The Never-Never Land Of Californias Housing Bubble
The buzz in California is about the housing bubble. “‘Buyers and sellers are at a standoff,’ said G.U. Krueger, an economist with an Irvine-based real estate investment firm. ‘Buyers want to pay less and sellers don’t want to sell for less.’ The result, he said, is that fewer deals are getting done.”
“New homes remained in high demand in February as sales rose 19% from a year earlier, with every Southland county except San Diego posting an increase. But new-home prices declined in Los Angeles and Orange counties, falling 5.4% and 21.5%, respectively.”
“More homeowners in Orange County are missing payment deadlines on their mortgages, as home-price appreciation slows and interest rates rise. Banks sent homeowners 316 notices of default in February, a 32 percent increase from a year ago. Banks typically send a notice of default if a homeowner has missed four to six monthly payments, said John Karevoll with DataQuick. The number should trend upward..as home prices grow less rapidly, he said.”
“‘We are absolutely positive this number will continue to increase,’ he said. That makes perfect sense, Karevoll said, since defaults move in the opposite direction of home prices, with a bit of a lag.”
“Even in a Silicon Valley market with home sales not quite as robust as they were a year ago, home prices keep breaking records. ‘Yes $765,000 is a record, but it was $750,000 last April and $760,000 last June. I suspect the price (for single family homes) in March will be basically unchanged and would estimate $750,000. If true, that will only be a 2 percent annual increase in prices,’ Richard Calhoun, broker/owner in San Jose said.”
“Martin Monica, a real estate economics instructor ain Saratoga says buyers are biding their time for the best deal. ‘You already have an indication that [Fed Chairman Ben S. Bernanke] is going to up the interest rates to offset inflation and that puts everybody on a kind of guarded position to make sure they don’t get into something that costs more than it should,’ said Monica.”
“Google dollars and stock earnings from other technology companies hasn’t made much of a difference, as some experts had forecast. ‘There’s just not as much funny money out there. The upper end is going to be even softer than the bread and butter stuff,’ Stefan Walker, an associate broker in Los Gatos said.”
“San Mateo County’s median sold price increased to $863,500. This is down from $922,000 in April. Santa Cruz County dipped to $712,000 some $71,000 below their peak price of $783,000 set in August 2005. Because the media focuses on annual price comparison the fact that it was $730,000 last year will like get attention.”
“Ventura County’s median sales price for all home types reached $618,000 in February, a 18.6 percent increase from a year ago, DataQuick reported Tuesday. Ventura County hit its all-time high of $630,000 in December and then slipped to $608,000 in January. Last month’s sales totaled 804 in the county, down 8.8 percent from 882 in February 2005.”
“‘We are sort of in a Never Never Land and no one knows what it is going to happen,’ Hadley Hendrick, an agent in Oxnard said. DataQuick reported that the March numbers are likely to give the first indications of what direction the market is going for the year. Right now, there are a few more signs touting a reduced selling price.”
“Suzanne Tonoli is representing a three-bedroom Todd Ranch condominium in Ventura that recently was reduced from $459,000 to $445,000. Reductions come with the territory when the market cools a little bit, she said. ‘Now stuff is definitely sitting longer, but what I am finding is that my clients still want to try to get in on the tail end,’ she said.”
‘There’s just not as much funny money out there.”… Stefan Walker, an associate broker in Los Gatos said.
AGREED.
Another FUN FACT TO KNOW AND TELL…
That Funny Money turns in to Sad Money- once the A.R.M. loan re-adjusts
I always get some quality info from Mr. Calhouns site.
Nice find, Ben. But isn’t a doubling of prices over the last 5 years a banality at this point? This level of appreciation is pervasive, which makes it all the more sickening to us young folks who have good starting careers and are unable to purchase and get settled. Ah well!
Like the L.A. Times article said, these people will take their homes off the market in the face of a buyer/seller standoff. I just hope there are enough ugly ARM/I-O resets to start the avalanche anyways.
Add to that the HELOCs that were also taken to purchase many of the spec/flip properties. They don’t have to just be ARMs and I/O reset that will get folks in trouble. Some of these people think they are going to outsmart the potential buyer by pulling out of the market and coming back in later. But in the long run it will cost the sellers a lot the longer they play chicken.
BayQT~
>to start the avalanche anyways.
Remember, some people are predicting a coming recession, which would pry houses from a good many cold dead hands. But, with affordability, leverage, and mortgage quality were they stand now, all I can say if that were to happen is:
Be careful what you wish for.
These price reports are all over the map, and in many respects don’t make much sense? Is comparing median prices for Feb, 06 vs Feb or Aug. 05, even the same apples to apples housing stock?
Unfortunately, I think the market is making a spring rally. This is exactly what happened last year. I looked like things were going to tank and then the rally began. I’m soo pissed right now think I’m going to start posting at the “no-housingbubble.blog.com” ! LOL!
How is the Bakersfield housing doing lately? I use to know someone who lived there.
I have heard all the spin the last few days. Lots of listings have been falling off the mls and I am being told its a result of increased sales?!?!?!?
I’m dubious about a sudden increase in sales at this price level (especially in Bako). More than likely this is either a ploy to manipulate the data or sellers are giving up and pulling listings. I would lean towards the latter but I wouldn’t discount either.
Some of these sellers may have the intention of relisting at a later time when the “spring bounce” is in full effect and they may be getting heat from listing agents that have too much inventory and want to shake out the less motivated sellers. Little do these people know that the spring bounce will be little more than a dead-cat bounce.
BWAHAHAHAH!!!!!
