
“During the first three months of the year, 1 in 68 houses in the Inland Empire was in default or foreclosure, a rate surpassed only by Detroit and Las Vegas, according to RealtyTrac.”
Wow..Third IN LINE after Detroit and Vegas !
Next STOP..a tent, bedroll and BEANS with the hobos UNDER the Victorville Narrows BRIDGE Fbs.
Lot of i.e.d.’s in the i.e.
Inland Empire Defaults
Inland Empire -“During the first three months of the year, 1 in 68 houses in the Inland Empire was in default or foreclosure, a rate surpassed only by Detroit and Las Vegas, according to RealtyTrac.”
“‘This is ground zero; this is where it’s all happening,’ says Juan Cruz.
My Mother lives in Victorville and they have a 25 month supply of homes listed for sale. Inland Empire is toast.
Interesting how Victorville is now considered to be part of the IE. I still think of it being out in the boondocks desert.
“‘Nobody can pull money out of their houses so nobody has the cash to buy a new car,’ said economist Chris Thornberg. ‘That was the game.’ Thornberg said there’s evidence the economy is tailing off. ‘Consumers have finally run out of steam,’ he said.”
I just love reading this - I’m in the market for a Jeep, and can’t wait to go to the dealer with cash (pulled from a bank account, not a house) and cut a super-aggresive deal.
What kind of Jeep? I LOVE those new Wrangler Unlimiteds. I hear they are in high demand, though.
Of course, I love my paid off ‘98 Cherokee (with 250K miles) that still runs like a champ even more. Gas mileage and prices SUCK though.
Either a new or slightly used 2006 Wrangler for me, or a 2007 Patriot for the wife, and then I get her 2004 Grand Cherokee. Either way, about $16-18K cash. I’m a fan of the old 4.0 I6 - the new Wranglers have that weak 3.8 V6 from the minivans.
I’ve got the 4.0 I6 in mine. It’s a beautiful thing, for sure.
Dealers don’t give a rat’s arse about someone with cash. They make money on the note.
“Consumers have finally run out of steam.”
I thought the housing bust wasn’t supposed to affect the rest of the economy. I guess the “experts” were wrong again!
“‘Nobody can pull money out of their houses so nobody has the cash to buy a new car,’ said economist Chris Thornberg. ‘That was the game.’ Thornberg said there’s evidence the economy is tailing off. ‘Consumers have finally run out of steam,’ he said.”
Is there a plan to target helicopter drops of money into the back yards of all the big-spending consumers who love to buy stuff they cannot afford using other people’s money? Because otherwise, I think the 2/3 of U.S. economic activity driven by consumption spending is about to go down the tube — just my hunch, not a forecast.
If consumers don’t NEED it, it’s gonna disappear. First thing to go: nail salons.
Nail salons remained very ubiquitous during the previous bust, so I wouldn’t count on their extinction this time.
A thing can’t be “very” ubiquitous - ubiquitous (like “unique”) is an absolute. A thing is either ubiquitous or it’s not. There are no degrees of ubiquitousness.
My rant for the day. Please carry on.
there are some small luxuries that survive, because they are relatively inexpensive and bring pleasure to the wearer.
Like toilet paper.
the women who have those claw-like nails with crystal inserts are not all homeowners. the salons will stay, maybe in smaller numbers, as long as a full set stays under $20!
lol
“Merced’s median home price stood at $302,750 in March, down from $372,500 in March 2006, according to figures from DataQuick. Merced…sales dipped by 127.3 percent compared with February. 2007.”
That’s a good start. A roughly 19% decline in a years time, but $302k is still way too high for Merced. I am thinking a median of $150k sounds about right, so another 50% drop should do the trick.
I think the Central Valley has been out of line with fundamentals for well over two years now. High paying jobs are few and far between and my guess that this is just the beginning.
