‘The ‘Feeding Frenzy Is Over’ In California
Some housing bubble news from California. “Humboldt County home prices have remained essentially flat since August, while average interest rates have climbed to 6.35 percent, increasing the average monthly mortgage payment from $1,851 six months ago to $1,936 in January for an equivalently priced home.”
“According to the Humboldt Association of Realtors, the median home price in the county in January, the most recent month for which figures are available, was just under $320,000, up from $270,00 a year ago and down from $339,000 in December.”
“The affordability index countywide continued to hover near 12 percent, meaning that only 12 out of every 100 households could afford to purchase a median-priced home. The numbers are ‘pitiful,’ according to realtor Jeff Katz. ‘You would expect to find low home-ownership rates like this in Southern California or the Bay Area where home prices are double what they are here,’ he said, but he called the local numbers ‘pretty sorry.’”
“Michael Monaghan, realtor associate in Arcata, said he thinks the local market might be ‘a little ahead of itself.’ Sellers in some areas, he said, are asking too much for their properties. ‘They don’t understand that it’s becoming a little more of a buyers’ market,’ Monaghan said.”
“Building permits for Victor Valley homes were at a two-year low in January. Home builders say they aren’t scaling back building, despite reports of a 32 percent drop in year-over-year home sales and a 110 percent higher inventory of existing homes from last year. But even builders acknowledge they could be signs of a much-needed market adjustment.”
“‘I think what had been described as the feeding frenzy is over,’ said Mike Dwight at Frontier Homes. Dwight says investors are probably exiting the market, allowing buyer-users to find a more affordable home. (Homebuilderz) Joseph Brady said the market is tipping toward the buyer and that builders will begin offering incentives and would also begin contracting with local real estate agents rather . ‘It’s just part of the cycle,’ he said. ‘They’ve been doing it for years. When the automotive industry has a lot of cars on their lot, they’re more willing to give incentives.’”
“San Diego County home prices bounced back above $500,000 in February, but sales continued to slow as rising interest rates put pressure on buyers stretching to get into their first home. DataQuick reported yesterday that the median sales price last month was $502,000, up $12,000 from January and 6.4 percent higher than a year ago.”
“The latest figure represented a partial turnaround from a sharp drop in January, when the median price tumbled by $26,000 or 5 percent. Amid the gain in overall prices, the volume of sales in February declined for the 20th straight month, logging 2,865 transactions, down 16.8 percent from a year earlier.”
“The San Diego Association of Realtors said unsold listings stand at their highest level in eight years of record keeping.”
“DataQuick analyst John Karevoll said San Diego home buyers have already backed off from their use of ARMs. In November 2004 about 83 percent of buyers in San Diego County chose adjustable-rate mortgages. That marked the peak in a database that goes back to 1988, he said. By November 2005 the figure had dropped to about 73 percent. In January, the most recent month tallied, about 54 percent of buyers used adjustables in their purchases.”
“Mortgage broker Ed Smith, Jr. in San Diego said a ‘guidance’ issued to lenders in late 2005 by federal regulators helped reduce the use of some of the riskier adjustable products, such as option or flex-payment ARMs. Those products allow the borrower to decide how much to pay each month. With sales and home-appreciation rates slowing, ‘you have to be more prudent in who you make these loans to, if at all,’ Smith said.”
“Jim Scott in Mission Hills said most of his clients have dug in their heels and are resisting his recommendation to lower their asking prices by 5 percent or 6 percent after a month of no offers.”
“Scott’s base ZIP code, 92103, encompassing Mission Hills, Hillcrest and Bankers Hill, is a case in point. It was one of eight ZIP codes in the county where median home prices dropped by more than 10 percent in February from year-ago levels. The median last year was $975,000 on 10 single-family resale houses and last month, $715,000 on 13 transactions.”
“Charles Jolly, president of the San Diego Association of Realtors, said he detects only one area where a real estate bubble of overheated prices may pop: downtown San Diego. There were 616 resale condominiums on the market as of yesterday, perhaps a record level.”
“Gary Kent, who operates in La Jolla, said those who bought condos in the last two years will have a hard time selling their homes for as much as they paid. ‘They’re ready to move up and the value of their condo hasn’t moved up,’ he said. Kent said condo buyers might be wise to jump in now while the market is slow. ‘The idea is contrarian investing: The best time to buy is when there are not a lot of people buying, which is now,’ he said.”
