The Weakening Nature Of The Housing Market
The Union Tribune reports from California. “Plans by lenders to auction more than 200 foreclosed homes in Southern California reflect the weakening nature of the housing market, analysts say. The increased presence of auction companies illustrates that the Southern California housing market is ‘pretty weak,’ University of San Diego economist Alan Gin said. ‘We have had all those foreclosures, and there are no buyers through normal channels.’”
“A record 525 San Diego County dwellings were reclaimed by lenders or sold at auction in April, surpassing the record of 433 properties in March, DataQuick said. There were 1,346 notices of default, the initial step in the foreclosure process. That number was more than double the 554 notices of April 2006.”
“‘I do think you will see it more,’ Irvine-based Real Estate Disposition Corp. Chairman Robert Friedman, said yesterday. ‘You have lenders who have a lot of inventory and pressure to sell.’”
“The last time private auction companies put large numbers of homes out to bid in Southern California was in 1997, during a housing recession, Friedman said.”
“High gas prices have started to discourage new-home buying and construction in the Inland Empire, the California Building Industry Association said in a report yesterday.”
“‘There has been a massive drop as commuters from elsewhere in Southern California have stopped coming to Riverside County,’ the associations chief economist, Alan Nevin, said. ‘It’s largely a function, we think, of gas prices, because most of them commute at least an hour and sometimes two to three hours a day, and (the price of) gas has just gotten to them.’”
“In his report, Nevin said the rise in fuel prices translates into a $40,000 to $50,000 reduction in home-buying power, particularly in households where both adults are working and facing long commutes to their jobs in Los Angeles, Orange and San Diego counties.”
“‘Thus, the savings on their mortgage payments originally gained by buying in Riverside (or) San Bernardino County quickly dissipates,’ he said.”
“San Diego County will have 9,000 to 10,500 new houses, condominiums and apartments permitted this year, compared with the 10,000 to 12,000 projected in January.”
“Nevin attributed the dip to reluctance on the part of some builders to start infill, low-rise condo projects because the extra cost of underground parking garages cannot be recouped at current price levels.”
“‘When we look around at Orange and San Diego (counties) in particular, we see a great slowdown in that product,’ he said. ‘It’s somewhat of a high-risk product.’”
The Sacramento Bee. “For some time now, it has been hard to escape the feeling that a downtown condominium project known as The Towers has evolved from a development into a soap opera.”
“Then all those visible signs of progress were replaced by the sound of silence. Developer John Saca apparently hadn’t been paying the crews. Subcontractors began slapping liens on the property. The housing market cooled. The Towers began to look like a project whose timing was just a little too late.”
“Another developer affiliated with CalPERS, the Los Angeles-based CIM Group, is looking at other options for the site. ‘The sad thing is that CIM doesn’t want to build (my) project,’ Saca said. ‘They would basically throw away the plans and start from scratch.’”
“In this case ’scratch’ means a big hole in the ground at one of the most important sites in the city.”
“The situation could be worse. A half-built project, abandoned by its backers, would stand as a can’t-do symbol that could stain the Sacramento skyline for some time. The advantage of a hole in the ground is that something can still rise from it.”
The Daily Bulletin. “More than 1,000 people came out to the new community of Edenglen last month to stroll its tree-lined streets and tour the first model homes to open within the New Model Colony.”
“But one month after collecting a lengthy interest list and receiving accolades for the 8,200-acre development’s inaugural neighborhood, Adrian Foley of Brookfield Homes said sales have turned out to be a bit anticlimactic.”
“Of the 30 new Brookfield and Standard Pacific homes in Edenglen released onto the market May 7, only about half have been sold, Foley said. ‘It’s less than we’re anticipating,’ Foley said. ‘There’s a ton of interest. The issue for buyers is selling their homes in the resale market.’”
“Many prospective buyers cannot sell their existing homes, so they are opting to wait on a new home until the market kick-starts again, he said.”
“Such is the case for Suzanna Macias of Adelanto. Macias said she and her husband liked the Edenglen homes a lot, but their house has been sitting on the market with no takers.”
“‘It might take a while,’ Macias said. ‘We’re competing with all the new home builders coming in.’”
The Press Democrat. “The housing market in Sonoma County will continue to spiral downward for another year, but the local economy will remain strong enough to prevent a recession, according to a new forecast issued Thursday.”
“Home prices have dropped 8 percent since their peak in summer 2005, and will fall an additional 6 percent before the market stabilizes in the summer of 2008, according to the forecast by Moodys Economy.com, which tracks the local economy.”
“Home prices peaked in the third quarter of 2005, when the median price for new and resale homes hit $715,000, according to Moody’s Economy.com. Prices slid over the next 21 months, dropping to $659,000 in the second quarter of 2007.”
“Economist Steven Cochrane, who prepared the forecast, predicted home prices would hit bottom next spring, with the median dropping to $622,000, and begin to rise slowly in the second half of 2008. ‘We expect the low point in the second quarter of 2008,’ he said.”
“Sonoma County’s major weaknesses continue to be the high cost of housing and of doing business here.”
“Home prices have fallen moderately over the past year, but not enough to significantly improve affordability. A family earning the median income can qualify only for a home priced 50 percent below the median price of a home.”
“‘In Sonoma County, that means they can’t buy a home. They’re renters,’ Cochrane said. ‘Home prices will have to fall further, or stay constant as household income rises, before there is any considerable improvement.’”
“Ben Stone, executive director of the county Economic Development Board, said Cochrane drew a reasonably good picture of the local economy.”
“‘I think generally it was a pretty good perspective on our economy,’ Stone said. ‘I was struck by his statement that we have to find a way to lower home prices or else find a way to pay our work force more.’”
Yeh, it’s just the gas prices that have gone up 50% or so in the past 5 years. NOT the home prices that have double or tripled.
Anybody who is making their decision whether to buy a $500,000+ home on the basis of high gas prices is definitely not qualified to buy a $500,000+ home.
Who is?
I would say those earning over $150,000 a year with a secure job and a diversified cushion of savings are qualified to buy at over $500,000. But for San Diego, where the median HH income is in the mid=$60K range, this probably describes under 5% of the population. Everyone in this situation already owns a nicer home than what they could afford at three times what they paid a few years ago when they bought their current homes. How many times have we heard the offhand remark, “We could not afford to buy our own house at current prices”?