There is still a lot of building taking place from what I see. Unemployment has historically run around 13 to 14% around here. Unemployment dipped to below 8% when things were going good. I have seen a couple of reports that estimate that 40 to 50% of the differential in unemployment can be attributed to construction that has taken place. Just doing the math, I would expect unemployment to drop back down to between 10 and 11% at best, if not more when building stops.
Based upon the information I have seen and the conversations I have had, I estimate 15 to 20% of all mortgages originated in the past two to three years are sub-prime mortgages. I further estimate that around 25 to 40% of all real estate purchases over the same period were speculation.
Looking at rentals for the Valley on Craig’s List, I see rents dropping over the past two months and the quality and quantity of rentals increasing. Additionally, the number of brand new unoccupied homes is going up as is the numbers of phone numbers listed from outside the area.
Looking at all of this, I would say that the Central Valley is in for a long period of decreasing home prices for the next couple of years. Over the long-term (10+ years), the fundamentals for this area look very good. There is a lot of good stuff in the planning stages for this area.
Just my unsolicited $.02.
Looking at all of this, I would say that the Central Valley is in for a long period of decreasing home prices for the next couple of years. Over the long-term (10+ years), the fundamentals for this area look very good. There is a lot of good stuff in the planning stages for this area.
Google: NRDC vs. Rodgers, then get back to me.
Caddilac Desert comes home to roost.
Googled NRDC vs. Rodgers.
Stand by what I said. Long term fundamentals (10+ years) for this area are very good.
OK humor me, just what fundamentals might you be refering to? Building prisons, or UC’s, or how about bullet trains, maybe a new Dam at Temperance flat.
!Read the Settlement!
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“Long term fundamentals (10+ years) for this area are very good.”
I’m curious as to what you are specifically using to base your assertion.
Otherwise, I agree that the Central Valley RE market is grossly overvalued.
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Been tracking Merced sales for a while: Mar ‘06 - 260 Sales countywide; Mar ‘07 - 66!
There’s a huge (for a town of 80K) development just to the north. New houses sold for 400/500K 2005/06 - now down under 400K. And there are many, many year old see-throughs on every street.
I spent an hour last nite talking to a Modesto RE agent. She said in her office first-time buyers qualify at a 10 to 20% rate over last year, and the marketing is dead. When I questioned that (as if I didn’t know) she said the word from agents in the office is getting very close to desperation - said one gal broke down and started crying and yelling about losing ‘all they had’ - seems another buyer had been denied and she hadn’t had a sale in 2 months. Bad moon rising.
My significant other was working for a mortgage broker you hear all the time advertising on the radio (or used to anyway). I told her a year ago to get out, it took her a few months but she got out and found a completely different job that has nothing to do with real estate.
She still has a friend that works at the old place and stopped by last week. They fired all the loan processors except one. They let most of the loan officers go too.
The one loan processor has to work until 9pm everynight and her friend caught her crying her eyes out at her desk. I’ve been to her house, and there is no way a loan processor and a border patrol agent could swing one acre in San Diego, with pool, and guest house with a traditional mortgage… looks like the aligator’s tummy has started to rumble.
San Diego is toast come 2008!
Maybe the border patrol agent is on the take. I wouldn’t doubt that a lot of FBs are going to be selling a lot more than their souls to cover their mortgage.
The US needs to MAKE Something and SELL it …Fast.
I’ve Got IT!
Maybe we can Package ALL our DEBTS …and Sell IT to the ….Chinese ?
Heck..We AREN’T Toast yet ….We’re just a nation of CRISPY CRITTERS ha ha ha
Ummm…. Who do you think bought all the Mortgaged Backed Securities? The Chinese already own all our debt.
What if the chinese play hardball on this and decide that they want their money all or nearly all at once? A war might solve this problem.
The US can’t even beat Iraq, so I’m not sure they want to take on China at this point.
For this reason, among others, I’m beginning to think a significant recession will be really healthy, in the long run at least.
A recession, plus some good old inefficient protectionism will hit China hard, much harder than us. It might be enough to chase that commie goverment out of power.