San Diego’s ziprealty inventory has gone from 13,916 on Jan 2, 2006 to 17,818 as I write — that would be up 28% in under 3 months. If this is not an irreversible crash, then I will eat my hat…
I will glady give you some ketchup! Lets hope you eat it sooner rather than later.
ziprealty for SD = 17,844 now (third update today, but who is counting?)
cc - not to worry, friend. we know too much and have come too far. this thing is gonna blow.
now get back in your foxhole and keep firing!
LMAO
Cereal, your allways good for a chuckle.
Thanks,
Remember Mt. Saint Helens!!! There was a lot of hype and a lot of rumble but when it blew what a sight! This RE market reminds me of the wait.
LMAO! Thanks for the words of encouragement!!!!!!!!!
Of course the RE complex will try to play some games to keep the impression that the rally is still going. But how could it? Interst rates, the long ones, are running. Inversion is done. Global rates are beginning their trek up which has kept the long rates from running all this time. The FED is gonna press lenders by raising their reserve requirements and there’s a push to tighten standards. Fanny&Freddie are under the microscope. Affordability is at abysmal levels. There’s nowhere to hide. This market is in a corner 10000 ways.
Goin’ DOWN HARD. FBs can’t sell now. Just a matter of time before the FBs can’t keep current…
But…. Interest rates are higher now and the funny loans are starting to go away!
youre a crackpot ths market is tanking dont take the median numbers.the low end has tanked and the exotic loans are drying up this party is over.never take median numbers for what is going on this is realtor spin.price per sq ft is what counts and the re people dont give you that number for a reason.im seeing 50k cuts in prices everywhere.
I knew all you guys would bring me back to the fold! The truth will set us all FREE!
Just watched Robert Kiyosaki on PBS. I thought you guys said he said he was out of real estate due to the bubble? Well, now he’s saying real estate is going to be far more expensive in 10 years, and he has no idea how any of our children will be able to buy homes. One point he made that did make sense was, part of what’s driving this asset bubble is inflation, ie, our currency is becoming worthless.
He’s heavy into gold and oil last I heard (as inflation hedges), and he’s still bearish on real estate (except if it cash flows) because of the risk vs. reward.
1. You can be IN real estate without BUYING real estate. It doesn’t make much sense for me to sell right now (taxes/fees/great loan). It also doesn’t make ANY sense for me to buy.
2. Homes may COST more in 10 years, but their VALUE will be similar (after dropping in the interim). Our children will be able to afford them just as they will be able to afford $400K Honda Civics. I paid for my car just under what my parents paid for their first house.
3. If Kiyosaki doesn’t understand this he is frighteningly stupid for a published author. I just have to keep repeating to myself… People are idiots. People are idiots. People are idiots.
Sorry for the abscene… on my vacation I’ve been away from the computer installing appliances and plumbing fixtures at my investments.
Because I’m so wealthy from real estate I get to work on toilets.
BF1, true dat!
$/sq. ft., though not perfect, would be MUCH better than median price, which can be skewed by more houses of a certain size being built, or the absence of buyers in a certain segment of the market. If the low and medium end buyers stopped buying condos and moderate SFHs, but the ‘rich’ continued to buy 6000 sq. ft. houses in the same community, the median price for that community would skyrocket. Tracking the average $/sq. ft. would give a more accurate picture.
I know its the Washington area. But there are some quite bubblicious numbers out here.
David
Bubble Meter Blog
‘Now stuff is definitely sitting longer, but what I am finding is that my clients still want to try to get in on the tail end,’ she said.”
What? Am I reading this correctly? This realtor is suggesting that buyer want to hurry & get in at the tail end of the run-up so, presumably, they get to ride the chute down to the bottom from the top?
I would like to meet these buyers and shine a flashlight into their ears to see if there’s anything blocking the light beam from coming out the other side.
Plenty of evidence that PT Barnum was ahead of his time.
Nice catch… I think that was a slip by the realtor.
To her credit, I think she meant in the tail end of low interest rates, or lax lending standards. This may be the last time in a looong time some underemployed 25 year old can take out an 80/20 I/O loan on a $500K San Diego condo.
I read that as an “80/20/10″ loan on a condo. Sign me up for that!
I think she was implying her selling clients wanted to get in on the tail end of the market, to try and sell before the crash is in full swing.
As I mentioned in a comment a few days ago, some sellers in CA may well be in the middle of blinking.
We spotted a so-so house in a lousy neighborhood (of the farm/prison town of Soledad, Monterey county) with $595K on the original flyer. The original price had been carefully whited out for $480K written in Sharpie, then the $480K was simply crossed out with the Sharpie for $450K.
Fringe towns in CA should blink first, for prices were driven by those who commute–in this case to Salinas, Monterey, or (most likely) San Jose. I couldn’t imagine living in a neighborhood with so many beater cars and Camaros up on blocks anyway!
The standoff should continue for a while longer in better locations.
I guess whether the standoff continues depends on the burn rate for flippers and FBs with reset ARMs…
The people that were just testing the waters, hoping to make a killing on selling their house, will overprice their property, list it for 3 months, get no takers, and decide to take it off the market. I’ve already seen this happen here on Cali’s central coast.
The people that want to sell, but don’t have to do it quickly, will overprice their property, get no bids for a month, listen to their RE, drop the price, repeat, until they sell. I’ve seen this too on the central coast.
The people that HAVE to sell will either quickly reduce the price until it sells, or go into foreclosure. I haven’t seen any of these here yet.
The builders that have to keep inventory moving to keep thier stock prices up will freeze prices, but will give more and more ‘incentives’, which are effectively price reductions in the end. I’ve seen this here as well.