Unfortunately, about 2/3 of the used SFRs currently listed on the MLS are priced to sell at over $500,000 (7981 / 12,058 = 66.2%). And then there are 130 “new home communities” typically offering new SFRs in the $1m+ range. Good night and good luck, sellers!
What $150,000 per year job is secure (other than being an ambulance chaser and a doctor)? I’m a high paid engineer and I know that the higher the pay, the less security. So I live as though I earn less than 1/3 what I make. Just for preparing for the outsourcing!
How many times have we heard the offhand remark, “We could not afford to buy our own house at current prices”?
Another version of this is “We cannot afford to move” because of the added tax burden that would mean in California. To think that this has been going on for years and the builders and realtors are only now beginning the get the concept of affordability. What good does it do to any economy and people’s sense of well-being if they are stuck in the house they own, even if they can afford the payments and have a good job?
My sister is delaying her selling her house selling in part, I think, because she cannot afford another. I am *so* glad that I found this blog and renting became a viable alternative for us. Even with the current inventory highs, I wonder both about the pent up inventory (and demand) from the stuck in the house problem created by the bubble.
BiP, me too, and I’m not even close to $150.
This is in reply to “Bill in Phoenix”.
Amen to the insecurity issue for so-called “high-paying” jobs in San Diego. Below is a URL for a LATimes article today, praising the U.S. and NIH for assisting in outsourcing drug research and development to China. The article repeatedly mentioned the much lower wages that would be paid to scientists and technicians in China, and how much money the company would save. Not so much was said about how many U.S. jobs would be lost, or the fact that many of the Chinese scientists were originally trained in the U.S.
Of course, it was biotech that was suppose to be one of the saviours of high-salary jobs in San Diego….hence the name “San Diego Biotech Beach” was coined. I thought a better name for the LATimes article would be “San Diego Biotech Beach Erosion”, than the one they came up with.
So, let me get this straight. If U.S. companies outsource our manufacturing, technical support, Research & Development, etc. to foreign countries, what is it again that we do in the U.S. to make a living?
http://www.latimes.com/business/la-fi-chibio2jun02,1,5636059.story?coll=la-headlines-business
Thanks Stucco,
I love it. 95% cannot afford $500k. The 5% that can already own a much nicer home than a $500k POS.
Easy.
We sell and finance houses to one another.
Duh.
RE: lmg’s article
Lower standard of living coming to a neighborhood near you. No way those and future jobs come here with such income disparities.
“praising the U.S. and NIH for assisting in outsourcing drug research and development to China”
At no point should NIH be sending our research money to China. I hadn’t heard about this but then I don’t do pharma research anymore. I hope I am reading this incorrectly because that’s a big boo boo.
The LATimes article noted that the Ascenta, the U.S. company outsourcing its research and development to China, is licensing its technology from the NIH. So, I would say that the NIH is indeed directly assisting this outsourcing of US jobs.
Curiously, no mention was made in the article about the recent poisoning of U.S. pets by Chinese food suppliers, where controls are much less strict than the U.S. There have been several articles recently, indicating that the U.S. food supply is similarly at risk because of poor foreign oversight.
The question arises as to whether there will be proper quality control of any research and development on drugs slated for the U.S. market, a much more complicated task than the more simple one of keeping poisons out of our imported food.
Interesting. 1/8 of my net worth is invested overseas. I’m bullish on them. I still have hope that our educational system will reverse and focus on teaching children to think and be analytical, instead of teach them “self esteem” and bully avoidance. Maybe in 20 years America will popularize learning over movie stars and sports stars. Maybe the average kid will want to become significant, not famous.
I agree with your perspective. As lmg “investor” who follows Roger Gibson’s “Asset Allocation: Balancing Financial Risk”, ~28% of my assets are in foreign stocks and bonds and have done much better than their domestic counterparts. As lmg “medical research and sometime biotechnologist”, though, I find it both appalling and short-sighted that we are sacrificing domestic R & D to save a few bucks for corporations.
“In his report, Nevin said the rise in fuel prices translates into a $40,000 to $50,000 reduction in home-buying power, particularly in households where both adults are working and facing long commutes to their jobs in Los Angeles, Orange and San Diego counties.”
“‘Thus, the savings on their mortgage payments originally gained by buying in Riverside (or) San Bernardino County quickly dissipates,’ he said.”
If a vehicle gives an average of 20 mpg, the annual increase in fuel costs from $2.50 to $3.50 per gallon comes to $1500 (excluding addl. maintenance costs).
Assuming that the person does not work on any weekends, i.e. travels for work for just 250 days for a 120 mile total commute for every work day. $40k to $50k is just BS!
Shut up shill -preying on the inablity of the GFs and future FBs inability to read and compute basic math.
LOL… So based on your numbers I would venture to say his numbers would be just a little off… LOL
It would add up over 30 years, especially for a family with two commuters. Then you have to factor in that gas will likely hit $5/gal before 2010
That ’s actually a good estimate…but based on peak oil theory it could be closer to $100.000.
Actually, peak oil may be irrelevant, as we will all be putting corn in our gas tanks soon. Of course, tortilla prices are about to go through the ceiling!
Agribusiness is the next bubble….
Hurry…Get in on the bottom floor of Biofuel R&D companies!
“as we will all be putting corn in our gas tanks soon.”
with this corn energy boondoggle, it’s not just our gas tanks that they keep trying to cram the corn up…
50k amortized over 30 yrs at 6% is $299.78. Remember when selling snakeoil to the masses, it’s always about the payment.
Let me see if I got this straight…The gas prices go up $0.50 in 2 months. So consumers do not take out a liar loan on a $500,000 house. Gas prices go down 50 cents a gallon then consumers think it’s worth it to buy a $500,000 monstrosity 60 or 70 miles from work? What happens in the middle of hurricane season to those buyers when the gas prices go up 70 cents per gallon, just after they buy that $500,000 house far from work? Are people that stupid to enslave themselves to big mortgage payments for many years, as if gas prices are stable?
I guess I don’t get it.
Are people that stupid to enslave themselves to big mortgage payments for many years, as if gas prices are stable?
