A Huge Turnaround In California
The Modesto Bee reports from California. “A bleak picture was painted of the region’s housing market at a recent conference for real estate appraisers. ‘This year, we’re going to see prices drop in every market across the country for the first time since the Great Depression,’ said Steven Smith, a property appraiser and consultant from San Bernardino.”
“Smith predicted that home values throughout the country will fall 25 percent to 50 percent below what they were at their peak, which was in 2005 or 2006, depending on the region.”
“New home prices already have declined dramatically in the Northern San Joaquin Valley. This March, the median-priced new home in Merced County was $310,990, which was nearly 22 percent below March 2006, according to Hanley Wood Market Intelligence.”
“In San Joaquin County, they sold with a median of $462,950, a 12.3 percent drop.”
“Used homes also are selling for far less this year compared with last. In Modesto during the past six months, the median home sales price was about $322,000, compared with about $340,000 during the same period a year ago, according to the Central Valley Association of Realtors. Resale home prices are down about $55,000 in Turlock, about $46,000 in Oakdale and Riverbank, $49,000 in Salida, and $113,000 in Ripon.”
“‘We have not hit the bottom yet in prices. There’s just too much inventory,’ said Glenn Race, sales manager for Prudential California Realty. ‘It will take time for the next recovery, perhaps four to five years.’”
“During the first four months of 2007, there were 1,733 homes for sale in the Northern San Joaquin Valley that were in process of foreclosure or already had been taken back by the lender, Race said.”
“Race said there were more than 3,300 members of the association in February 2006. But that declined to about 2,500 in February 2007, a drop of 800, or 24 percent. ‘Simply put,’ Race said, ‘there are not enough sales to sustain the large population of agents walking around with licenses.’”
The Record.net. “Greg Paquin, president of a real-estate information and consulting service in Folsom, said the shakeout in the sub-prime lending market and tightening credit standards have for now backed off many would-be homebuyers.”
“Sales and prices looked to be stabilizing at the end of last year and the first couple of months this year until news hit about subprime lending woes and tighter credit markers, he said.”
“It’s not a bad market, he said. Although there are those having trouble qualifying for mortgage loans these days, there are buyers out there. ‘They just want the right price.’”
The Bakersfield Californian. “A year ago, it was all about image: a Gulfstream jet, bodyguards, a half million-dollar car, Armani suits. Now, David Crisp is floating in default notices. So are family members and employees, current and former.”
“In April, 770 of the county’s homeowners entered some stage of the foreclosure process, according to RealtyTrac. That’s more than five times the number of Kern residents who defaulted in April a year ago.”
“County records, meanwhile, show notices continue to roll in. On Wednesday alone, for example, the recorder’s office entered 28 new default notices.”
The Orange County Register. “Fresh local housing statistics confirm what’s been suspected: Prices are off their peaks and the top occurred sometime in the second half of last year.”
“The market has surprised many watchers with just how fast it turned to what in most cases is the weakest pricing climate in a decade or more.”
“One trend stands out to Cal Poly Pomona real estate professor Michael Carney, whose group’s index shows O.C. prices down for the first time in 11 years: ‘widespreadness…The fact that everywhere I look, prices were down.’”
“This professor who thought regional prices would fall by maybe 5 percent in 2007. He thinks we’ve already seen losses of that scope this year. ‘There has, no doubt, been a huge turnaround. Early last year, there was an unexpected decline in the demand for housing,’ he says.”
“Why? ‘I don’t have good explanation,’ admits Carney, who doesn’t think oft-mentioned affordability challenges for shoppers totally explain the flop in sentiment, nor does any other rationale. ‘People somehow changed their expectations.’”
The Union Tribune. “John Karevoll, analyst for DataQuick Information Systems, estimates that there are between 700,000 and 750,000 outstanding loans on existing houses and condominiums within San Diego County. That figure excludes duplexes, triplexes and apartments, he said.”