A worldwide recession would also make the price of oil plummet, which would take care of Chavez.
Compared to most of the rest of the world, the US economic infrastructure is more than capable of supplying its own citizenry with food and decent jobs. We just need to stop selling our jobs abroad to benefit the upper 5% of this country.
“‘Now your house has to be underpriced and spectacular to sell,’ says foreclosure investor David Schultheiss.”
Underpriced = Properly priced
po-tay-to, po-tah-to
“‘It’s not a bad market, but there are just overpriced listings right now.’”
So what would happen if, magically, everyone dropped their prices by 25% overnight? Would that “cure” the market?
Just the opposite. It would cause an explosion in foreclosers and REO sales down the road. A quick blip of knife-catchers then even more blood. No easy way out.
Not unless the lenders “magically” forgave big chunks of home debt. Particularly where there is a second mortgage, it’s probably still in the interest of the primary lender to let these foreclose and let the 2nd take most of the loss. Doesn’t seem to me that the “cure” is going to come ahead of the whole process playing out, but to my mind one question remains:
How to you even try to effect a cure when the sources of contageon -by law - must be left alone over the course of a cripplingly slow legal process - to hell with rot, vandalism and further damage to a neighborhood’s home values.
Not the first time I’ve ever asked, but has anyone in the industry seriously taken on that question? It kills *me* to see a nice house go slowly to hell, and it’s not even my money…
This is going to be a serious problem with the houses sitting vacant for months ,maybe years . This is just another byproduct of a housing mania where builders overbuilt and speculators bought up houses they never intended to live in .
Its really is a big waste especially since many buyers got priced out of the market who would of wanted to be living in those houses . What about the houses they built in places that no demand other than speculator demand existed .
lending tree layoff 20% today, look at
http://blogs.ocregister.com/mortgage/
‘Builders aren’t in the same position they were in the 1990s, when supply got way ahead of demand,’ said Jack Kyser,
This is were I beg to differ. The builders built most of this inventory for scum sucking leaches like Jeff over at the SD”creative” “investor” to buy 14 homes in 14 weeks. Those types and the many like him will hopefully lose their a$$ to foreclosure including his personal house. False demand by these scum sucking FB’s has created much more supply than in the 90’s and falsely raised the prices of homes to the point that young families can’t afford to put down roots until the Jeff’s and Casey’s of the world are flushed down the toilet. I am sorry, I know most people will feel sympathy for their plight, but I hope they eat a bullet.
Damn. I just hate it when bloggers sugar-coat their opinions!
Love it.. LOL .
“I am sorry, I know most people will feel sympathy for their plight, but I hope they eat a bullet.”
I’m not sure most people feel sympathy for the speculators. Personally, I enjoy watching them lose everything. They were as responsible as any in driving prices out of reach for the honest, hard working families and individuals.
the only thing i feel sorry for are all the trees needlessly cut down to build houses nobody will want
in a prior comment someone said that the normal value of real estate is about 100-120 times the monthly rental price.
Is that info accurate?
Also, if it is, how do you guys think that number would change (if at all), with the change in US tax law on capital gains ($250/$500 deduction)?
And if there is a change, would that change then float back to the 100-120 times monthly rental rate for the real estate, or would it reset at a different number?
And if it resets at a different number, what would that be? (higher or lower?)
thanks,
Los Angeles Friends In Deed
Yes, 120X fair-market monthly rents (or 10X annual rents) is a traditional –and quite reliable– pricing rule-of-thumb. There are other methods to guage a house’s “fair market value”, including cap rates, or simply comparing the monthly carrying costs (PITI + HOA + maint. -mtg. intrst deduction) to equivalent rent. Here’s a good thread for you:
http://patrick.net/wp/?p=186
I think this rough formula is used by traditional landlord for property purchase e.g. if the landlord can buy a place for $100K and rented out for $1200 per month, it would be a worthy investment. I think it is also a good indicator of a healthy real estate market pre-2000. I also think invididual capital gain tax may not apply since this is a business purchase, although, I can be completely wrong here.