It’s the same mentality that caused many people to buy SUVs in the 1990s when gas was very cheap, though there was no reason to expect that it would remain so.
CONTRAST THIS:
“Home prices have dropped 8 percent since their peak in summer 2005, and will fall an additional 6 percent before the market stabilizes in the summer of 2008,
WITH THIS:
“Home prices have fallen moderately over the past year, but not enough to significantly improve affordability. A family earning the median income can qualify only for a home priced 50 percent below the median price of a home.”
Wow… good thing that housing prices will only fall 14%, when they need to fall 50% to become affordable!
the disconnect is astonishing… in this case the disconnect is 36%! (50% needed drop minus 14% “anticipated” drop”
Bernanke’s going to give everyone a 72% raise. (72% of 50% is the missing 36%.) Whaddaya think. As soon as all the rich folks get ALL their money out of US dollars.
“Wow… good thing that housing prices will only fall 14%, when they need to fall 50% to become affordable!”
This sums up, in a nutshell, the extent to which exotic financing allowed home prices to disconnect from household income. That the local median income can only afford half the median home price is just stunning, and I’m sure it’s repeated in overpriced markets all over the country.
Add to that the fact that the adjusted up interest rate is high after the sub-prime teaser doesn’t apply anymore . No wonder the sub-prime liar loan applications were stating that these people made 10k to 20k a month .I guess that was the borrowers wishing income .
“The housing market in Sonoma County will continue to spiral downward for another year, but the local economy will remain strong enough to prevent a recession, according to a new forecast issued Thursday.”
More bullsh@t. When I give my boss forecasts for business, we all know it’s like throwing darts at a dartboard. Sure, in general we know our business and our customers’ level of bookings. But you also know when the forecast is shall we say, cloudy. How can you say housing will spiral but claim it will have no affect on the economy, fully knowing what it meant for the economy the last 4 years? Please.
Not to mention, the only economy in Sonoma County is small engineering startups, Medtronic (who keep trimming), and wine.
and real estate agents, and mortgage brokers. The only thing making the economy look good since 2000 is the construction, home improvement, real estate agents and mortgage brokers buying and selling houses to each other and fools.
We have fewer jobs than we did before the dot-bom layoffs, and 40% of the jobs that have been added in the last 6 years that get us to that number have been building and real estate related.
We will see if this doesn’t impact the economy.
My company has a division down there. I was shocked to see the condos being built in Rohnert Park off the RP Expressway and Commerce (I think). $400K condos……in Rohnert Park.
Hey Athena,
It seems like the north bay has been creeping into the stratosphere for over a decade. Most folks get dewy eyed talking about the region (wine, good coffee, bookstores,etc.), the assumption being that the region is superior to all other places on the planet. Now that it has reached such a ridiculous level that working stiffs are having to look elsewhere, I wonder if something irreversable will begin. Namely, folks will realize there are many good places to live besides coastal CA at, literally, a fraction of the cost. Before, the assumption of superiority was so ingrained, no one even questioned it.
Sonoma County housing was shooting up at a crazy rate in 97-2000-ish, driven by a sudden large increase in high-paying jobs as a zillion new hi-tech startups came to the area and there was not enough supply to meet the demand.
During the tech bust, many of those startups became shutdowns and I knew many people who could no longer get tech jobs and had to flee to other areas. I remember thinking then: “OK, at least the housing silliness will end.”
Well, we know what happened then. Except during the tech boom there were at least high-paying jobs driving it to some extent. Since then, not so much. Today, I think the number of tech jobs are around pre-boom levels, with many of those feeling rather precarious.
Given all that, it feels like Sonoma County has farther to go down than many places. The fact that we were consistently rivaling Santa Barbara for least affordable in CA during 2005 or so would support that feeling.
Thanks A,
I have wondered why we are so overrun with North Bay emigres. I noticed a number of decent homes in Ashland, OR as low as $120k in 1999, but things took off around 2000 so that now very little good inventory is available under $350k. It is driven almost exclusively by CA expats, who have literally taken over the town. They have been overpaying in cash for years. The tech bubble must be the ticket.
Funny, I would bet close to 1/5 of our new residents are beneficiaries of the tech/re double bubble in N. Cal.
I agree, sleepless. The upbeat forecasters always equivocate that the housing crash won’t impact consumer spending because incomes have gone up 3% since last year. Please, how can you compare a little 3% raise with the chunks of “equity” recent financing has produced for consumer spending? That piddly 3% is more than eaten up by milk, gas, and health care premiums. We’ve been right up to now, so just sit back and enjoy another opportunity to say “I told you so.”
“Home prices have fallen moderately over the past year, but not enough to significantly improve affordability. A family earning the median income can qualify only for a home priced 50 percent below the median price of a home.”
this shows just how far things have to go before we get back to normal…..i’l bet they are still using a 5X income level even at a 50% drop cause i got this info from wikipeda:
The median household income was $53,076, and the median family income was $61,921. Males had a median income of $42,035, females $32,022. The per capita income for the county was $25,724. About 4.70% of families and 8.10% of the population were below the poverty line, including 8.40% of those under age 18 and 5.70% of those age 65 or over.
lets take the big number and times it by 4 (even though CNN.com says NEVER buy a house that costs more than 2.5X your income) so the median home should be $240K……..ouch!!!
“The median household income was $53,076,…”
Does that factor in home equity gains?
That’s the median for everyone. The bottom 1/3 or 1/2 are renters, assumedly.
The remaining have a much higher median…
So of the homeowners, their median might be 100K. For the homeowners who do make 60K, the don’t have to afford the median home, just the entry level homes.
“So of the homeowners, their median might be 100K.”
HAHAHAHAH… Yeah, or their median might be $1,000,000/yr.
But it’s more likely closer to the $53,000 mark than it is the $100k mark. Perhaps something more like $65,000 or so.
(I have no idea, but there is no way that the median household income for homeowners is anywhere near $100,000)
yes..
brianb is forgetting that for the last five years anyone that was willing to, regardless of income, could become a “homeowner”, regardless of income level
ten years ago, your assumption probably rang more true…
for the last 21/2 years a new ‘homeowner” was anyone stupid enough to sign the suicide loan.. income not an issue
On the other hand, the median among those San Diegans who recently entered homedebtor status might well be in the low $30K range. That’s what tends to happen when lenders dispense with traditional headaches like income documentation. And all the renters I know have incomes over $100K. But my sample is admittedly biased
‘We have had all those foreclosures, and there are no buyers through normal channels.’