“At the end of the first quarter, about 10 percent of outstanding home loans countywide were in the subprime market, said LoanPerformance spokesman Bob Visini. His figure includes loans on attached housing of less than five units.”
“Nearly 13 percent of those loans were at least 60 days behind in payments, he added.”
“One thing researchers agree on, however, is that the pace of foreclosures has increased dramatically. During the first four months of the year, DataQuick reported 1,707 foreclosures within San Diego County, compared to 238 during the same period last year, an increase of more than 600 percent.”
“Steve Doyle, San Diego area president for Brookfield Homes, stressed that the local housing market remains sound, despite the rise in foreclosures. Prices have softened, but there have been no steep declines. Even so, fear that failing subprime loans will depress home prices has caused some buyers to unnecessarily delay purchases, he said.”
“‘Right now we have a lot of difficulty finding people who think it is a good time to buy,’ Doyle said. ‘That fear factor is keeping them on the sidelines.’”
The North County Times. “San Diego County’s sluggish housing market is churning out single-family home sales at a pace barely above the low point of the recessionary 1990s, according to an analysis of regional statistics.”
“At the height of the recent housing boom, about 4 percent of county homes were being sold every year. Today, a little more than half that are changing hands.”
“The recent developments are to be expected, as they reflect long-term trends, said Ed Leamer, director of the UCLA Anderson Forecast. Leamer said housing markets tend to go up and down, but cycles are different for price than for sales volume. Typically, sales fall first and fast following booms, while prices decline later and drift down slowly.”
“‘The volume cycle has already made a major adjustment,’ he said. ‘We may not be on the bottom, but we aren’t far off the bottom.’”
“On the other hand, Leamer said, ‘The price decline is just starting. And we expect that to last for a considerable time.’”
“‘It’s definitely a buyers’ market,’ Leamer said. ‘By that I mean, if sellers want to move their product they are going to have to do what the builders are doing, which is aggressively price and promote.’”
“There aren’t many bargains being offered in the resale single-family market, Leamer said. ‘If you want a bargain, you have to buy a new home or one that has been foreclosed,’ he said.”
“Leslie Appleton-Young, chief economist for the California Association of Realtors, said there is no question prices also are going to pull back from the ‘unrealistic appreciation in prices’ that occurred during the boom of the 2000s.”
“Robert Campbell, an independent San Diego economist, said a strong economy and low interest rates can’t eclipse the market’s need to return to price levels that more closely reflect the region’s income levels. Campbell said he believes the county is in store for a severe price decline, in the neighborhood of 35 percent.”
“‘This boom took prices twice as high as normal cycles,’ he said. ‘People talk about high gas prices. But what is really stalling the economy and could actually bring the economy down is overpriced housing. Affordability, of course, hit the wall. The market is just exhausted.’”
“Borrowing a baseball analogy, Campbell said, ‘We’ve got innings four through nine to go…and that’s assuming we don’t have extra innings.’”
‘With many of the largest commercial and residential developments finished or nearing completion in Avila Beach, business owners are seeing a bustle of activity. Real estate agents say a number of condominiums and town homes originally listed for more than $ 1 million dropped their prices to sell, including those at The Courtyard at Avila and Hole in the Clouds. Those currently on the market are priced as low as $ 949,000.’
anyone smell burning toast?
“Smith predicted that home values throughout the country will fall 25 percent to 50 percent below what they were at their peak, which was in 2005 or 2006, depending on the region.”
Hmmm…
50% value declines…Where as that number been bantered around before.
Must be a stealth reader of Ben’s blog.
During the last down turn(90-95) prices in SLO county retreated 34.9%. Unless you are on the water with a great ocean view, your value will crash. My next door neighbor went into escrow at $3.56 million. Moving to the Phillipines and a grass shack.Will give an update on multi million $ houses on Bayview by Alan Little at the end of the week.
pismoclam, that’s interesting. Downward progress of prices in the county sure is SLO this time! (-3.7% yoy dqnews YAWN.)
Me. I was the first to stick his neck out and say 50%’wtavos.