If the all powerful “Spring Selling Season” appears this year, things get re-set, and we begin all over again.
From today’s The Daily Reckoning:
The Mortgage Bankers Association expects mortgage originations to drop off
by 20% this year; it says refinancing should fall by 40%. Without easy
finance, consumers have less to spend. Yesterday brought news that retail
sales had fallen in February, for the first time in six months.
Why?
“Too many consumers have been attracted to products by the seductive
prospect of low minimum payments that delay the day of reckoning, but
often make ultimate repayment of growing principal far more difficult.”
Speaking was U.S. Comptroller of the Currency John C. Dugan, and what he
was speaking of, specifically, was the way in which consumers took out
interest-only or negative amortization mortgages.
“In the last two years, however,” Dugan continued, “we have seen a spike
in the volume of payment-option ARMs which are no longer confined to
well-heeled borrowers who can clearly afford them. Increasingly, they are
being marketed as ‘affordability products’ to borrowers who appear to be
counting on the fixed period of exceptionally low minimum payments -
typically lasting the first five years of the loan - as the primary way to
afford the large mortgages necessary to buy homes in many housing markets
across the country.”
We already know what will happen. We see the signs before us. Foreclosures
are rising. Households which bought more house than they could really
afford are going broke. Consumer spending has become a little wobbly.
The expected effects on the housing market itself are starting to show up.
Sales are down. Inventories are rising.
In California, the housing boom has raised prices to the point where the
median wage earner in L.A. County can only afford one out of every 35
properties on the market. We wonder who, then, will buy the other 34?
Other people are beginning to wonder, too. Transactions in January fell
24% from the year before.
Speaking of prices, “I would expect a general decline of 5% to 10%
throughout the country, some areas 20%…and in areas where you have had
heavy speculation, you could have 30%,” says Angelo R. Mozilo - a man who
ought to know. Mr. Mozilo is the CEO of the nation’s largest mortgage
lender, Countrywide. While we have no reason to doubt Mozilo’s words on
the subject, it is his actions we’d bet on. According to Grant’s Interest
Rate Observer, Mozillo “has been a steady and heavy seller of Countrywide
common for two years.”
We recall an estimate reported in these epistles a few months ago. Fully
40% of the job growth since 2001 is said to be the fruit of the housing
boom. If that is so - and if despite these new jobs, real wages have gone
down during this period - we can’t help but wonder what will happen to
wages when the boom ends. It seems likely that they will go down further.
And, it seems likely that consumer spending will fall, too.
We just had a condo sell in my San Jose complex after several months of being empty. It had been “staged” with furniture. The Realtor proudly sent out flyers boasting that it had sold at List Price. My reaction was “yeah and this time last year it would have sold in a week and with a $30K overbid.” I feel like sending a letter to the buyers asking how it feels to be one of the last buyers at the top of the bubble.
Truth is they could throw in other bonuses that don’t show up in the “list price”; I’ve heard there is a lot of that going on right now.
I wonder if the tired RE Agent tactic, “Better hurry, prices are continuing to go UP and inventory is dropping”, is still being used to dupe unwary buyers.
The majority of people still firmly believe that RE prices always go up, even when the law of supply & demand would dictate otherwise…
One thing that has fascinated me a great deal is the genesis of the “talking points” that Realtors all adhere to. I may not be the sharpest tool in the shed, but I’m certainly smart enough to know it can’t be a coincidence that they all speak the same exact mantras. And I know why they’re doing it, to not spook the herd and keep everybody salivating. “You don’t sell the steak, you sell the sizzle”! I’ve accepted the fact that that is part of their marketing strategy. So be it. But I take comfort in knowing this, and can smile now and gag later when confronted with this optimistic bile.
A multi-headed monster cannot spew the same rhetoric without someone pulling the strings or providing the script. The odds of them all articulating the same omens and advice almost verbatim at the same time seems rather remote to me.
Their NAR’s PR Department must be one hellava huge, well-oiled machine. And the best part is that they don’t have to strategize on how to get the message out there. The Jon Lansners of the world are apparently more than happy to give them unchallenged article space in the paper.
My question for any Realtors out there, or anyone who knows, is what are the mechanics at work here? Do these talking points originate from the NAR Lair and then passed down to the regional and local levels through periodic meetings or newsletters all the way to Dottie Remax? (If that is true, I would eat a bug for a copy of a newsletter or the minutes from one of those meetings that speak to this.) Or is it just regurgitation of the NAR leaderships’ spoon-fed perma-positive “take” on the market that they read like the rest of us? I have my doubts about that. I think it’s more along the lines of; “Here’s how we see the current and likely future RE market.” “Next slide please.” “Here’s how we want to focus and portray it.” “Next slide please.” “And here are some talking point suggestions on how to do it.” “Okay, lunch will be in the Terrace Ballroom, let’s meet back here at 1:30.”
Enlighten me if you dare.
I’m obviously being tongue in cheek about my ‘ballroom’ scenario but it begs the question, is it concerted on any level? If it’s ingrained in Realtors to automatically defend the market, I would argue that you’re just as apt to hear it from a veteran who has seen all types of markets as you are from a newbie with the ink still wet on his licenses.
.
Of course it is. The NAR’s prospects are at stake. They will do anything imaginable to keep the volume up. Whether any buyer loses $$$$ is not material to them, but they still need to convince buyers to buy to keep the agents and brokers paying. It involves getting fake economists to make false claims, holding a monopoly over information and manipulating releases, a well funded national lobby and INTENSE TRAINING CAMPAIGNS!