There are buyers, alright. Sellers drop your prices by 50% you will be amazed how fast they come out of hibernation.
Anyone can sell their home. It just needs to be priced accordingly. I have a friend who calls me a cheapskate because I refuse to waste money or overpay for anything. I tell her that I’m just being smart.
“Anyone can sell their home.”
Better yet, anyone can sell their home in one week. You just have to price a little bit below the current market value to do this. Of course, most sellers have no interest in accepting the current market value on their homes, and will get to ride the roller coaster down to the bottom of the hill or until foreclosure, whatever happens first.
during the dot bom era my portfolio went way down, plus i had to pay huge cap gains. i suffered losing paper value, but there was no monthly payments. these damn homeowners are going to learn how to lose money. whats 10k or 20k? i say step up and take your losses and lower your prices.
quote…
“Anyone can sell their home.”
Better yet, anyone can sell their home in one week. You just have to price a little bit below the current market value to do this. Of course, most sellers have no interest in accepting the current market value on their homes, and will get to ride the roller coaster down to the bottom of the hill or until foreclosure, whatever happens first.
true IME, did exactly this a month ago in Northern CA, accepted a bid after 3 days on the market and closed 5 weeks later….have spent too much time here to foolishly attempt to hold out for another 5-10k in a declining market
Good for you, jerry. I’m a proud cheapskate. I’ve been thinking for a long time about buying a nice grand piano, and some recent newspaper ads have tempted me to buy. Tomorrow I’m going to look at one. The lady selling it told me that they are moving to a smaller house. Hmmm, that got me thinking. Sure enough, a quick visit to zillow and the mls told me that they bought the house for $526K in 2005 and now it’s on the market for $533K. And their neighbor’s house is on the market for $470K. I guess this means that my check for the piano would pay another month of their underwater mortgage. Cheapskates have money for bargains!
Nice bit of research. Checking out the sellers of non-RE stuff. I like it.
2,324 Mercedes and 1,987 BMWs for sale on ebay.
Yea, I’ve been tracking that as well the prices on those slightly used 7 Series are coming down in a hurry. I may be tempted to bite.
Don’t buy a 7. Nothing but problems. Buy a 5 instead.
Agreed. Good advice!
MacAttack-
keyword “tempted” I’ve driven 5’s for quite awhile although I like the look of the 7’s , could probably afford a 7, as long as there are multi-family properties available for sale I will probaby never own a 7. Love the look hate the prices. Geez 125k for a car, not in my lifetime…
Agree with buy a 5, not a 7 also. I sure like the size for my six four frame, but the 7 my parents have is RIDDLED with issues!
Jerry, is she one of those women you were talking about with tattoos?
I told a woman friend I spent less than $100 on clothing last year. She told me she spent more than that on pantyhose.
you can get great dead man johnston murphy’s and suits on ebay
Pantyhose are really overrated. And no bagging on women with tats. They’re not all trashy.
Wasn’t bagging, just recalling JiR’s comments about his dating experiences.
Gwynster, are you vested in UCRP yet? Have you ever read through the UC Annual Reports to see the participation rates in the 403b at various UC campuses?
Yep, I’m vested but my DH is not. I participate in the UC DCP and the 403b.
I didn’t know the max for 403b was 13k. I thought it was a standard 20% cap which we do. Still, I can’t max that puppy out as it would be 1/3 of my salary - ouch
I haven’t read through the reports but I’m not sure I’ll be shocked. As an example - I have people in my office that are about 5 to 10 from retirement and they never change their investment strategy.
As one woman explained to me, she just goes with whatever the system set her up in because that must be the best. She’s banking on selling her house and whatever UC gives her to fund her and her husband’s retirement. The husband is a RE agent in Dixon but he’s mostly on disability. It’s like watching a horror movie in slow motion.
But they CAN’T lower prices. They don’t have any money, and they don’t have any equity. I stumbled across this just now at brokeroutpost, and it really really floored me. I like to troll that site because the brokerage world is fascinating, and nothing that happens will ever make headlines. Yet its tendrils are wrapped around 69% of american households. Literally, there is a sea change going on daily. The tides have changed so violently that we can see all those boats resting on sand dunes, we read about them as foreclosures, but they were motoring full-steam out to sea when the sea just went away. But no one wonders very hard what made the tide turn in the first place, headlines are all about the hard luck of scraping bottom.
760 FICO, R&T refi (so they’re not trying to extract cash), 100% stated, owner occupied (not investors). No one will touch it. Amazingly crazy. What do you mean reset? How do we pay the credit cards? You know these cars aren’t cheap either… that’s why we got em. You don’t need a refi, you need a raise.
ajas,
followed your link…boy, what a nasty bunch of sharks. Funny tho, one ethical broker started a firestorm with a sleazy bottom-feeder. Example…
“Salty said: never said anyone was being taken advantage of…but while we are on the subject- my customer is barely making his payment right now because it has been adjusting for the past two months, the most expensive payment I have gotten him APPROVED for is two-hundred and fifty dollars less than what he is paying right now. He has NEVER been late. So, how am I taking advantage of him by reducing the monthly payment he is already making? I guess it’s pretty predatory of me to get him a couple of hundred dollars extra each month for groceries, eh?
So I take it you had nothing to do with getting him into the loan in the first place? It sounds to me like the borrower is strapped, and suppose you do get the loan through, what happens if the borrower has a financial hardship? At 95% LTV already, there is no place to go. I call these loans future foreclosures, and there is a real good reason why my LO’s don’t have access to the programs. Stated income and no ratio are case by case only. If a borrower can’t afford the home, we don’t do it.
If the borrower is having a bona fide hardship, why not put your energy into requesting a loan mod? Have you at least tried to do that?
If that doesn’t work, perhaps you might want to indicate what the borrowers income really is and see if anybody can give you any suggestions as to work with it.