I think we’ll see this formula again eventually albeit not anytime soon. I think the traditional landlord occupation will be hurt by many reluctant landlord coming in and stealing their business away.
So you think it may go below 120x monthly rent, due to so many reluctant LL/FBs underpricing each other? Wow. For L.A., that would require price declines on the order of 60-70% virtually everywhere –a total meltdown. Even factoring in recent price cuts, you basically cannot buy anything in L.A. County for less than 300X equivalent rent.
IMO the favorable tax exclusion on capital gains increased the market by about 30% above fundamentals. Come on , no capital gains tax every two years on real estate profit encouraged real estate churning every 2 years .
If the gov. keeps that tax exclusion it does change the normal factoring on real estate . Alot of the increase in prices were due to faulty lending to speculators and unqualified buyers and I think the easy money was the biggest factor in inflating the prices .
I completely agree that the 24-month $500/250k cap. gains tax exemption was a huge incentive to flip. One caveat though: it will not provide much support to prices on the way down. Why? No price gains = no capital gains. No capital gains = no tax exemption. 30% of nothing is still nothing.
thanks everyone for your imput. Your imput really helped and makes this blog stand out as one of the best places to discuss the housing bubble and factors that may(or not) play into what made it.
I am supposing that the capital gains income tax exemption may have at least initially stimulated a boost the the amount people would pay, even for single family homes. And as others suggested, I think that perhaps it will only be a temporary condition, with those that flipped property on the first or second round being able to make some tax free money.
And it has occurred to me that many professional real estate investors already talk about not haveing to pay any income tax anyways, by using a loophole in the tax code that allows them to take out capital gains to invest in more real estate.
And I am wondering… in previous comments people spoke of if a mortgage holder forgives part of a debt or reduces the debt to their debtor, that the IRS would consider that income.
So I am wondering, if that is true, then perhaps these FB’s could get some kind of tax credit if they sell their property at a loss.
BTW, just about all the republican candidate for president are talking about getting rid of the IRS in total, especially Ron Paul. They were bashing the IRS as a seriously malfunctioning agency that seems to be doing more harm. And some have proposed that after doing away with it, that a flat tax and/or a consumption tax to replace it.
I am wonder how those proposals, if they go through, will effect property values. Any thoughts?
Remember, prices will be chasing rents down, so prices can fall 70% and still be 120x rent.
Recent sale in my neighborhood: house plus five apartments behind it sold for $1,000,000 last month. It was on the market for the past year, and I thought it might sell for half a million. Lots of people over there sprucing the place up. I’m anticipating that the $4000-$5000 per month in rent won’t begin to cover their costs. Maybe I’ll buy it in a couple of years after they’re done renovating it and have been foreclosed on.
Anthony Hsieh, who founded Home Loan Center before it was sold to LendingTree, is leaving his post of chief executive of LendingTree Loans in June. The division funds loans.
“He is actually going to build and pursue full-time a marine business …to distribute certain brands of yachts on the West Coast,” a company spokeswoman said.
Oh, you mean the guy who said the following:
“If you own your own home free and clear, people will often refer to you as a fool. All that money sitting there, doing nothing.”
There’s a special circle in Dante’s Hell for people like this.
Sorry. This was meant to be a reply to the Lending Tree post by dbdn145.
Vanda Martin, real-estate agent at Coldwell Banker Grupe, Stockton, said homes are still selling - if sellers are willing to start out low or cut asking prices.
“The consensus about the market right now is it’s all about the price,” she said. “It’s not a bad market, but there are just overpriced listings right now.”
Ding..Ding..Ding…ha ha ha ..We HAVE a Winner HERE !