‘The idea is contrarian investing: The best time to buy is when there are not a lot of people buying, which is now,’ he said.”
I think that the contrarian would be buying when no one is telling you to buy.
Na, I think I will wait another 24 months, that is when I can get that same condo at a 20-30% haircut, now that is what you can call contrarian.
Calling All Sheeple:
Now is the time for everybody to become a contrarian.
James T. Kirk: “..Everything that Harry Mudd tells you is a lie…”
Harcourt Fenton Mudd: “…Now listen very carefully to me…I lied…”
I was wondering about that too. I don’t think this guy knows what it’s like yet to have no buyers.
“Dwight says investors are probably exiting the market, allowing buyer-users to find a more affordable home.”
Buyer-user? Is that some new-fanlged term for a person who buys a house to actually live in it? Who would do something foolish like that? That’s so 1995!
Buy a home to live in it? That’s so Ozzie & Harriet!
The RE pumpers are going to use the price gains over Jan as evidence that there’s no bubble and suckers holding their breath for this “confirmation” will breath a sigh of relief. RE agents will be back to telling their “clients” to buy before the next burst of 20% gains. Just watch…
Well, it didn’t take long. A link on DQ News to this story…
http://www.signonsandiego.com/news/metro/20060313-1327-bn13homes.html
Forgot the headline, “County home prices bounce back from January slide”
Toooo predictable
According to CNN: “The Poor Get Richer” , the US is losing jobs that require college education while keeping jobs that require only high school education.
IEEE had an alarming news about more than 1/4 of all electrical engineering jobs have been lost between 2000 and 2005. Most of them simply gave up their engineering career and likely became realtors or loan brokers and that contributed to declining unemployment among electrical engineers even with the job loss.
All other crises aside, just this trend alone means SV and Boston’s RE markets are going to fall hard to 1995 or even 1980 level. Until now, those ex-engineers could still live on home-flipping or jobs in RE industries, but the RE game has already ended.
As a engineering manager at a Silicon Valley semiconductor company, I can tell you that the bottom 1/4 of engineers that dropped out of the work force weren’t worth hiring anyway. For the salaries they wanted, I could just hire four engineers in India that were each twice as smart. Silicon Valley is better without those laid-off dumbasses.
Good article listed at Patrick’s site. Time to buy a condo - when they are at least 50% down, and the flippers/developers are in BK court trying to throw the albatross from off of their neck.
3 ways you can go broke in real estate
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Real estate investing is no slam dunk. A market can turn on you in a heartbeat, and a property can drain you.
By Jeff Schnepper
I’ve been involved in real-estate investing for years, and I’ve learned some hard lessons based on what was purported to be great advice. Like: “Buy property. Buy it now. It will always rise in value, and you’ll never go broke.”
Trust me, you can not only go broke, but you can actually pay taxes as you do it. Let me show you three ways you can get creamed and suggest some strategies to limit your risk.
Neighborhood change
I once had a client who bought an apartment complex for $1.5 million. He held it for several years, just about breaking even on a cash-flow basis and enjoying the tax benefits. Unfortunately, the neighborhood changed. The fair market value of the property fell to only $800,000 — on a good day.Start investing with $100.
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Because of the decline in the neighborhood, rents also dropped. His cash flow wasn’t sufficient to cover the mortgage, and he faced bank foreclosure. Seeing nothing but further price decreases, he panicked and sold.
Here’s where he got killed. While he got $800,000 for the property, he owed the bank more than $1 million. He had to take out a second mortgage on his home to cover the $200,000 difference.
The pain, however, was just beginning. Because of the depreciation he had deducted, his basis in the property was only about $700,000. That meant, according to Internal Revenue Service rules, he had a taxable gain of $100,000 on the property.
We’re not done yet. Even though the gain was a capital gain, the depreciation-recapture rules subjected it to a 25% tax. That was another $25,000 hit in the pocket, not counting what the state sucked out.
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Related news and commentary on MSN Money • 5 ways to protect yourself from a housing bubble
• Real estate clubs ride the housing boom
• Nothing quick about getting rich with real estate
• Stocks or real estate?