Well, if condos in Avila are going for ” as low as $ 949,000″ 50% is conservative in some places.
Things seem to be really accelerating. Another couple of bleak months with places falling out of escrow should start to hammer the comps.
Along with the growing resets…
Seems like the soft landing is breaking away as many here suspected.
Cool. I’ve always wanted a house next to a nuclear reactor (Diablo Canyon reactor in Avila Beach). Not.
Actually, this is kind of sad… I was in Avila Beach in 1988- it was a quiet little town. Lots of weathered buildings downtown. Reminded me of fishing villages. And now it has blocks of condos!?!?!?!
After Unocal “discovered” that it had contaminated nearly the entire boardwalk with underground oil, the town was dug up and rebuilt. Completely lost its old-fashioned charm, but of course it’s still one of the prettiest stretches of coastline in the world. Nice that you can’t see a hint of Diablo while you’re in Avila Beach.
This reminds me… why do people keep bragging about how wonderful Santa Barbara is, especially the beach. Whenever I walked across the beach there, I had to spend 20 min with vaseline and paper towels getting the tar out from between my toes.
Santa Barbara is beautiful if you like looking at oil rigs on the water. The first time we went there our intention was to spend the night but we were so unimpressed we drove home instead.
While I don’t care for drilling off the coast… the ocean views from Santa Barbara at night are fantastic.
If they’d give a discount for living next to a reactor, I’d do it. Of course they don’t. We looked at a place in Chino Hills called Butterfield Ranch a few years ago. Anyone knowing that area knows the kind of stench (dairy farms) that permeates it. I couldn’t believe people were paying top dollar for living in that stank.
That is one of the hallmarks of the tail end of this boom - you don’t get much of a discount even living in extremely undesirable places, like Compton or the Inland Empire or the Central Valley. Every one of these places has median house prices higher than a $100k/year earner can afford with conventional financing. Yet most “experts” are comfortable predicting that prices will stabilize next year. Nonsense - the only thing that can stabilize the situation is a statewide price adjustment of at least 50%, and while that is almost certainly going to happen, it won’t happen in the next 12 or 24 or 36 months. This is going to take years.
“Those currently on the market are priced as low as $ 949,000.”
As low as? Let’s give it a little more time and see if that still sounds like a number that can be preceded by “as low as”.
What type of income earner can afford the $950K place ? And what type of profession one must be in to earn that type of money ? If we look at the traditional, old fashion way of earning to house price ratio 1/2.5 then you need to make around $380K a year to be comfortably purchasing a place like that. Again I am lost as to what type of profession in C.A that you will be able to make $380K annually, and not in the fear of being laid-off. Please enlighten me…
Saw a big mechanics lien on the ‘Clouds’ project this week.But, their are enough ‘rich’ people who will bail the builders in Avila. Almost didn’t read any further when I saw a quote by LAY. Bad as anything by Lereah.
I was poking around Avila about four years ago - but the prices were too high, in my opinion. Little did I know that trees grow to the sky.
Maybe in a year or two I’ll get off the 101 on the way by again and see what the prices look like. I am not interested in those tacky condos on the inland side of the highway between Avila and Pismo, but some of the houses just north and east of downtown Avila in the canyons looked nice - at the right price.
The Bakersfield Californian. “A year ago, it was all about image: a Gulfstream jet, bodyguards, a half million-dollar car, Armani suits. Now, David Crisp is floating in default notices. So are family members and employees, current and former
And 2007 imagine IS …the Repoman, Bankrupticies and Stunned Fber’s .
David Crisp reminds me of M.C. Hammer, another neer-do-well who lost it all.
I don’t know much about this Crisp dude, but reading the article, it seems like he’s more flashy than successful and is still faking it until he makes it. Why is he such a big deal?
“By 2004 his income had jumped to more than $160,000, which included his share of corporation profits.
He also brought in about $220,000 that year from buying and selling investment properties with his second wife and business partner, according to the statement.”