This is as close to a “Pay no attention to the man behind the curtains” operation as it comes. They cover all the bases they can. But what they can’t do is sway world economics and global liquidity. This is what will determine the outcome…
Realtors are salespeople working for the seller. They get paid strictly by commission. It’s no surprise that they’re going to be rosy on the outlook - they gotta get paid! Kind of like how no matter what car he shows you, that used car salesman’s gonna have something good to say about it.
I agree with what you are saying. What I am curious about though is the actual mechanics of how this ’stay on message’ culture gets disseminated. They don’t just wake up in the morning and collectively say the same thing. At least the presidents of the various state RE associations must get briefed on spin, because they’re more likely to get quoted. But it obviously trickles down to the local level. I’m very interested in the downstream flow of the game plan and how overt, premeditated, structured and specific it is.
Or is it simply implied that no matter if everything is falling down around you, always talk up the market.
A. Always
B. Be
S. Selling
And then leave it to the rank and file to figure out how. But then that doesn’t explain the verbatim talking points.
Have you ever watched a real estate agent try to set up an Open House sign? It’s ludricrous to think they have a formalized “talking points” phone tree. Nah, their slogans are drummed up almost inadvertently, possibly accidently, and then spread like this-month’s high-school lingo. One minute, an agent is looking at the pre-schooler’s gym set in the back yard and the next s/he’s telling everyone “Wait till you see the shallow slide…”
It’s like a died-in-the-wool Democrat or Republican…no one faxes them the daily talking points. The rank and file get it from the media outlets, and incorporate the daily mantra into their belief system. Then it’s easy to regurgitate the message on command, or when provoked.
No black hee-lee-oh-copterz needed.
Now get back to work, wage slave!
No no! Just the Democrats do that!
I heard it on a talk show!
“Hurry, buy before the start of the Spring Selling Season (4 more days) pushes prices out of your reach!”
I am glad the reports from Silly-Con valley have started coming. I know it may never become Arizona or Florida. But I really want the sheeple to realize that “It is different here, it will always go up” kind of thinking was a BIG mistake. Watching the bubble getting burst in other areas is making me look forward to the time when it happens here.
I hope this “spring buying” season does not delay the inevitable to next spring. We need news paper headline like “Bay Area, are you ready for the news ?” here to start the panic. Because, I am not sure if we have run out of panicked buyers here. Shitboxes are still selling for over 900K in Cupertino. People working in South Bay are buying in Tracy for 600K plus and willing to commute from there. Both these, are based on people whom I know and have bought.
Patience. Patience.
I knew it was time to move from the bay area when we started getting priced out of Gilroy….GILROY!
You are SO right. I knew someone who bought in Gilroy, CA in ‘96 or ‘97 in the $200Ks. NOW, the houses in that neighborhood are listing in the $800s! And let’s not even talk about Tracy. Pitiful.
BayQT~
From the Beige Book released today, on California real estate:
Real Estate and Construction
Activity in residential real estate markets continued at high levels but showed further evidence of softening in some areas. The pace of home construction and sales was rapid in general, and sales prices held steady or increased in most areas. However, a decline in the pace of home sales and slowdowns in other indicators reflect significant cooling in some previously hot markets, notably in Hawaii, Arizona, and parts of California. On the non-residential side, office vacancy rates continued to fall and rental rates rose further in most major markets, and building activity has picked up for commercial projects and public structures. Construction costs also rose further in some areas, due to elevated prices on selected materials and higher wages for skilled workers.
http://www.federalreserve.gov/fomc/beigebook/2006/20060315/12.htm
Things look ‘HOT’ in the 12th district. Come on Ben, jerk the chain a whoe 1/2 pt. this time. Stop giving us paper cuts with thes e crappy 1/4 pt. increases.
I found this article very interesting as two people from Saratoga/Los Gatos (neighboring towns in Silicon Valley) were quoted.
When I sold my house in Saratoga in Oct, it went for $150K less than a clone house on the next street (I knew the market had cooled and priced mine $200K lower). Another house down the street was originally priced at $1.8K, finally sold at $1.65K a few months later (and was on the market for months, mine sold in a week). A friend in Los Gatos had his house on the market during the same timeframe…first at $1.75K finally sold at $1.45K. It’s my observation that prices peaked in early summer 2005 in Saratoga/Los Gatos, and have been going downhill since then. It’s not as obvious in that area though because most (but not all) homes are bought by people that then live in them. There are lots of long-time homeowners too, some even the original homeowners, who flat out own their homes and have incredibly low property taxes despite Saratoga being one of the top CA cities for so-called “million dollar” homes (e.g. 1950/60 ranch houses on large lots in good school districts).
Are homes just sitting lately? What are your plans now?
I left the state and am renting in one of the cheapest areas of the country (midwest). Not sure what I will do next.
I don’t really know what’s happening to the Saratoga/Los Gatos market anymore. I am trying to sell an elderly relative’s house in southern Riverside County (CA) and after 3 months, no nibbles. House is priced comparably and in top shape, new carpets, paint, etc., but lots of houses on the market there including many, many new developments.
Kind of interesting…from the LA Times today
City West Catches Up With the Vision
The long-dormant area across the 110 Freeway from downtown L.A. is gaining appeal with studios, builders and urban professionals.
http://tinyurl.com/gzxmw
Never-never land is headquartered in The OC (Anaheim = Disneyland…)
Isnt Never-never land being foreclosed on (Michael Jackson’s ranch)? Sign of things to come?