I have a flipper friend that was telling another guy the other day that his houses had gone up in value since his real estate taxes had gone up….. I had to cover my mouth and turn away so he did not see me laughing…. they were appraised at the peak….. and they will probably be sold at the trough…
San Jose prices are collapsing but you wouldn’t know it looking at zillow.com
ttp://www.zillow.com/HomeDetails.htm?zprop=19839081
This is a house which sold in San Jose, CA for 569K 4/11/2007 the Zestimate is 673K
How can this be? I thought they would have the software with some logic.
link missing h
http://www.zillow.com/HomeDetails.htm?zprop=19839081
GIGO… Garbage in, garbage out.
“Sale Prices” are so scewed by cash-back and other incentives, not to mention bogus and\or missing size, age and other data…
Housing analyst Patrick Duffy said some builders are still saddled with large numbers of unsold homes. Stricter credit standards and the diminishing use of 100% financing and stated income loans also are cutting into sales.”
So to remedy that they [builders] continue to build.
“So to remedy that they [builders] continue to build.”
They have to build. They took on massive debt to buy land, get zoning, impact fees, infrastructure, etc. Those costs are spread out across houses in the planned community. If they stop building, they can’t pay back their loans.
Build or die.
The prices are being preasured on all sides. Fewer buyers that can no longer qualify. Foreclosures adding inventory. Speculators desperate to dump. falling prices telling buyers to wait. All this sucks prices down.
AND builders that HAVE to complete thier developments that toss in incentives, lower prices, pay fees, etc. This pushes down on prices.
Sucked down from below and hammered down from above. All the while, the NAR uses rigged stats to pretend prices are mostly flat… maybe slightly down.
Yeah, right.
I think this is good. The one bright spot in this bubble is that infrastructure is being built. Houses will not disappear as this bubble pop /fizzle. Excess supply could only mean cheap prices for future homebuyers or renters! I’m all for building pace to continue unabated!
Nope. A complete misallocation of resources. Complete economic inefficiency. Infact what you call the ‘bright spot’ is probably the most tradgic part of this whole thing…
I agree.
Take Maricopa, AZ as a “for instance”. Hour shouth of downtown Phoenix in the desert. In 2000 there were about 1000 people in the area, working farm land.
Developers bought up the farm land and started building houses. 2003 incorporated with supposed population of 5000. Continued to crank out houses, marketing to out of state speculators. Supposed population in 2006 was 20,000, but news reports put the population closer to 10,000.
We now have 8,000-10,000 houses that were built an hour from downtown. Roads, schools, other infrastructure. And NO ONE wants to live there. 1200 houses on the market. People with $2K+ a month carrying costs are trying to find renters for $900 a month.
This is going to be a VERY depressed area as these houses that were bought for $200K-$300K crash in price down to $70K. No way the “city” will be able to pay back bonds used to build the infrastructure.
But I’m sure the guys that bought up that farm land and planned this nice little disaster in the middle of no where, sold at a HUGE profit.
Went out to Harrah’s “Ak Chin” casino a few months back.
went out to Harrah’s “Ak Chin” casino a few months back.
What were these people thinking?
Depreciating, deteriorating “infrastructure” that was built hastily and shoddily benefits no one except the slum dwellers who will eventually inhabit it.
I guess Patrick Duffy came back from the dead just like he did in “Dallas” when Victoria Principal “dreamed” he died.
Housing analyst Patrick Duffy said…
What, is he finished with acting?
I have to admit, I’m really enjoying all the bad news today. As a Christian, I know I’m not supposed to revel in other people’s suffering, but I am having a very difficult time generating an ounce of empathy for all these people who are suffering the consequences of their own unfettered greed.
Even Jesus understood that Caesar wanted his due. Damn sight better to have your treasure in Heaven, because your manna-house is depreciating.
Well Toast…One thing is for SURE. A LOT of these people WON’T be TAKING their House WITH them…when they GO !
I think Jesus would have been more pissed at the modern day flippers than he was at his tax collectors.