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Don’t tell him you can’t go broke investing in real estate.
But, you might suggest that he not invest in properties bordering on severely depressed neighborhoods unless the gentrification is going in the right direction.
The lesson: Do your homework on the neighborhood before buying.
The tenant leaves
You can also get hurt on real-estate investments in good neighborhoods. Another client built a new rental property on the Jersey shore. He looked forward to full summer rentals that would cover his expenses for the rest of the year.
Unfortunately, in his first rental year, drug needles were found washing up on New Jersey beaches and stories of HIV infections from contaminated needles were grabbing headlines. A tenant my client thought he had signed up for two months disappeared, and it was too late in the season to find a replacement.
Financially, my client got clobbered. Without the summer cash flow, he couldn’t meet the mortgage payments. He sold out for more than the property had cost him, but he had to pay transfer costs. So, on a cash-flow basis, he was substantially out of pocket.
The good news was that this client didn’t have to pay any taxes. The bad news is why: He’d lost his shirt.
The lesson: Figure out all the ways a tenant might decide to leave and plan for the contingencies. At the very least, make sure you get first and last months’ rent up front.
Interest-rate changes
Don’t be tempted by what looks like a low-rate mortgage. These days, interest rates are going up. So, if you have an adjustable-rate mortgage, your basic nut will go higher, too.
If you borrowed $300,000 on an interest-only 3% loan, you’ll pay $9,000 per year. If the interest rate goes to 7%, you’ll have to pull $21,000 out of your pocket each year — $12,000 more than before.
The odds that you’ll find $12,000 a year in additional rent aren’t good. So, I hope you’ve got deep pockets. Otherwise, you’re gonna have problems.
The lesson: If you’re buying rental property, financing is nearly as important as location. Run cash-flow projections to test your ability to repay a mortgage at a given rate. Consider the worst case scenario. An adjustable loan may be cheap to start, but it can come back to bite you. An interest-only note has the potential to consume your wealth.
Soaring prices, but …
Many of us have made a lot of money on real estate. According to Merrill Lynch economist David Rosenberg, 70% of the rise in household net worth in recent years can be attributed to gains in home values.
Sales have been at or near record levels all summer. In fact, sales of existing homes set a record in June and generated the third-best sales rate ever in July.
Let’s also be real. This real-estate boom has been fueled by rock-bottom interest rates. Federal Reserve Chairman Alan Greenspan has become increasingly outspoken in his concern about excess speculation, especially in markets like New York and California. Others worry the housing boom could be snuffed out if property simply becomes too expensive for all but the richest buyers.
I’m not singing a song of disaster. I’m singing a song of prudence.
Successful real estate investing really boils down to three rules:
Do your homework. Know the market and its risks.
Prepare for the worst. It will happen.
Think location, location, location.
I would agree with most of what you said need 2 with one added thought…In almost all of the circumstances that I have seen people lose money in real estate is due to over leverage and not enough reserves to weather long term corrections…
“If you borrowed $300,000 on an interest-only 3% loan, you’ll pay $9,000 per year. If the interest rate goes to 7%, you’ll have to pull $21,000 out of your pocket each year — $12,000 more than before.”
Here is a question: Do “IO loans” go up when interest rates go up regardeless of the re-set date? I’m confused. Thanks!
The interest rate does not NECESSARILY increase when the rate resets but MOST LIKELY it will.
Consider getting a 3-year interest only mortgage when interest rates are at near-historic lows (as many borrowers have done in the last few years before the rates on such loans became comparable to the rates on a 30-year rixed). If you are in a rate cycle where rates are decreasing there is a chance that, four years later, you might get a comparably low rate if you have a low enough margin and the index to which the rate is “pegged” is still low. Bear in mind that even if your rate is the same your payment will be higher because you now have to pay priciple.
On the other hand, if you’re in a rising trend (as is the case now) not only is the index likely to be higher once the rate starts to adjust and amortization kicks in but interest rates on all other products could be higher as well. That is why these loans were designed specifically for those people who were expecting to sell the home in a few years and who were less concerned with building equity in that time than saving money.
It’s a risky loan whichever way you look at it. Unfortunately it appeals to the near-sightedness of most borrowers who have no long term financial plan.