Even if you consider that he probably did much better in 2005, this still isn’t a lot of money on a post-tax basis for someone you usually associate with a private jet, $500K car, etc. unless he’s charging it to his company (I know, I know, it’s silly for me to even suggest otherwise.)
So, he leveraged himself to the hilt and got lucky with a rising market. Massive gains. Now, he’s leveraged to the hilt and is stuck in a dropping market. Massive losses.
*Yawn* At his $ level, this happens all the time in asset bubbles. Although his levered amount will look better from a news standpoint, his true equity gained/lost is laughable by Bay Area standards for this type of fawning article of being a mogul in the making.
And let’s give Hammer his due. He went through $20M of his own money. Mike Tyson went through something like $250M. Crisp’s real net worth rise and fall isn’t even a rounding error on a CD compared to these guys.
Burnt to a Crisp.
How old is he with a second wife? Do I hear a third?
Think he is 27.
27? He looks more like 47, seriously.
“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.”
Is that a life?
Altogether now…
“It’s BAKERSFIELD.”
….and Bakersfield will always be Bakersfield….a way post on Route 99, oil wells, fruit stands and on its way to the Grapevine. It stunk in 1967 and still stinks. 500K homes there is a joke.
From the article, David Crisp’s mother’s name is “Tu Crisp”…
Guessing his mom is Vietnamese btw
Is his sister Mai Ti Crisp?
That was actually pretty funny Chip…
Always go to the sports metaphor, when pressed to state an opinion…
Why the sports metaphor?
Every game has a fairly clearly identified end, or as luck would have it in baseball, the longest game was 23 innings, so Campbell has covered himself, by the mere fact of mentioning the possibility of extra innings.
“Borrowing a baseball analogy, Campbell said, ‘We’ve got innings four through nine to go…and that’s assuming we don’t have extra innings.’”
Have Americans become such total cretins that in order to explain anything to them, you have to avoid using big words and go with a sports analogy?
To anyone I may have offended: Please note that the above comment does not refer to all 300 million Americans, who are not inherently stupid. That should be blindingly obvious, but I don’t want certain hyper-sensitive, easily offended hothouse orchids accusing me of being “anti-American.”
Commie!
No offensive taken here. Your sooooooo right, Americans are stupid, and I believe the majority of them are. We’ve lost our way as a people and as a nation. I personally don’t feel that there is much hope for us. We sold out as a nation a long, long time ago. It’s all about profits, stock prices and acquiring more stuff. Our fore fathers must be turning over in their graves.
Don’t forget “shareholder value,” the bane of a productive, healthy, forward-looking enterprise.
my dog is smarter than 50% of the people I meet - seriously!
“Your sooooooo right, Americans are stupid”
That’s “You’re”. But you made your point. In opinion polls we generally don’t like the direction the country is headed so maybe there’s hope for a retreat from materialism.
Only 50%? Next time get a German Shepherd.
maybe you’er insinuating teh americun race is stupiid??? wanna go outside and discuss that???
maybe you’er insinuating teh americun race is stupiid??? wanna go outside an discuss that???
“To anyone I may have offended: Please note that the above comment does not refer to all 300 million Americans, who are not inherently stupid. That should be blindingly obvious, but I don’t want certain hyper-sensitive, easily offended hothouse orchids accusing me of being “anti-American.”
get over it Sammy
Please note that the above comment does not refer to all 300 million Americans
Maybe not, but if you round up from 295 you get 300, so close enough!
Many have, thanks to our school systems, which stress feel-good over the three R’s
That’s if they’re GETTING their three ‘R’s! More likely, people these days major in Meth, Money and Moronic.
You are right man. Americans have become self center, over-indulged and self rightious people.
Just look at the president they have choosen, a complete idiot.
Disclosure: I am a conservative.
We may have not chosen him….both times… and still got him. The evidence seems that some of the biggest douche bags in the world might have cheated to win…what a shocker!
LMAO. Testify, Brothah Patricio!
That one brought tears to my eyes. Well said Patricio!