I don’t believe for a New York minute that you don’t know the exact amount and nature of your borrowers income and your little rug dance is an insult to my intelligence, experience, and business ethics.
When the price and location are right, I’m just going to pay cash. Who needs this sleaze in their life?
See that’s the tough part. “Who needs this sleaze in their life?” Well lots of people. I might, for instance (not that I am buying soon). I never realized you needed 4 lines of credit open for 1-2 years to get a good loan. I’ve always paid cash… not from savings but from income, never needed debt. If I were to go apply for a bank loan I would get totally screwed, yet there are honest brokers that could find me a deal.
At the end of the day, you are educated and know to shop around your deal, what to look for in a broker. Or you are uneducated and take what someone tells you to take. (it in the ass)
Ajas,
I could well be wrong, but I bet starting in 08 you’re going to see a lot of firesale prices on houses. I’d still wait tho to see how the property tax issues resolve themselves.
I’m betting on cash.
I agree- there are plenty of people with the means through normal channels.
I’m going to be a first time buyer soon (but not too soon). My hubby and I have an income of $140k. We can only afford to buy a cookiecutter crapshak in Vista with 20% down and be housepoor for the next 30 years. Instead, we rent that crapshak and save $2000/month in mortgage and taxes.
WTF are people thinking out there? Everyone should stop buying COMPLETELY until the RE market comes back to its senses.
“San Diego County will have 9,000 to 10,500 new houses, condominiums and apartments permitted this year, compared with the 10,000 to 12,000 projected in January.”
So it sounds like inventory is going to keep growing briskly, as used home inventory is still growing fairly steadily, and newly constructed homes already built are sitting like an elephant under the living room rug until the day they are brought onto the market and end users have pretty much gone into hibernation until prices line up with incomes again.
“In his report, Nevin said the rise in fuel prices translates into a $40,000 to $50,000 reduction in home-buying power, particularly in households where both adults are working and facing long commutes to their jobs in Los Angeles, Orange and San Diego counties.”
BFD. By contrast, a doubling of home prices in five years translates into a $500,000 drop in home-buying power. These MSM-quoted experts are a joke.
Diego de Naranjo
A new name for the area from the orange curtain, on downwards, to the borderline…
That’s hilarious. I was just in the city of Orange today. Nobody spoke english, not even a little bit, at every business for blocks in the area I was visiting.
Horrible.
be honest now, being the corona delivery guy to all the mexican restaurants in the area really doesn’t provide an accurate picture, does it…
LOL…
Drinkin’ expecially strong G & T’s, in honor of today’s…
Master Of The Obvious (MOTO)
nas drovya~
“Plans by lenders to auction more than 200 foreclosed homes in Southern California reflect the weakening nature of the housing market, analysts say. The increased presence of auction companies illustrates that the Southern California housing market is ‘pretty weak,’ University of San Diego economist Alan Gin said. ‘We have had all those foreclosures, and there are no buyers through normal channels.’”
“Such is the case for Suzanna Macias of Adelanto. Macias said she and her husband liked the Edenglen homes a lot, but their house has been sitting on the market with no takers.”
ADELANTO! Oh my God! That place is the Compton junior north - besides Palmdale / Lancaster. They have literally built 1000’s of homes there. Many are in the 400 -500k range! If you have a home for sale in Adelanto you are stuck for a mighty long time , unless you are forclosed on.
“Such is the case for Suzanna Macias of Adelanto. Macias said she and her husband liked the Edenglen homes a lot, but their house has been sitting on the market with no takers”
No wonder she can’t find no takers. WHO THE F*KE WILL SPEND $150-200 WEEK FOR GAS GOING FROM A WASTED DESERT OUTBACK TO THEIR JOBS IN LA/OC. Maybe she should lower her price by 50% and she might just find that real desert-infactuated ready-to retire specu-boomer. No property in adelanto is worth more than $100,000 tops.
BTW not much improvement going from Adelanto to Ontario exept for improving your commute/gas costs. Ontario searingly hot in summer/fall and besides gets all that truck exaust spew/smog blowing out of LA. Every home in that Edenglen better come with a pool or it ain’t worth a turd.
It’s not the truck exhaust blowing out of LA. It’s the truck exhaust spewed out right there in Ontario on the I-10. If you are north of I-10 and at a higher elevation, you can see the smog source with your bare eyes.
“you can see the smog source with your bare eyes. ”
And then they start to burn.
“‘I do think you will see it more,’ Irvine-based Real Estate Disposition Corp. Chairman Robert Friedman, said yesterday. ‘You have lenders who have a lot of inventory and pressure to sell.’”
———————————————————
foreclosures- forecast to peak in 2009!! according to a respected report in the San Diego Union Tribune last weekeng (signonsandiego.com)
They are still smoking weed in SLO county! The Tribune reports that 21% of the buyers in the county can qualify for the median house (NOT). They are using the ‘old’ Lereah-Lay calculations qualfying for ARMs, stated income, and 1 or 2 % interest only that the NAR-CAR gave us last year. What a bunch of idiots.
21% may mean that of those who attempt to purchase a home, 79% are declined now in contrast to 99% approval rate just a year ago. Not that 21% of the buying population qualifies.
The point is well made however, in that not more than 5% of San Diegan’s can really afford a $500K house and most of them are already in a home at this time.
“Economist Steven Cochrane, who prepared the forecast, predicted home prices would hit bottom next spring, with the median dropping to $622,000, and begin to rise slowly in the second half of 2008. ‘We expect the low point in the second quarter of 2008,’ he said.”
I predict a black swan will deposit a giant guano pile on Mr. Cochrane’s prediction, and that Mr. Cochrane will never be heard from again. BTW, where is Gary Watts these days?
——————————————————————————
Uncertainty
The perils of prediction
May 31st 2007
From The Economist print edition
“IT’S tough to make predictions, especially about the future,” said that great baseball-playing philosopher, Yogi Berra. And yet we continue to try, churning out forecasts on everything from the price of oil to the next civil war. Nassim Nicholas Taleb, a professor of the sciences of uncertainty (who gave us “known unknowns”), has no time for the “charlatans” who think they can map the future. Forget the important things: we can’t even get it right when estimating the cost of a building—witness the massively over-budget Sydney Opera House or the new Wembley Stadium.