“If you borrowed $300,000 on an interest-only 3% loan, you’ll pay $9,000 per year. If the interest rate goes to 7%, you’ll have to pull $21,000 out of your pocket each year — $12,000 more than before.”
I am not sure if this post will go through, I just tried unsuccesfully. Here is my question: Do interest rates make your Morgage go up when you have an IO loan regardless of the re-set date?
Thanks!
nothing happens to your mortgage payment until the reset date. on the reset date the bank will calculate a new payment, depending on where the rates are at. the bank will also add their margin (2-3% points) on top of it. in my case, the rate would go from 4.125 to 7.5% if my loan had to reset this month, but i’m good till Sept 2008 and nobody knows where the rates will be at then, so 7.5% is a purely hypothetical number which will fluctuate until Sept 2008 if i still have the loan by then (i know i won’t)
A lot of investors along with others it seems are exiting the market here in Venice. I can’t believe how many buildings are for sale around here. There seems to be a sign every 30 feet in this entire area. It’s unbelievable how many properties are for sale. I have been seeing maybe 2 or 3 properties for sale just on my drive to work in recent years, last month I noticed 10, and it’s up to I think 17 now. Realtor signs are absolutely everywhere!
good good good!
i see a pickup of listings here in culver city during just the last week.
Culver City listings from last July to present.
This is all listings from ZipRealty, SFR,Condo, MFR.
July 15 (58 Listings)
Aug 01 (68 listings)
Aug 09 (64 listings)
Aug 30 > (70 Listings)
Sept 6 > (77 Listings)
Sept 9 > (68 Listings)
Sept 13 > (70 Listings)
Sept 14 > (79 Listings)
Sept 26 > (82 Listings)
Sept 29> (87 Listings)
Oct 1> (92 Listings)
Oct 4> (98 Listings)
Oct 7> (93 Listings)
Nov 11> (105 Listings)
Nov 15> (111 Listings)
Nov 21> (116 Listings)
Nov 28> (119 Listings)
Jan 5> (97 Listings)
Jan 18> (101 Listings)
Jan 24> (105 Listings)
Feb 10> (106 Listings)
Feb 14> (103 Listings)
Feb 17> (105 Listings)
Feb 27> (110 Listings)
Mar 02> (114 Listings)
Mar 07> (115 Listings)
Mar 13> (124 Listings)
Venice, California?
Venice, Italy ?
Venice, Florida??
Venice, California: 90291 zipcode
WHERE??!! I’ve been looking to been looking to buy (for me) in the 90291 area for 6 months now, and the dumpiest little “bungalow” or even duplex or triplex, on no land, is 950K, minimum. If anyone sees any decent deals in Venice, the listing would be much appreciated: boalt1997@yahoo.com. Thanks!
Prices haven’t yet dropped on the Westside…sellers and buyers are in a standoff (and one greater fool keeps managing to come along as soon as someone relists at a 2% reduction after being on the market for 60+ days).
By the time prices take a drop of any consequence in any area that actually matters in LA, none of us will have to be looking for any signs or pocket listings….
Slightly OT: Interesting article on the increase in Billionaires.
http://moneycentral.msn.com/content/invest/forbes/P146582.asp?GT1=7922
Is this a product of inflations (or devaluation of being a Billionaire) or have these guys taken their liquidity out of the RE markets?
Yes and, look at the top 10….None made it originaly through real estate even though they are probibly now well deversified…
DataQuick analyst John Karevoll said San Diego home buyers have already backed off from their use of ARMs. In November 2004 about 83 percent of buyers in San Diego County chose adjustable-rate mortgages. That marked the peak in a database that goes back to 1988, he said. By November 2005 the figure had dropped to about 73 percent. In January, the most recent month tallied, about 54 percent of buyers used adjustables in their purchases.
That 26% drop in ARM useage is just about equal to the overall drop in purchases for San Diego in January. Looks to be a straight line approximation for future sales in the current market.
The cutback in demand thus far is simply due to a tightening of the budget constraint — higher interest rates mean that nobody can afford the 10%+ increases over last year’s comps that sellers think they are entitled to charge. The next shoe to drop will be the vanishing of the spec premium due to an obvious absence of price increases, and that is when the price level will stop going up and start to drop.