Just be glad he didn’t use an American Idol reference…
“The fact is: The smart money is buying real estate now,” Zagaris said. But he warned that prices may not recover quickly. “Next year we’re still going to be in this real estate correction.”
If prices are still going down, then it’s the STUPID money that is buying now.
I love that this quote is in the same article that predicts 4-5 more years of pain and 50% price declines throughout the USA.
It’s *always* a good time to buy or sell property! My Realtor told me so!
Exactly! It’s in the bag!
The realtors only care about their commision and nothing else.
From the Modesto Bee Article:
As you drive from the Bay Area to Modesto, home prices drop $6,000 per mile,” said Mike Zagaris, president of PMZ Real Estate. “A 2,000-square-foot home in Santa Clara costs $700,000 more than in Modesto.”
His calculations are based on the price of homes for sale in Santa Clara, Pleasanton, Tracy and Mo- desto.
“That $6,000 per mile difference is an incentive for people to move here,” Zagaris said.
This does not bode well for the exburbs. Perhaps it should read: That $6,000 per mile difference was an incentive for people to move here.
I don’t know if Ben has posted this or not and would be surprised if he hasn’t but I found this blurb about hedge funds interesting.
http://tinyurl.com/3dgpx9
http://tinyurl.com/3e5l5z
I didn’t grab the whole Financial Times article because I didn’t feel like going through the process of registering besides I got the point from the blog excerpts.
But if the Hedge Funds get their wish this could be worse then we all predicited happening at a much quicker pace.
The way this was explained in some posts a few days ago made the Hedge Funds look just a bit less evil: the argument then was, that the hedge funds who had bought the securitized mortgages would have the right to sell those mortgages back to the banks if default happened within N months, and that the banks were trying to help the borrowers pay for the final month(s) of those buyback periods so that it would be HFs and not the banks, who would be the final bagholders. If this is how it is, the greater crooks are the banks and not the HFs.
I understand that aspect. But from the article excerpt it appears that there is a monetized incentive for the market falling. The bad thing about the above scenario is that if the hedgies control the keys they will liquidate those properties for 10 cents on the dollar in short order. With no concern for the market. God help anyone who didn’t buy prior to the 60’s or 70’s if that happens. Saw this during the last downturn with commercial properties without the monetized incentive. GE Capital they discounted severly and went though great lengths to get rid of property. It was amazing.
Of course there is a monetization of the failures. Without that there would be no market. The only reason the mortgages could be given at all was the risk was sold off along with the profit.
right…
this is the whole purpose of credit swaps…. billions of dollars on either side of a trade and every time some politician thinks he’s kissing the right a$$ by proposing a bail out he gets a call from the other side of the trade…
good grief, we may actually be witnessing a free market!
just when I thought I’d seen everything….
the David Crisp story:
http://www.bakersfield.com/102/story/56414.html
in the link from 2006, he said “I plan to be a billionaire before I’m 30.”
the quote was truncated, should’ve been, “I plan to be a billionaire or in jail before I’m 30.”
I think he hopes to be a billionaire by 35.
Just 1000 nights of the misses sleeping with Robert Redford, from realizing that dream…..
For any of the non-millionaires out there who have $15,000 lying around, you can buy a million krona worth of (my favorite) Iceland government notes (7.25% coupon, YTM about 8.9%, AAA rated, 5/17/13 maturity), and then go around calling yourself a millionaire. The way things are going, I wouldn’t be surprised if they are worth $20,000 US dollars before they mature, not counting the coupon at all.
From Bloomberg today, “Iceland’s Krona Falls as Government Is Advised to Cut Cod Quota.”
Are you actually advising people to buy bonds from a country whose currency value is determined by a “cod quota?”
AZ lender,
That idea is intriguing. Could they be purchased via E-Trade/Scottrade account?
‘This year, we’re going to see prices drop in every market across the country for the first time since the Great Depression,’ said Steven Smith, a property appraiser and consultant from San Bernardino.”