The problem is that almost all forecasters work within the parameters of the Gaussian bell curve, which ignores large deviations and thus fails to take account of “Black Swans”. Mr Taleb defines a Black Swan as an event that is unexpected, has an extreme impact and is made to seem predictable by explanations concocted afterwards.
http://economist.com/books/displaystory.cfm?story_id=9253918
A version of the ARM reset chart that has been popping up all over the place recently is the version that shows subprime ARMs only. If one didn’t know that the Alt-A etc were going to have a big huge enormous wave of resets in 2010-11, one might reasonably conclude from the subprime-only chart that the only relevant peak of resets would be end of 07, hence likely peak of foreclosures maybe 2Q08, and so forth. Of course I’m giving these jerks more credit than they deserve … I don’t even think we need a black swan here. The known statistics of Alt-A resets dictate there will be no sustainable recovery before 2012.
Yeah, but that graph kind of misrepresents Alt-A by labelling it as such. That OptionArm surge is the real demon, they should just call it Alt-Subprime (though it is probably counted by lenders as Alt-A).
Wow, all these foreclosures already. At this point the tide is pulling out strangely and beach-goers are starting to poke each other and comment on the suddenly rising sea-horizon.
“I predict a black swan will deposit a giant guano pile on Mr. Cochrane’s prediction, and that Mr. Cochrane will never be heard from again. BTW, where is Gary Watts these days?”
Guano (from the Quechua ‘wanu’, via Spanish) is the name given to the collected droppings of seabirds and bats. It is highly prized as an effective fertilizer or gunpowder ingredient due to its high levels of phosphorus and nitrogen and also the fact it is an odorless substance.
Hey GS,
No smell just KABOOM EH? (wink)
Yep, they used to mine bat guano from the Carlsbad Caverns in New Mexico and ship it via train to the orchards of SoCal. Occasionally a train car full of guano would spontaneously combust en route through the desert. This is very similar to what is now occurring with the housing market.
“and also the fact it is an odorless substance.”
Good thing, the last house I rented had an attic full of bat guano.
Love that guys books. Nice to see you’re reading it too.
must be w the 100 year interest only mort
“In his report, Nevin said the rise in fuel prices translates into a $40,000 to $50,000 reduction in home-buying power
Reality check. I think it would be a mistake to label this a “California real estate downturn” based on the articles that have been coming out of Sacramento. News of this type for LA and many other areas of CA have been fairly sparse. Where I am, prices are still very, very high.
Investor girl,
Prices are still high, but check out redfin to see that homes in our area are sitting, not days or weeks but months. A home in Pacific Palisades that was listed for 3 million was just re-listed today for the same price after sitting for a year. It’s a (excuse the expression) mexican stand-off. Sellers have their egos in the prices and nothing is moving until sellers drop their prices or drop their pants and take it in the shorts.
Let’s wait and see who wins. Patience Grasshopper.
Patience my foot. I’m seeing houses in my area go into escrow, not immediately, but within a reasonable amount of time. I don’t see a bust.
have you checked to see what they sold for? Most homes in santa monica go for under asking these days.
I bet prices will be down by %15 in december and so on and so on until the election in November.
Keep your powder dry and your money in a safe place. You’ll have a ton of investment properties to choose from in 6 months.
Keep your powder dry and your money in a safe place. You’ll have a ton of investment properties to choose from in 6 months.
Six years is more like it. When has a housing bust ever hit bottom much faster than that? And the bust has barely even started yet on LA’s west side.
The last bubble popped in 1989, and prices didn’t hit bottom in West LA until 1995 or 1996. This time should be no different, except that prices rose much higher and hence will drop much lower. It is going to be a once-in-a-generation, perhaps once-in-a-lifetime, buying opportunity for those who are PATIENT and don’t catch a falling knife.
lainvestorgirl, it’s true that there are still knifecatchers around in the Westside. I’m seeing the “reasonably” priced nicer properties sell, and the run down “cheap” ones in good areas sell in one week to people who intend to remodel. Last week there was an interesting house in a very good part of Cheviot Hills for just over a million. I didn’t even get to see it, it sold right away. But it is also true that some houses have simply not sold. And prices have stopped going up. I don’t like predictions, but here we have at least another year to go until things start looking really different. There’s no way around it, waiting it out is the only possibility.
Gas? Milk prices will be next.
What if I drink soy milk?
Ohhh, that stuff is expensive - you definitely won’t be buying a house anytime soon. If you do try, don’t go to any open houses with soy milk breath.
“But one month after collecting a lengthy interest list and receiving accolades for the 8,200-acre development’s inaugural neighborhood, Adrian Foley of Brookfield Homes said sales have turned out to be a bit anticlimactic”
Edenglen/new colony may actually be a decent-looking housing development(haven’t seen it) but that entire area sucks. Ontaro bakes in summer and there is nothing to do except hang around in the Ontario Mills mega mall. It sits on the edge of the gigantic Ontario ‘industrial’-warehouse logistics zone; most of the local jobs are low-wage warehouse workers/truckers/low-paying factory process workers, mostly immigrants.
Average Wages out in this area cannot support no more than $250,000 home prices, period. Unless large immigrant extended families, who are an important segment of the RE market in IE/LA, have 3-5 wage earners per household able to afford paying on a $400,000 IE purchase.
Here is a home which is located in Pedley. 8 miles SE of new Colony:
http://www.zillow.com/HomeDetails.htm?zprop=17819140
This is a well-kept up property(i went by it)with a huge lot with enclosed patio sunroom, workshop shed, gazebo, spa, aviary, 5-7 lg shade trees, 3 car garage: really a nice though rather small 1250 sq ft house. Yard lush and well-manicured. The for-sale brochure lists it at $449,900.
Problem is that area was just recently developed , one of hundreds of spankin new IE communities sprung up literally out of the former rustic ranchettes/pastures/ horse corrals which were once all that there was of Mira Loma, Glen Avon, Pedley, Jurupa, Roubidoux, ect. And the entire area still reeks of the old rusticity half-torn out to be replaced with yet another IE Shopping strip mall and tiled stuccoed tract.
IE is looking at a 50% haircut min all across the board unless the feds take the following stupid actions: grant out-and out amnesty and/ or drop rates 1-2 points and/or do a bailout for FB-ers.