Yup and, watch the world markets for interest rate increases…Te US is ahead of the curve on this and to keep our bonds attractive to foreign central banks we will need to continue to offer that premium…
I also think buyers were spooked by all the “suicide loan” talk and decided to go with fixed rates. Unfortunately, most people I know who have gone this route are still into I/O options. Some for 10 or 15 years with interest only on fixed rate loans (yes, fixed for 30 years). This is why I think this cycle will be longer than most — it will be a while before all the unqualified buyers are shaken from the market. The lenders have tried to cover their a$$es by staggering the reset dates/terms and offering such a wide variety of loan products.
I think the price bump is due to a changing mix of buyers as evidenced by the drop in ARM usage.
it’s killing the lower end of the market - hence median prices rise - unless a miracle happens this month the figures are going to be ugly - really ugly.
And I would guess that increasing interest rates/inability to sell the current property (no under-median first-timers) will soon start impacting the over-median bunch, leading to a consistent drop in overall prices.
Hi everyone, thanks for this awsome blog! Here is a bit OT question:When you have an IO loan, do you pay more in your morgage when interests go up REGARDLESS of the re-set date of the loan? Sorry for my ignorance, but I can’t figure that out.
I doubt even Vinney the Arm Breaker would reset his loans at will. There are reset dates in the loan docs. There’s a reference basis, a margin, an increment, a CAP specified and ALL ARM loans taken out over the past couple of years will reset higher for quite a while to come…
‘The idea is contrarian investing: The best time to buy is when there are not a lot of people buying, which is now,’ he said.”
Not quite. I believe what JP Morgan said was, “Buy when everyone is selling, and sell when everyone is buying.” So far, to many people are still buying, and not everyone is selling. Unless you are a multi-millionaire, for whom loosing a couple $100K is no big deal, then it is best to ignore Realtors (TM) who claim there was never a better time to buy (didn’t they say the same thing for the past 100 years or so?).
I can’t remember if it was Morgan or another robber barron who said buy when there is blood flowing in the streets. We haven’t even gotten cut yet.
I think it was J. Paul Getty who said “Buy when everyone is selling, and sell when everyone is buying.” and Rothschild who said buy when there is blood flowing in the streets.
It cannot a good buyer’s market now. After big price drops, most people pessimistic about RE and the economy. When it is really hard to sell a house, then it will be a buyer’s market.
Now, all except the blindest of the extreme blind bulls will BEGIN to see that there are problems in California. But never fear, Arnold and the summer selling season will rescus us and get the ave home price in CA to be $1M. Can’t wait for the $600K flips in Needles and Barstow.
And if you think Needles and Barstow are hot, try Furnace Creek, Death Valley Junction, El Centro, and Baker - the golden spots of CA - whiching you a 120F^ day in the shade
i’m putting my cash in boron property.
Sorry OT, but yet another Marketwatch pundit has lost all faith on the rosy scenario for the housing sector:
http://tinyurl.com/lwzhw
That article offers a great explanation for how the median and average prices DO NOT necessarily reflect accurate pricing trends for a specific home.
He fails to mention that if prices shot up 20% between January and June of 2005 and have dropped 5% since then, prices are not “still going up” even though the YOY number looks impressive. I can’t count the number of times I’ve read “prices are still going up” in the last month, which implies prices are currently increasing, not that they increased at some point over the past 12 months.
“The San Diego Association of Realtors said unsold listings stand at their highest level in eight years of record keeping.”
One whole sentence about an inventory of homes that keeps increasing by the hundreds each week? I love the fact that they didn’t even bother to share the actual figure at the time of writing the article.
Looks like they are moving to fixed rate loans now that rates are higher, having used ARMs when rates were at post-1970 lows.
Does this make sense to anyone? Shouldn’t ARMs be more attractive if rates to up?
My guess is that people are “shell-shocked” these days when it comes to ARMs. Back in the day, getting an ARM *was* the way to get in at a lower rate. I had one in the 80s…I believe it was a 5/1. After the 5 years, it rolled into a fixed at whatever the rate was at that time. It was perfect for us…young, growing family, salaries low but increasing as the years went by. All we wanted to do was *live* in the house so the reset didn’t bother us. It was just the way it was and we dealt with it…no problem. NOW, ARMs are so exotic, I don’t know if I’d recognize one if it slapped me in the face. There are so many horror stories out now that are connected with having an arm, I think people are afraid of even hearing the words “adjustable rate mortgage”.