“Smith predicted that home values throughout the country will fall 25 percent to 50 percent below what they were at their peak, which was in 2005 or 2006, depending on the region.”
Wahooooo! We are finally starting to get the scope of this crash out in the MSM. Prices just starting to fall. 4-5 more years of declining prices. Biggest bust since the great depression. 25-50% price declines
Love
There’s no way we’ll see 50% price declines. At least, according to all the people I know who own houses.
But its the buyers who set the market price, not the putative sellers.
I think Egon was speaking “tongue in cheek”.
yes…
and property owners are still thinking “head in a$$”….
I bought in the mid 90’s - if I get upside down, so be it. I am not walking away. I bought a house to live in, not as an “investment”.
If you bought in the mid 90’s, it doesn’t seem likely you will get upside down. Unless you bought it as an ATM.
Putative sellers? Puta, oh yes, 20 million illegals coming. hehehehehehehe
One can only hope Steven Smith is right. I doubt it, personally. Prices will fall 25 to 50% from their peak, but it will take 5 years. A quick drop would be the healthiest. My dad’s house I sold in 2000 is up 200% from that selling price. It’s actually zillowed at more than triple my selling price. It was no desperation sale either. That was Fresno. It’s just one extreme. Fresno does not have the incomes to support multiples of what the houses sold for in 2000 to 2002. Same goes for many other cities, including good location cities such as San Diego. I think in the extreme cases such as my dad’s house, prices could drop 50% next year.
50% real, 25% nominal is my bet.
“Prices will fall 25 to 50% from their peak, but it will take 5 years.”
Bill - at least you tied a timeframe to it. Mr. Smith’s prediction doesn’t mean much without one.
Prices will fall 25 to 50% from their peak, but it will take 5 years.
And then consider what happens after that - even if prices bottom out in 5 years, most likely they will be flat for several more years (as in the 1990s), hence real prices continue declining. I’m currently expecting that real prices will not start rising again until 2012 or 2013, so there’s certainly no reason to buy until then, unless prices drop so far that it’s cheaper to buy than to rent.
Prices certainly aren’t going to correct faster than 5 years from now - after all, it took them that long to go UP, and that was with an absolute frenzy on the part of buyers. Perhaps if sellers start bidding down each other’s prices and writing letters begging buyers to take their houses, then we will have a symmetric situation, and prices can fall as fast as they rose (which still wasn’t overnight).
I, for one, look forward to demanding that sellers lick my ass every day as a condition of the sale.
“This year, we’re going to see prices drop in every market across the country for the first time since the Great Depression,’ said Steven Smith, a property appraiser and consultant from San Bernardino.”
This Smith is seing it at the real ground level, especially in San Benardino which is about to take a terrific wallop in RE, especially Metro SB which will be one of the epicenters for the impending IE RE collapse.
I live in San Berdoo. Well sort of, in the mountains above SB. I own but it’s a cheap house that I bought at the bottom. Woo Hoo!
I can wait to “upgrade” to a bigger house. The cherry on the cake will be to kick some squatter out of the house he can’t afford.
I got a nest egg saved to buy me a phatt mountain mansion for pennies on the dollar.
“Leslie Applecore-Young, chief economist for the California Association of Realtors, said there is no question prices also are going to pull back from the ‘unrealistic appreciation in prices’ that occurred during the boom of the 2000s.”
Did Applecore once say prices will never pull back in California? And Gary Watson where are you? Applecore needs help.
WOW - unrealistic appreciation! I thought they were not making any more land and prices only ever went up! And where was leslie when folks in 2005 needed to hear about unrealistic appreciation?
“Why? ‘I don’t have good explanation,’ admits Carney,”
Gee, maybe it’s time to stop asking someone continually so wrong for their “expert” opinions ?
““Robert Campbell, an independent San Diego economist, said a strong economy and low interest rates can’t eclipse the market’s need to return to price levels that more closely reflect the region’s income levels. Campbell said he believes the county is in store for a severe price decline, in the neighborhood of 35 percent.””