A Money,
That’s the rumor in Santa Barbara. MJ’s Neverland Ranch is actually in north Santa Barbara county… closer to the small towns of Los Olivos and Santa Ynez.
But there has been alot of heresay in the local town of SB.
Lately though, MJ has been wearing woman’s clothing overseas
>Ynez
Gazoontite!
I never liked that that name didn’t have a vowel between the “Y” and “n”.
My kids are only allowed to go to the version of Never-never Land in Anaheim.
OCKurt-
It makes sense for the 110 corridor to gentrify, given its location. That said, it has a LONG way to go. I used to take Huntington Drive to work each day and know the area well. Highland Park/El Sereno/Hillside/etc. are still teeming ghettoes.
The people moving to that area are TRUE pioneers. Over the very long term, prospects are probably good, but in the short term you are still living in an awfully grotty area. And I don’t know that the beginnings of gentrification that we are seeing today will last if the market takes a tumble. Over the very long term they will, but in the next few years the improvements that have been made to the area could very easily revert to tenement status if the market goes south.
Joe, I agree.
This is called incentives and price cuts.
Can I get hired as an analyst at an overinflated salary? Because I know what’s gonna happen.
Be patient everyone………real estate boom to bust doesn’t happen over night. It doesn’t happen over days and weeks but rather years……..that’s where the pain comes in.
For an indication of where things are at, focus on things like…….
(1) Housing for sale inventory
(2) Sales rates as they relate to listings
(3) Interest rates
(4) Affordability
(5) employment
Don’t put to much credence in median sale price data at this point as it can often paint the wrong picture at the top of a boom as it depends on what part of the market the sales data is coming from.
Booms run up over years and generally top when the pace is most frenetic.
At the top things plateau……………
Then comes the long decent.
On the way down there will be plateaus…. only to see it start falling again.
I’ve seen 3 such boom-bust cycles in my time in real estate but I must also say I’ve never seen a boom of this magnitude.
See ya all back here in about 3 years time when I predict prices will be at least 25% lower than they are today.
too true, i think Step One is increased inventory. ziprealty costa mesa just crossed 300 mark and climbing, price reduced on 60 of them…
If you really want to buy now, you should be able to find some must-sell owners and bargain to get at least 20% off now. A coworker of mine just paid $1.6M 2 months ago for a $2.1M home (Cupertino or some good area in the Bay area) from a SBC senior VP who had to move. Comparable homes sell for more than $2M.
Don’t get me wrong, there will be what seems like good deals on the way down. And we’ll only know what was a good deal when we hit the bottom
My 25% + is accross the board not just in one price bracket.
Transactions are closing in Menlo Park and Palo Alto at a brisk pace and high prices throughout the first two and a half months of 2006. Prime listings and even some mediocre listings are selling within a few days, often at prices 10-20% higher than asking.
However, junk SFR listings and most condos are sitting.
Folks with the financial resources (and believe me, there are a lot of them around here) are not hesitating to bid up for prime and sometimes even mediocre properties.
Then those with “financial resources” might find themselves with a lot less of them. I suppose to some it hardly matters?
However, it’s been my experience that those with a lot of $$$$ don’t like to lose it. In a lot of cases that’s why they ended up with a lot of $$$$ to begin with.
When interest rates rise to 8, 9% (or more), those frugal people who have saved up a lot of cash and liquid assets will be able to choose whatever home they want, assuming they can pay cash for it.
And I can nearly guarantee rates will rise to those levels again–simply because they have in the past. Mortgages have been over 10% at times in my life….
Meanwhile inventory continues to build in Los Gatos and Saratoga. What gives?
I noticed that too. And those are not cheap homes!!!!
I looked at the number of homes for sale in the “Golden Triangle” in Saratoga, and there were hardly any. Where are you seeing an increase in inventory?
mlslistings.com (updated every 15 minutes) is showing (144 -21 pending continue to show) = 123 SFR homes on the market in Saratoga. Median listing price is very close to $2 million. I don’t track Saratoga so I don’t know how that inventory compares month-over-month or year-over-year. It does seem like a lot of expensive homes though.
Thanks for the link. I looked at the list. There is one house a street over from where my former house is, quite a bit larger, listed at the same price I sold mine at. There are a LOT of houses above $1.5M which is considered the high-end in Saratoga. When I sold the market had already slowed way down for homes over $1.5M. And there are very few houses under that price so it looks like things may be stagnating. But there are also almost no houses for sale in the “Golden Triangle” area.
Re: Saratoga - I was looking at my spreadsheet this morning and I believe the inventory increase was well over 30 units (SFH/Condos) in the last week. I track the entire city as a whole so the section you speak of may not apply. I know there is someone else on Patrick.net who tracks inventory in Saratoga and he has also reported a large increase. Saratoga and Los Gatos have both had large increases while Cupertino seems to be holding steady. It’s very strange out there right now.
Interesting. Cupertino has a much wider range of type of houses; from condos to duplexes to apartments to SFH and up to mansions. Saratoga is almost exclusively SFH mostly in the $1M-$2M range with some incredibly expensive remodels and new homes. My guess, looking at the homes that are for sale, is the core part of Saratoga e.g. the Golden Triangle with the more “modest” homes, does not have an increase in inventory, it’s the really expensive homes is where the increase is. I wonder if this is because people just can’t afford these homes anymore? By the way, Cupertino is somewhere between 70%-90% asian, and Saratoga is probably 50% or more and increasing. One reason is the schools are considered some of the tops in the state/country.