My 2 cents.
BayQT~
I took an ARM with a10% 2nd and PMI to buy my first home in 1987. Was scared spitless, but refinanced (3x) as rates went down, lost the PMI and always paid more than the required pincipal every month.
Not recommended, but paid it off completely last year. (Pats self on back, vows to stop eating Ramen and macaroni and cheese in the box).
If you look at actual loan rates without considering teasers there simply isn’t much of a premium for going after an ARM, in fact, they were about even with 30yr rates not too long ago. Since fliiping isn’t attractive and buyers expect to stay put longer than the teaser period there’s no incentive to taking risk.
Well, it takes two to tango. If rates are at historic lows, then fixed rate loans should be more attractive to borrowers, but less attractive to lenders. So it makes sense that lenders would try to sell ARMs then, both through offering lower rates on ARMs and by pushing them with advertising, etc.
As rates go up, one would expect that the difference in rates between ARMs and fixed rate loans would decrease. (This is a theoretical prediction, I haven’t looked at any numbers.)
Oh yes, Boron - another lovely town. Next week, I will be making another trip from Albuquerque to the Bay. I go right past Boron on Hwy 58. I might consider stopping for gas, but it is easier at the Kramer Junction (58/395 Xing). Make sure you get a large number of trailers to compete with those that are homesteading in the limited desert land surrounding that tropical palm tree lined paradise. And let’s not forget the next boom town, California City, where all of the people fleeing high priced Bakersfield will be going to.
How sarcastic can I get about the “Garbage Dump Formerly Known as California”.
Need to; Where you a abused child or something ?? Just Kidding…
Just a thought on why the median price hasn’t dropped.
The median price for each month’s data is based on that month’s sale. So, technically median home price can still go up or stable while the actual home price goes down providing more higher end homes are sold. It makes sense now b/c there are more mcmansions now than a few years back.
And, many homeowners like me have upgraded our homes significantly. In my case, I have put over $150k in improvements in my 1922 Craftsman. Blame home improvement for some of the increase in the median.
I am not a flipper at all, but improvements do add to the value. Are improvements more prevalent in bubble areas?
I just finished Talbot’s book - an excellent read
For those folks in Humbolt county, they need to make sure they don’t trepass on the weed grower’s property. They shoot to kill any trespassers, and are all over up there. It is the area’s biggest cash crop and a big boom to the economy. Take that away, and all you have is a few minimum wage jobs, and a lot of $300K vacant homes.
i track humbolt county. i see average 5-8 new listings a day. humbolt cannot absorb that kind of inventory.
He’s simply a CA bear. And who could argue with that position given the ABYSMAL quality of living standards in CA? What above average income dolt would not simply pack up and leave in the face of…
Taxes
Overcrowding
Housing costs
Housing quality
Traffic
Smog
Crime
Poverty
Earthquake risks
High cost of living (tax & RE cost burden buried in goods&services)
Poor quality school systems
…fill in more at will…
Forgot to mention the horrible weather AZ B-POP…..
As a native California girl, and one who recognizes the validity of many of your complaints, along with some others you don’t mention, let me list some of the positives which keep way too many people here:
An excellent community college and state university system offering quality education for a price not seen in most other states.
Better worker benefits and protections in the area of disability, overtime and health issues.
No hurricanes or tornados. While we do have an occasional earthquake, when you compare the number of deaths due to earthquakes in California to the number of deaths due to tornados, hurricanes and weather extremes in other states, there is no contest.
No winter wardrobe required. At least not in most places.
Sunshine and the ocean. A winning combination which gets into your blood.
Jobs. Lots more here than in many other places, and in a wide variety of industries.
Diverse communities offering something for people of all ethnic and religious backgrounds. There is an openess and acceptance of differences amongst people which is not found in many other places.
Yes, we have our problems, but there are reasons why 1 in 8 Americans chooses to live here.
Hey Cereal,
Do you have the number of for-sale listings from the past year? I’m looking for these data.
TAKE AWAY THE POT!!!!!!!!!!!