If our Lord were to walk today and said “tear down this temple and I’ll rebuild it in 3 days” the Pharisees would have said unto him “oh so you work for Centex?”
Please forgive me father
Ah, Schadenfreude (defined as pleasure taken from someone else’s misfortune). According to Wikipedia, there is a Finnish saying about Schadenfreude that translates to “schadenfreude is the purest joy, since it doesn’t include a bit of envy.” It is a common feeling here on the HBB as the bust plays out.
“‘In certain parts of the state, we’re seeing a depressed market, especially in the Central Valley,’ Hatamiya said. ‘Statewide, prices have gone up so I’d hate to characterize it as a bust. It’s more of a correction.’”
——————————————————
They can call it whatever they want, so long as they drop the damn prices.
The part that kills me is that “…Statewide, prices have gone up…”
How can this be?
They use year-old data, ignore foreclosurs and short sales, count new home deliveries that were actually put under contract a long time ago, ignore sq/ft gains, etc.
It’s not a bad market, but there are just overpriced listings right now.
Now???
Seems to me homes in CA have been overpriced for a very, VERY long time.
A little california rocking and rolling.. and a little shaking and baking will probably lossen a quite a few of those FB’s that are hanging on by their finger nails.
What’s interesting is that while foreclosure sales won’t impact comps directly, they will impact comps eventually, it’ll just take some time.
Example. Bank forecloses on a home that at one time had wish price of $250,000 (comps were at $250,000). Home goes to auction. True bottom feeder buys home for $125,000 at the auction. No comp is established. Bottom feeder turns around and sells home on the open market for $175,000–new comp established–more than auction price, but also less than all the list prices on the market.
It takes longer, but sales out of foreclosure WILL have an impact on comps. It just takes time. Of course, these comps won’t be established if the bottom feeder is going to live in the house, nor if the bottom feeder is going to rent out the house, but you don’t need all the bottom feeders to flip the homes, just some of them.
I see the cycle progressing as follows:
1. Subprime blowup in early March stops the refinance of bad loans with worse loans–Ponzi finance takes a major blow, credit begins to tighten;
2. 90-120 days later (July ‘07 for those keeping track), borrowers with loans unable to refinance starting in March get foreclosed upon at a much faster rate (starting in July since it takes 90-120 days to process a foreclosure);
3. Foreclosures happen at an accelerated rate, as credit tightens, and more ARM resets happen pursuant to the Credit Suisse chart;
4. The second home sale after a foreclosure begin to happen en-masse starting around 6-8 months after foreclosures begin to spike in July ‘07 (time to fix-up/market/wait through winter), thus beginning to lower prices in the market just about when the rate of foreclosures are peaking, about 120 days following the peak on the C.S. chart in October ‘07, call it February/March ‘08;
5. Credit will have tightened substantially by then–even if people want to buy at listed prices, they can’t get the home appraised at anywhere close to the wish price–post Super Bowl selling season is non-existent for the second year. No spring bounce;
6. 2008 is far worse than 2007.
I submit that the only thing that can break this vicious cycle is either a) the reinstitution of Ponzi finance, thus slowing/stopping the wave of foreclosures or b) price readjustments such that homes are far more affordable than they are today.
My money is on b). I just think we are too far gone for financial institutions to buy into a).
Might as well wait until 2009 before even dreaming of buying…
I’m guessing here, but… it seems like most sellers on the market don’t HAVE to sell, at least not right away, and are clinging to near peak-level prices.
What has to happen for their attitudes to adjust?
Is it… A) lots of doom-and-gloom pieces in the MSM? B) Tough talk from their listing agents? C) No showings? D) Deals that fall through because of lower appraisals? E) Open ridicule from their friends and family?
I’m still hoping that by the end of the summer, the trends will be too obvious to ignore, and we can get this logjam moving…
“They stopped short then of calling the housing slowdown a ‘bust,’ instead referring to it as a ’souffle with the air slowly leaking out.’”
Kinda makes you want to fwow up, don’t it?