This bores down on three Silicon Valley, South Bay counties, and activity is still off in the high teens yoy.
http://www.dqnews.com/ZIPSJMN.shtm
Prices and sales weekly:
San Mateo:
7-27-2005: 775k 807 sales
12-06-205: 745K 740 sales
2-06-2006: 720k 405
2-14-2006: 718K 438
2-22-2006: 718K 446
Santa Clara:
08-02-2205: 653K 2659 sales
2-14-2006: 650k 1477 sales
2-23-2006: 665k 1592
3-02-2006: 669k 1,787
Santa Cruz:
08-01-2005: 684K 316 sales
2-9-2006: 687k 218
2-17-2006: 679k 211
2-24-2006: 670k 201
If anyone read the Parade Magazine supplement on “What They Earn”, you’d note there is a total, almost incomprehensible disconnect between incomes and the cost of housing in this country. Most numbers fell in the high-teens to upper 30k range. The one which stuck in my mind was the nuclear physicist in NM making $65k.
WTF?
He must be livin’ in a double-wide out in the desert…Shades of the 3rd World.
Except that last time I checked, there was not a McMansion building boom going on in the Third World (but please correct me if you have better data…).
There will be when the Californians discover the Third World countries.
Federal government scientists do not make much money. NASA, NIH, CDC, DOE are all solid jobs with good benefits, but with low pay. This is one reason why the DC area is so out of whack. Sure they (gov workers) have low unemployment and steady jobs for the most part, but the pay is not great.
2 more houses going back after today’s consultations. That brings it to about 15 in the last 3 weeks being given back because of that pandemic virus which is spreading faster than bird flu: “flipfail”. IO and HELOC adjustments are secondary symptoms for which there is no cure. Unfortunately, they forgot to innoculate themselves with the “econ101″ vaccine. This is getting ugly fast.
DO YOU SEE A PICK UP IN FORECLOSURES FROM YOUR CLIENTS?
Too early. Foreclosure process takes minimum of 110 days here in California. People are still goofing around with juggling payments, Peter to pay Paul, liquidating 401ks and taking cash advances to make the upside-down payments. It’s gonna be a while. Banks are also slowly scratching their collective heads and asking “Hey, what are we gonna do with all these houses?” (Ben, where does the question mark go?? Inside or out). Buddy of mine is trying to make money on the collapse by negotiating short sales with 2d and 3d mortgages. What used to be hours has turned into weeks to hear back on his offers.
I second what Tom said. We all know which way this is going.
Which SBC Snr VP turned into a F seller. I would love to know the name
Footie,
U are absolutely correct, this could be the next great depression or it may dwarf the great depression of the 1930s, especially if foreign investors pull out of our Treasury Bonds
I like this part:
Really? I know what’s going to happen. Idiots will hold their homes while buyers simply wait for the sellers cash to run out like sands through an hourglass. Wait too long and you have 2 choices - sell to me or give the keys back to the bank and maybe get a nice tax bill, too.
big mike - i like that. the hourglass thing. wasn’t there an old rolling stones song called time is on my side?
“New homes remained in high demand in February as sales rose 19% from a year earlier, with every Southland county except San Diego posting an increase.”
Big exception there! First to bubble, first to crash?
“More homeowners in Orange County are missing payment deadlines on their mortgages, as home-price appreciation slows and interest rates rise. Banks sent homeowners 316 notices of default in February, a 32 percent increase from a year ago. Banks typically send a notice of default if a homeowner has missed four to six monthly payments, said John Karevoll with DataQuick. The number should trend upward..as home prices grow less rapidly, he said.”
John, you say this so nonchalantly. I guess it must be business as usual then, with the increase in the number of notices of default and all? More signs of the return to normalcy, I suppose…
These F’ing robots say this sh1t without even thinking.
It doesnt even occur to them that if more homeowners miss their payments that home prices start going down more rapidly. Just makes you want to take a bat to their head.
Those missing their payments will just use the ATM machine under the kitchen sink. Business as usual. No problem
Unless? Maybe? The ATM just broke down. TOOO BAAADDD!!!
And Michael Jackson fled to Bahrain. Hope he likes the heat.
When do we think we will see reports like these? I cant get enough of these reports. Google groups is such a gold mine of information that I can find alomst everything that mirrors now and that which will foretell the future!
Real Estate News Summary, Part 145, February 1993
1147.Sellers who are willing to price their homes at market value will have a
good opportunity to sell their homes this spring. The only thing
preventing sellers from selling is the price they ask. Some sellers are
still hung up on 1989 prices that were unrealistically high. Inventories
have diminished from 13.6 months in November to 10 months in December. It
is also normal after years of stagnant real estate sales for pent-up
demand to develop. [San Francisco Examiner]
1148.The cost of owning vs. renting is a simple measure of the sanity of home
prices. In the 1989 Palo Alto/Menlo Park market a 3 bedroom starter home
cost $400K. Assuming 20% down, the cost was $2700 per month even after
tax benefits. Renting that home cost only $1300. Prices have dropped 10%
to 20% since then. Loan rates have fallen while rents have gradually
risen. The cost of owning is now $1900 and the cost of renting is $1500.
Don’t buy just for the tax benefits, which are already reflected in
prices. [San Francisco Examiner]
1149.A company called Myth Breakers produces a booklet “Homeownership: The
American Myth” and a pair of software programs to help weight the issues
and crunch the numbers. Buying a house will cut your taxes and provide
savings, but you’ll likely pay a lender far more in interest. Sometimes,
as when house values are flat or falling, you will save more renting.