I’ve seen Robert Campbell speak twice and he is well worth the $15 fee. He will be speaking to SD CIA July 11th at the Scottish Rite Center and if you are in San Diego it’s well worth your time to attend.
Since someone will again confuse the SD CIA Meetings with the SD CIA Discussion Board please note that the organizers and speakers for SD CIA are true bears whereas any idiot can post on the discussion board and does. I don’t read the discussion board - waste of time listening to financial morons who have no clue what they are doing pretending they are “experts” - but the meetings are great.
Come now, one reads the SD CIA Discussion Board purely for entertainment. Where are you, Jeff?
Last I heard, Jeff was throwing up in his bathtub while taking a shower.
There are plenty of bears on the SDCIA discussion forum/board. I think most of the optimists have left, given how the market has turned.
Robert Campbell is very entertaining; and he loves talking re. I once called him a couple of years ago and ended up speaking with him on the phone for about 60 minutes about the re market/cycles.
Campbell use to post here regularly…
Thanks RE_ONLY_GOES_UP
I haven’t looked at the board for a few months but every sound argument I saw against RE investing supported with numbers was drowned out by yelling about how everyone wants to live here, etc. Good to know it has changed to more realistic viewpoint.
However, I am still seeing lots of denial of any problems in real estate. It’s been a rough weekend. My friend showed me a list of articles handed out by a county assessor at a Chamber of Commerce meeting she attended Friday. All showing how there is no bubble (dated 2005) and that everything is rosy in San Diego and prices will not decline. (And all created by the REIC.) So the San Diego government is still spinning the company line.
Yesterday I got stuck in an hour long conversation about how “San Diego is different because everyone wants to move here” and how annuities are the best thing for people regardless of the costs and commissions. (Her investments from 2000 still hadn’t come back - hmmmm, maybe try a diversified portfolio?? - thus an annuity that guaranteed her principal in an IRA or 401(k) was worth the extra 2% a year in fees.)
God save me from financial idiots. But at least I am finally learning I cannot save them from themselves.
Okay, I can agree with you about the positive spin many were having.
If you look at the posts with the most hits you will see they are catagories/situation were very poor choices were made in regards to re investing.
With that said, the board has changed greatly over the years (I am an avid poster under a different screen name). I have been posting there for about 3 years. I suspect it will continue to change as the re market changes. There is not much going on there now, but I am sure that one will post another losing shirt in Tuscon, or tramitized in San Diego post in the near future. Just as long as nobody posts pictures of dead peolple the board will survive.
“Campbell said he believes the county is in store for a severe price decline, in the neighborhood of 35 percent.”
You have to admire a real estate economist who figured out how to make a living by making reasonable predictions which resonate with current and historical evidence.
good comment
“‘We have not hit the bottom yet in prices. There’s just too much inventory,’ said Glenn Race, sales manager for Prudential California Realty. ‘It will take time for the next recovery, perhaps four to five years.’”
Whoa - a candid assessment from a realtor. Is that occupationally possible? Has the NAR moved to sanction/silence him yet?
LOL give the guy some credit sheesh…
I would hate to see the contents of his inbox tomorrow morning…
But if the black helicopters have already been dispatched, he may not make to the office in the morning
Article about “piggybacking” FICO scores.
Estruch paid $1,800 in December for three credit card spots, and by January, his FICO score jumped from 550 to 715. In mid-March, he closed on his four-bedroom beige stucco house after obtaining a 30-year fixed-rate mortgage from a unit of American Home Mortgage Investment Corp. It carried a 7.5 percent interest rate and required no down payment.
“Everything now is score driven. I had a great mortgage history, but I got hurt because of my credit score,” said Estruch, who also works as a mortgage broker, had bought and sold two houses previously, and currently owns another home in New York. Estruch said he’s current on his mortgage payments.
That guy is a mortgage broker AND a real estate agent. Haha. I’m not competing against these guys. Let me know when the funny money stops getting dolled out.
http://biz.yahoo.com/ap/070603/cash_for_credit.html?.v=4
I’m convinced that FICO scoring is nothing but one big scam, an excuse for companies to fleece consumers for more money.