Blasphemy!!!!!!!!!!!!
“Kent said condo buyers might be wise to jump in now while the market is slow. ‘The idea is contrarian investing: The best time to buy is when there are not a lot of people buying, which is now,’ he said.”
Wow! Gee, somehow in my lifetime I missed out on this pearl of wisdom. Alas, poor me. I was so stupid. I changed jobs in the summer of 2004 and had to sell my Bakersfield property for a $200,000 gain and put it in bonds at 5.05%. Then I moved to the bay area and since I couldn’t buy was forced to rent for $20,000 a year, which by the way was close to the $18,000 increase in wages. Poor me, no house deduction so I had to take the free $9500 deduction and pay $2100 more in taxes then when I owned a house of $100.000. And poor me because I now put $1000 a month in savings, $15000 a year in deferred comp which last year threw off 21% and another (wife and I) $10,000 in a Roth IRA. Dah, I see the errors in my way. I’ll put a postit on the frig to take a month end flight to SD and purchase a new condo.(not)!!
Well, because I’m a Wizard ,and I can make predictions ..here goes…
My dog has been picking up on my neg. feelings about the housing market lately . In spite of totally being trained not to sh-t on the carpet for the last two night in a row she has .My dog is always right . I predict: ITS A BEAR , IT WILL BE TOP NEWS WITHIN A WEEK ,ITS GOING DOWN FAST ,AND ITS GOING TO BE SHI-TY
Dogs are generally known to have an innate sense of when a storm is brewing…
You bet
Nothing like Dog Poop on Carpet as forward indicator…
I was just kidding you guys , but ,my dog did poop. Maybe there is something to it
Yep frenzy is down but there are still buyers out there propping things up all over the place…(I see LA and OC markets). OC ‘median’ close to 4thQ price again for whatever that is worth….JF
The CNN and IEEE employment news in my comment posted at 09:43:24 are sufficient to convince myself that the real US economy has been declining year after year since 2000 and it’s especially true to info tech workers that 1/4 to 1/3 of info tech jobs have been lost nationwide since then.
Even Hollywood is seeing declining boxoffice and intensified competition from Australia, Canada, South Korea, and many other strong competitors.
Until the US is gaining high-skill jobs again with real wage gains, buying a home as an investment is one of the easiest ways to lose money.
SCDave - I actually had a nice childhood. Grew up in SLC (made some comments about there yesterday). Now just left CA after 16 yrs. Didn’t realize how much I hated the placed until I left (for all of the reasons AZ Bubble Popper said) and more. Nice to be in a much saner slower paced place. I am still technically living in CA and go back and forth every couple of weeks. Hence, why I have made jokes about the little desert towns. I got so sick of people asking me when I was going to buy, and seeing people who now will see they have committed financial suicide. I was the odd one because I lived modest, drove a paid for older car, actually saved money, and didn’t have a big mortgage ringing up all of the paper equity. Currently on a temporary leave, and having some time to play on this blog. It is tremendous fun, and very educational. I must thank my kind host in Albuquerque, Arby’s who has free WIFI, where I have done my blogging from.
I hope you took it as I ment it…just a little fun…I hope no offence was taken….
Quite frankly, I cannot blame you for leaving….If it were not for the fact that I can afford a relatively high quality of life here, I would leave myself…In fact, I am incouraging my twenty something children to do so and have offered financial help if they do….
I have familya and friends in Oregon and we are considering moving there…Will see…
And lastly, I have also enjoyed the blogs….Some very entertaining and bright people here…Stucco, Need to, LALAW, BIGDADDY, Peter, The Wizard just to name a few and of course BIB BEN…..
I agree that animals have a sense that humans don’t have. Animals try and leave from trouble as soon as they sense it. Look at the animals in a rainstorm. Yet, the sheeple are going to stay there and won’t know that they are even wet until the water is above their neck (financial from the bubble sense).