[McClatchy News Service]
1153.Existing-home prices in Southern California will drop as much as 3.8%
annually through 1996, or a total of 15% from current levels. Already,
prices have fallen as much as 25% in the hardest-hit areas. With a
shrinking defense industry, total employment statewide won’t recover to
its 1990 peak before 1996, and Los Angeles, Anaheim, and San Jose won’t
have recovered even then. California real estate brokers dispute the
severity of projected price declines. [Wall Street Journal]
Real Estate News Summary, Part 102, April 1992
But 1990 and 1991 were slow for residential
real estate sales. In 1990 and 1991 people were putting their houses on
the market in the illusion that it was still 1989. They were only willing
to sell if they got the 1989 price. In the past 6 months sellers have
become very realistic about price. The market is moving actively for
anything perceived as good value.
Renting is looking better all the time. There’s no maintenance. Renters
don’t pay property taxes or interest rates. A renter who invests modestly
for 3 years can earn an amount a new homeowner gains only if the home
appreciates at more than 24% over the same 3 years. In Santa Clara
County, where the median price of homes has been stuck at $225,000 for
months, double-digit appreciation isn’t likely. It’s a myth that housing
prices will always increase. From June 1989 to the last 4 months of 1991,
homes in some Santa Clara County neighborhoods sank by as much as 30%. If
a mortgage is a lot more than you would pay in a current rental situation,
take the money and save it. [San Jose Mercury News]
sorry, if these posts are boring for you.
I find them extremely interesting because I can see that we are going “back to the future”
nah, the history of RE just helps us figure out where we are.
#19 Real Estate Rebound
After a long, painful slide, housing prices around the Bay Area — especially in certain zip codes — are finally heading back up
Jonathan Marshall, Chronicle Economics Editor
Sunday, April 9, 1995
L.A. banks strongest in nation, report concludes(1990)
In the interest of fair play, I’d like to report that the OC Register DID write about all this stuff on the front page again…
BUT THIS TIME…
They were actually FAIR.
They wrote about the median price going up, but they ALSO talked about the overrall sales volume going DOWN.
I wanted to cry wet tears of joy.
I still think it sucks that Dataquick won’t publish inventory figures.
How the heck can a consumer understand WHY sales volume is falling if they don’t know HOW MANY homes are on the market?
I think I may have to hound John Karevoll now.
Maybe I can get him to come here, and talk to us.
Basically, the market is like this…folks…
The Real Estate Market in America as of March 2006-
Very much like a ball, thrown into the air, when it stops at the head of the vortex…
…and spins for a moment…
…before plunging back to earth.
The Register, by the way, DID reference online bloggers- though not us here- who were ‘debating’ the figures online.
Then, they quickly went back to talking to ‘experts’ who said…
…of course…
…that everything was just fine.
Hey- at least they’re acknowledging us.
It’s definately a step in the right direction.
John Karevoll? Calling John Karevoll…
Can we get some INVENTORY numbers in our Dataquick sandwich, please?
Pretty please?
auction, i’m gonna take you to an angels game when this is all over.
of course you’re buying the first round of dogs.
I like your approach.
I will call it the Howard Stern approach. Use the bully pulpit to require a response from the famous.
Ben has provided us a much listened to microphone and we can bash away at people for their lunacy until they must respond and attempt to get at least a wary truce out of this blog.
Actually, Lansner is pretty astute for nipping the bashing in the bud. He got a traffic spike to the OCR RE blog.
Some other nominees….
Karevoll
who else…
HeliBen?
Maybe we can get Mr. Karevoll to go with us…
…and buy the beer?
By the way…
I also want to note that I am NOT seeing prices going up.
They’re either staying flat- 30%, or falling- 70%.
Maybe they aren’t falling much- $10,000 a cut or so- but they are STILL FALLING.
So all of this talk about people just pulling listings off the market, if they don’t get their price-
In my humble opinion-
-is NOT supported by FACT.
Why I think is going on is this:
A whole bunch of flippers are trying to unload their homes, after getting caught ‘holding the bag’.
Some of them are obstinate, but most of them, from the timid- though real- reductions- are not.
Can’t wait to go to the Angels game.
But I must warn you…
…when I sing ‘Take Me Out To The Ballgame’…
…I sing it in doublespace.
>So all of this talk about people just pulling listings off the market,
>if they don’t get their price-In my humble opinion-is NOT supported
>by FACT.
Believe what you want, it is happening. It’s not 100% of the market (obviously), but some sellers are pricing above the market, getting no (or low) offers, and then taking their house off the market. Who knows, maybe they didn’t need to sell, and just wanted to make a killing and move to Mexico. Or maybe they decided to wait for the great and powerful “Spring Selling Season” without having a tripple didgit DOM weighing them down.
mr karevoll is stuck in running springs, they” caltrans” are repairing the 330 from running springs and its closed.
Last year some time there were a few stories of some wonder flippers. Wanted to know if there were any updates that anyone remembers.
There was the idiot grandma in San Diego who refused to believe that here POS in a gang infested neighborhood could actually have gone down in value and wanted $1.1M for it. She had bought another condo, and was stating something to the fact that someone who could spend $1M wouldn’t care if they added an extra $100or 200K. She also said that she wasn’t a person of means (of course if she got $1.1M, then she would).
Then the extreme idiot lady in Las Vegas that bought $4M worth of flipper homes in a new subdivision to then have the builder cut the new home price by $100K each (and she was ramroded into buying 14 of these McMansions at the higher price).
And then the fool that cashed out his 401K to buy dirt in Reno (for new condos). Did he lose his A$$?
The single mother in OAKLAND who bought a 500 sq ft condo in the ghetto for $217K on a 3 yr IO. The last part of the article stated that she knew Nov 2006 (or 7) would be her day of reckoning when the suicide clause would take effect, and she stated that she was already working OT and not able to make payments and cover other expenses.