I think MSM is in a bind. These journalists, not only are they not remotely experts in the fields on which they report, they may also have preconceieved notions about the object of the report (or financial influence, indeed). So they are presented with some data that they aren’t remotely qualified to interepret, let alone question, and yet simply writing the data would lose 95% of readership. Enter the “experts.”
The slightly inquisitive writer should look closely at the smoke blown into the asses of America’s newspapers. The most obvious case is that no journalist points out that Mr Yun offers no explanation about what will change to cause a bottom. “Recovery” is a favorite and often reprinted word, never challenged. MSM simply needs to address the qualifications or influences of experts, whereas now they are accepted as expert without question.
Blogs, of course, are the opposite problem. Anyone can claim expertese just by spelling correctly and persisting. It bothers me sometimes that there is no real internal debate here except for the start of the recession, its duration, and the ultimate price bottom of the housing market. Maybe inflation vs deflation. But you see that even if “This blog’s different” no journalist is ever going to include the opinion of a feedback-loop driven community. Not saying that is HBB, but it is true of a lot of blogs.
What I like about blogs:
o information/links/aggregation of info
o anecdotal info
o analysis
What I don’t like about blogs:
o ranting
o gloating
o name-calling
o whining
“What I don’t like about blogs:
o ranting
o gloating
o name-calling
o whining”
I suggest you don’t have any kids, Nick.
Damn it… quit touching me
Don’t make me come back there!
ROFLMAO! Excellent, GS!
“Anyone can claim expertese just by spelling correctly and persisting.”
We weed ‘em out pretty quickly here. Some times we even give people a hard time for speling issues.
Come on, what do they call people from China?
Seriously, I am 100% with Nick, especially about the aggregation of info. You can’t argue with a newspaper in any meaningful way to the rest of people who care about the issue. So blogs give you many sources each with their own bent, and you get many interpretations. But there is the feedback-loop issue, and there is the scenario where some juicy article pops up, everyone links it, then everyone links each other, and it’s suddenly FACT. Weirdly, this happens to MSM news sources too.
I guess I defend the MSM because BlogSphere has no way to offer any experticiousness against Mr Yun and his rag-tag band of misfits. “We the blog, question Mr Yun’s assessment that housing prices will proceed upward at 8% appreciation for 40 years in SW Florida while credit tightens, incomes are stagnant, interest rates increase, and while current valuations are based largely on unrealized income growth in stated income mortgages and speculative investments. Most importantly, it is not supported by any fundamental valuation.”
Who would print that? Nobody. Because it’s a stupid thing to say? Well, I just lack the expertality to be quoted. What would you do if you were in the MSM news business? Quote blog entries?
Not people from China, but the language of China. Hence “expertese” the language of experts (giving you a break for your typo).
I guess I defend the MSM because BlogSphere has no way to offer any experticiousness against Mr Yun and his rag-tag band of misfits
Two years ago the MSM’s “experts” were telling us almost unanimously, “there is no housing bubble” and “house prices never fall.” They were spectacularly wrong. This blog, on the other hand, nailed it.
Now the MSM’s “experts” are telling us that housing prices won’t drop much farther, and there will be a recovery starting next year. In fact, I’m confident that they will make this prediction every year between now and 2012 or 2013, and they will be equally wrong each year.
What exactly qualifies someone to be an expert if they’re constantly dead wrong, while a bunch of internet yahoos have so far been largely correct?
You aren’t likely to find a real estate-centric journalist unless it’s in a area where real estate is the #1 business. For most big mainstream papers (LA Times, etc.) real estate would just be part of a beat and they aren’t going to know all the little things about it.
“Economist Steven Cochrane, who prepared the forecast, predicted home prices would hit bottom next spring, with the median dropping to $622,000, and begin to rise slowly in the second half of 2008. ‘We expect the low point in the second quarter of 2008,’ he said.”
Reached for comment at the El Paso County municipal dump, where he was decimating the local rodent population with his trusty .22 six-shooter, non-economist, non-expert Sammy Schadenfruede had this to say: “Bulls***. Most economists are incompetent, and the ones who try to nail down specific bottoms and percentages are the biggest charlatans of all.” Emptying his 40-oz, Sammy closed one eye and squinted inside of it. “They say you can’t find answers in the bottom of a bottle, but looky here. By my reckoning, the bottom won’t come until 2009 at the earliest. And it’s going to be a lot deeper than “an additional six percent.” It’ll be a MINIMUM of thirty percent, and that’s presuming there won’t be some Mideast crisis that jacks oil up to $100 a barrel or more, which is always a possibility. In that case, all bets are off.”
DISCLAIMER: I never touch alcohol while handling firearms. Never, ever. Neither should you. Nor have I gone rat-shooting in quite a while. In all seriousness, however, given the perfect storm that’s bearing down on the credit-and-debt bubble our “prosperity” is floating on, I think the housing market, and the economy as a whole, is sailing into severe turbulence. As much as the RE industry hacks and clueless “experts” want to convince us otherwise, I firmly believe a confluence of events over the next 6-24 months, and probably beyond, are going to slam the housing market down harder than even the most ardent bears in here could have imagined. Compare my prediction from today, June 2nd, 2007, to Cochrane’s, and we’ll see who came closer to getting it right a year from now.
Is Liareah’s post at the NAR still vacant? Maybe the blog could send in an anonymous referral for Stephen Cochrane — seems like he has the right stuff for the position.
Great post Sammy,
I think you were channeling Ed Abbey there, except he liked to shoot old appliances..
I agree with the call for turbulence. It seems the like a “perfect storm” may be fixing to explode. Flipper culture, boomer specuvestors, subprime meltdown, foreclosures, an anemic economy propped up by real estate, papers crowing about outsourcing engineering jobs, government debt. All are moving in parallel now, but when they coalesce, things will get wild and woolly fast.
As Alan Gin mentioned foreclosures in San Diego, here is an interesting one in San Diego with someone taking a big bath…
3762 Mykonos Lane #89, priced at $447,900, ziprealty notes state it is a bank owned foreclsoure, MLS #076043666…crazy priced even now, BUT, on checking the San Diego County Tax Assessors property sales (parcel number 307 022 39 11) it was sold on 12/23/2005 for $581,645, 2 bed 3 bath, 1202 SQFT. This is a conversion of rental townhomes in Carmel Valley, 92130…nice $133,745 loss…23%, WOW.