THIS IS ALSO POSTED UNDER THE MILWAUKEE BUYERS BLOG. BUT FITTING HERE.
http://tinyurl.com/j9l9u
Comment by need 2 leave ca
2006-03-14 10:30:41
Building $1M+ homes in the city of San Bernadino (connotates cheap, hot, smoggy, high crime, gangs, cow town, etc), then we are truly at the end. So if this is true, I would like to know the following 1) what are the sheeple buying this crap smoking, eating, and/or drinking? 2) where can I get the same so that I can go out to the desert south of Albuquerque and throw up a few 2×4’s and sell $1M New Mexico ranches for a cool $1.5 million. I am sure having clear air and a mountain view vistas would be worth an extra 500K over San Bernadino
Downtown San Bernardino is a WIC using, gang infested waste land but the ouskirts towards the mountainf areas are nice and picturesque. I still dont see how they can price them at 1 MIL being not too far from downtown. Overall, i would say that the entire Inland Empire is way overpriced but I wouldnt say that its all a dump. There are somre pretty nice areas (Rancho Cucamonga) and some dumps (Pomona) just like any other state. btw…I heard Albaquerque has a high crime rate? Whats the deal with that.
Humboldt county, huh? That secluded enclave of northern California is indeed beautiful, but I noticed from looking at the MLS that practically all the homes listed have been so since the autumn! Sellers in their infinite greed, largely refuse to lower prices. Luckily, no one is stupid enough to buy anymore, either. Much of the housing seems to have been purchased by Santa Rosa flippers or parents of Humboldt State students who were intending on making a quick buck selling the houses once their children graduated/dropped out. Expect many more listings once the school year ends!!! BTW, the realtors up here are certainly trying to put a positive spin on things—the Eureka Times Standard newspaper carried a daily writeup (from a local realtor) for a week about the advantages of homeownership. Among the words spoken: “expect at least 5 percent appreciation every year (maybe not the 30 percent per year as has been the case of late)”, and no where was it mentioned of the maintenance costs of owning a house.
I’ve been following ten flipper properties here in Huntington Beach.
They’re all vacant.
Out of the ten I’ve been following:
8 have had price reductions
2 have not gone up or down
and none of them have sold.
The winner of most days on the market:
$749,000
2 bed 2 bath condo with no view but on the beach
Taxes $3409
HOA $478
Days on the market: 120
Four months on the market, and not one price reduction.
Can’t figure out if this guy’s nuts- or betting his entire wad on ‘the spring’.
It’s truly a standoff here in Huntington Beach.
However- there is NO appreciation- that I’ve seen.
Only flat, or tiny little $10,000 price reductions.
From what I’m seeing, we’re at about -1% appreciation.
Downtown HB is much worse.
In construction flips that have been stalled for a year.
6th and PCH directly behind Java Jungle and the donut shop and across from the Strand development which will be in construction for 2-3 years.
The OSB (oriented strand board cheaper plywood) was exposed to weather for months. We all know how well OSB weathers.
It was FSBO. Now there is tarpaper and stucco wire on the exterior walls and listed with Century 21’s upmarket subsidiary.
Whoever buys those homes should know that they have already had 5-10 years taken off of their useful life.
Will that be disclosed? I bet not.
That is OK because there are 263 active listings in 92648 per Ziprealty which is nearly double the inventory of last spring/summer. They aren’t going anywhere but back to the bank.
Those flips aren’t going anywhere.
God. That’s terrible.
Hey Sunset…
Those homes behind the Hyatt- they seem pretty vacant.
Any idea what’s going on with those?
I call it ‘flipper city’. It always looks vacant.
I don’t get into that neighborhood that often. I will keep an eye on it.
We always tend to head up towards dog beach on drives and walks.
The condo conversions at Seabridge near Beach and Indianapolis have a lot of for sale signs out. I need to take a picture and send it to Ben.
How does the median price keep rising in Cali? Highest inventories in 5 years, people selling condos at losses, and massive price reductions….After all this the prices are still climbing? This has to be a lie. The numbers are fraudulant is my guess.
There have been several posts regarding how this is probably working. Let’s say for example and simplicity that median price a few months ago was $500K. We have probably all seen the increasing inventory in the 400-600K range with nothing selling. Now say that a few houses that were in the higher price range, 800K asking and actually sold for $775K, then the median would be higher. Even though nothing is selling over all , a few sales in the higher price brackets could effectively be reflected in the median going up (lot’s of Fords sitting on the lots with price cuts, but other folks buying BMWs, net result is median price of cars shows an increase, even though there are lot of reduced prices not selling)