And these are just a few that were actually mentioned in the paper, or on these blogs. Multiple by 100K’s for actual. Just curious abot these FBers.
Here’s one of the stories, need 2. It’s the story about the woman in Oakland, Ca. It ran April of last year. Her name is there so you can probably keep track via public records
http://tinyurl.com/re4ud
BayQT~
In the interests of full disclosure Hadley Hendrick and I have been friends for over 20 years. Friends as in I have the alarm code to his multi-million dollar beach home and he enjoys playing harmonica for my kids. When he says no one knows he is correct. Truly uncharted territory. Anybody else own a multi-million dollar beachfront home based on their ability to judge the real estate conditions of Southern California? Been a broker for decades? Well then, if Hadley doesn’t know, then no one does. We can guess but he’s got a point.
It’s a beautiful day in the neighborhood, can we be yours? What would it take realistically?
Looking at some of the RE cycle graphs I would normally have predicted the next bottom in prices to be coming somewhere between 2010 & 2012. However, given the exponential nature of the rise in prices without an underlying rise in wages plus the heavy use of variable mortgages, overextension of leverage, and other factors, I would say this crash will be spectacular. Still, it takes time. If a person really wants to buy at the bottom let’s say 3 months for ARM resets to begin in earnest, 3 months of pawning and selling everything they own, 6 months foreclosure processing, 3 months to wholesale auction and then resell at marginal profits. Add three months for a buyer to find a house. That ought to put the bottom about september of ‘07. If you truly want to buy at rock bottom prices you don’t want to buy from an FB, you have to let them fail and go through the process. As soon as prices hit bottom rates will probably be going back down too. When the timing is perfect make your move quick because helicopter Ben might have to fire up the printing presses big time somewhere along the line.
I hope were not going to get into up/down…up/down …up/down
patterns regarding this market correction . Get it corrected than go up yearly based on normal inflation or and true job/income growth in any given area .
Resetting ARM’s will take care of that.
Bingo. Despite all the ‘big money’ interests that wants to keep this thing going indefinitely, it’s done.
What about the supply and demand issue that realtors always bring up. They continually cite that in California there is a chronic housing shortage, especially in places like OC
Piggington pretty thoroughly debunks the growing population myth for southern california.
http://www.piggington.com
It is an urban legend.
The population is indeed growing, just not evenly and the population is loating against national trends in increasingly dense locations. High housing prices tend to correct high population growth as the prices self selcet for fewer children and richer and older residents.
I suggest you read the recent SD Union Tribune article about this subject.
What it comes down to, everyone…is word of mouth.
They are referencing ‘us’ in the papers.
Who are ‘we’?
The ‘we’ they refer to are…
…people with really, really big mouths.
Should a home really cost $700,000 when ‘we’ know the income that can support that is astronomical?
‘We’ all know better.
All of the ‘we’s’ need to keep talking.
To our hair salon people…
…to our valets…
…to our gas station attendants…
…to our bank tellers…
…to our friends…
…to our family…
…to our spouses.
The Emperor has NO CLOTHES.
We need to keep talking…
…and make it LOUDER.
Is this a ‘Stand-off’?
Hell yes it is.
And we’re gonna friggin’ win it.
LOUDER PEOPLE.
Grassroots. Low tech. We only fight-
…with words…
…and LOGIC.
Ah, the beauty of LOGIC.
Gets ‘um every time.
LOUDER!
P.S.
So a very good question might be…
…from those who think I’m nuts…
“At the end of all of this…this ‘activism’…
“What do you win, Auction Heaven in ‘07?”
What do I win?
I want a house where I can raise children- without getting foreclosed on, declaring bankruptcy, or getting evicted.
I want to remain ANONYMOUS so I can live in that house, and make money for my FAMILY without getting hounded.
I want my kids to have OTHER KIDS as NEIGHBORS, instead of EMPTY FLIPPER HOUSES so they can PLAY WITH OTHER KIDS.
I want to go to PTA MEETINGS so I can have an input on my children’s education.
Getting rich?
Screw that.
Love and family are WAAAAAAAY more important than getting rich.
Am I old for thinking that?
I don’t think so.
But maybe I am. So be it.
LOUDER, PEOPLE.
The complacent, the drugged, the national televison media, the single, the hopeless, the imprisoned…
THEY STILL CAN’T HEAR YOU.
Logic, and words.
These are our weapons.
USE THEM.
I say this with all of the love in my heart:
Try decaf.
It is crucial. I agree with Auction. I have been subjected to activism and it ain’t fun but it does get things done.
Tell everyone why you aren’t buying. My favorite is we aren’t stupid.
My wife and I decided that we had similar values, and we decided to do something about it; we moved. It was a difficult thing to do leaving family and friends behind, but looking back it was the smartest thing we ever did, and when we visit our former digs on vacation many of our friends concede that they wish they had the strength to relocate too. Sure, we hate the longer winters up north, but at the end of the month everyone has to pay their bills, and we actually have plenty left over these days. I sure hope our kids inherit some of our values.
Good luck and strength to you, Auction Heaven!
Bravo! Well said Heaven! I want a home for my kid and I in a neighborhood that is full of other familes with HOMES and kids not empty investments or foreclosures.
Turns out everyone doesn’t want to live in San Diego, including about half the people I know that live there (many on their way out).
That is why we left - and don’t have that long of winters in ABQ. A little snow, and a little colder at night. The close mountains and skiing will be greatly appreciated. Scenery much nicer than CA