“nice $133,745 loss…23%, WOW.”
in 2003 i spent time looking for condo’s priced at 287,000 in carlsbad.
i have bitter renter moments all the time.
lets see, my LL wanted 459,000 for this place (shoddy condo). next door (fixed up condo) sold for 380,000. this place needs at lease 35k to fix up, which he can’t afford. i hope he can only ask 330,000. after that doesn’t sell it will eventually go back to the 2003 price of 287,000. now thats progress!
o ranting
o gloating
o name-calling
o whining”
“….so they are opting to wait on a new home until the market kick-starts again….”
Yeah….. the market goes cold and your home sale won’t start. Damn.
Well I agree…..like an old cold Suzuki, the answer is to just wait. Push that sucker back in the garage and try again tomorrow. There is a magical thing that happens overnight with things that don’t work. No sense in beatin’ yerself up over it, tomorrow’s a new day.
Waiting is always the answer to the most difficult problems in life, not dealin’ withum….
(See you in 2010, when I pick up that Suzuki along with your house at half price)
In all, the former principals of Crisp & Cole Real Estate, close family members and staffers have received default notices on more than $11 million in loans.
http://www.bakersfield.com/hourly_news/story/155905.html
year ago, it was all about image: a Gulf Stream jet, bodyguards, a half million-dollar car, Armani suits.
Now, 27-year-old David Crisp is floating in default notices. So are family members and employees, current and former
Holy cow…I had no idea this guy was only 27 years old. No wonder it played out like it did.
Crisp is the exact type guy whose actions justify debtors prison. In the end, there is no other word than “theft” to describe his oppulent lifestyle on borrowed money. When these properties foreclose and he eventully goes BK, he will have simply stolen money from his creditors to finance his ego. It is hard to believe that there aren’t stiffer penalties for these kind of ass holes.
“Yet Crisp says he’s not out. He’ll make good on the troubled properties and move forward with plans for giant towers at Cal State Bakersfield.”
What he said:
“I will not put my head down,” Crisp said Thursday. “I will not roll in the sand. There’s not one day where you won’t see me in the office working.”
What he meant: “There’s not one day where you won’t see me groveling for more credit to bide myself some more time.”
Casey, Crisp…..who’s next?
The Lehigh Valley is going to see prices back to 2001 levels soon. The Morning Call is the co-captain cheerleader for local realtors. Houses are sitting even the ones under 200k for months and not selling. I live in Emmaus and can point out at least 10 homes that are priced around 200k or under that aren’t selling. There’s some under 175k that aren’t selling. People that are stupid enough to fall for this housing bubble deserve to get screwed. No smart local would have ever paid 100% more in 5 years for a home. The morning call ran an article a few months ago saying how commuters basically stopped coming in 2006 but yet they still try and say prices are up. When row homes on Chestnut street in Emmaus that were selling for 85k in 2001 sold for 175k in 2005 anyone with a brain had to realize something was wrong. I would guess 95% of the fools who overpaid are from NJ. They travel 3-5 hours a day to work and then spend at least 8-10 hours at work. Do the math what kind of life is that. Foreclosures are up 40% in Lehigh & Northampton but the morning call doesn’t report the truth. I love the figures they print in Sunday’s paper about the % of home sold and value. Almost every week they claim positive figures. That’s a joke. The only people who actually don’t see prices falling around here are realtors and fools who bought from 2002-2006. They act like we have more job, “DO YOU WANT FRIES WITH THAT” will not pay 200k for a home. The average “LOCAL” couple averages under 75k around here. Watch as the foreclosures start pouring. Another thing is the amount of rentals from 1k-3k that’s even funnier. You can rent a nice home for under $900 a month. These people are just waiting for foreclosures and praying. I don’t think god will help this bubble. I predict prices back to 2001 levels by the end of 2008 and it might get worse. I am a lifetime local!
Lehigh Valley:
Interesting post. I was just up in that area with the family for my sister’s graduation from Lehigh a few weeks ago. I’ve been up there a few times over the years, but I was shocked by all the McMansions that were still sprouting all over the landscape. The Lehigh Valley as far as I know is rather economically depressed, and thus those McMansions make even less sense than they do in places with more jobs… although even those places rarely offer salaries high enough for the “Housing Bubble Lifestyle.”
People commute from the Lehigh Valley to New Jersey?! Argh, that has to be a horrible trip!? This Bubble has really brought out the lunacy in our nation.
The Median Home Price Does Not Matter At All
Everyone knows that the median home price in San Diego is well above $500,000. The high median home price is often cited as being the main reason that San Diego is unaffordable for first time home buyers. Taken at face value, the statement appears to make sense. Upon further examination however, that statement proves to be incorrect and very misleading. The major reason that the statement misses the mark is that first time home buyers almost never buy homes near the median price. The median price does not apply to them at all. First time home buyers are buying homes priced much lower than the median. Typical San Diego first time home buyers purchase condos in the range of $200K to the low $300Ks. Houses bought by San Diego’s first time home buyers are normally priced in the low $400Ks. It is rare for a first-time home buyer in San Diego County to purchase a home near $500,000. An important point to remember is that first time home buyers are purchasing starter homes, not their dream homes.
The median price is defined as the price point at which half of the homes are sold above and half are sold below. First time home buyers normally purchase nowhere near the median price. A price point that is much more indicative of affordability for first time home buyers would be the median price of home in the overall lower half of home prices.
Other factors that make homes considerably more affordable than many renters think are the tax advantages of owning and the increased availability of first time home buyer assistance programs. The tax advantage can typically put an extra $200 to $400 of additional after-tax money into a new home owner’s pocket every month. First time home buyer financial assistance programs enable nearly any renter with reasonable income, responsible use of credit, and a little money saved up to become a home owner.
The real concern for the first time home buyer should not be the median home price but what overall payment would the buyer feel comfortable with and whether any acceptable homes are available in that price range.
by Mark Harmon
http://www.1866SwiftSource.com