Just a note to say that the way Fair Isaac calcualtes FICO scores will change in Sept… supposedly to make them more accurate… and that many people’s scores will go up.
I emailed a question to FI awhile back, and according to what they said, contrary to some popular speculation, FICO scores aren’t affected by what type of mortgage you might currently have (they don’t know that from the records they use), just the timeliness of payments.
That’s true, but that’s one of the things changing in Sept (risky mortgage not affecting score).
ajas - what are the other changes?
I’m just a propogator of widespread speculation
The people that know the real answers are not posting to HBB, I’m pretty sure.
Don’t be silly, ajas. All the real answers to everything are seen here before they’re seen anywhere else.
The USA is “The Village” and you are “The Prisoner”.
“You are number 6. I am number 2″.
“Who is number 1″?
“That would be telling”.
How do you have a great mortgage history AND a 550 FICO? Sure, it’s technically possible, but does this happen often in the real world?
Yes
Hey mrincomestream, I don’t know if you follow this area, but there are some fairly decent price reductions in W. Ventura, and a 4-plex now bank-owned, something new for that area. All would still give negative cash flow with a 25% down.
Yea, I know the area sold a few foreclosures there… I’m seeing some fall off on the high end in the ghetto’s where I like to invest. I’m considering one now.
If you check the foreclosure sheets you will see plenty of 4 plexes coming back in all areas of L.A. End of summer first of the year they’ll be on market. If you’re savvy enough and can dig through the daisy chain you might want to contact a bank or two and see how friendly they are in regards to getting something off the books. If you can show you’re a strong buyer and can eliminate some book cost. You may find some nice deals (hint, hint) if 4 plexes are your comfort zone. I know of at least two in Santa Monica.
Is it just me, or shouldn’t a buyer get positive cash flow with 25% down and interest rates where they are? My first building cash-flowed with 10% down. Not much, mind you, and that was 1974, but…
I think I’m going to have to ask to contact you off-the-blog, pretty soon. Thanks.
sm_landlord:
It’s not just you, with the cheap money available 20-30% should cash flow depending on area. If you’re buying over 15 units and it’s not cash flowing in this market, then you are overpaying. My targets right now are value add at 10% cash on cash by next year I’ll probably adjust upwards to 15%. A lot of sfr equity went into stupid decisions and now the piper is asking for his fee. I’m finding a lot of play in the prices right now. Especially with the market values dropping approx 15 to 20k per door from last year. But then again I like the ghetto, westside may vary… LOL but not by much.
Saying you have a great mortgage history but a low credit score is about as credible as saying you are a wonderful golfer except for two things - your short game and your long game.
Jeez!
Maybe they’re paying the mortgage with your credit cards, but not paying the credit cards…
…with their credit cards…
Early last year, there was an unexpected decline in the demand for housing,’ he says.” “Why? ‘I don’t have good explanation,’ admits Carney, Cal Poly Pomona real estate professor.
Proving once again that being a clueless moron doesn’t preclude someone from attaining a PhD. Is ‘real estate’ even a valid discipline? Shouldn’t that just be a specialization within Economics?
He probably owns a couple of “investment” properties, and all those late nights worrying have burned in what he’s mind repeats night after night “why, why, I don’t understand”
haha
Ofcourse it could not be lack affortability ..right?
That would make him admit to himself that he payed way, way too much for those boat anchors!
Didn’t Harvard researchers proclaim no RE bubble a few months ago?
For the second tier, we have similar claims from the like of U. of the Pacific, and a husband and wife team from Irvine. Check Ben’s blog.
Let’s be vry clear tho… He’s at Cal Poly POMONA.
Hy, don’t dis my undergrad school
It’s a very underrated school, although I doubt economics is yet a strong point there.
“Steve Doyle, San Diego area president for Brookfield Homes, stressed that the local housing market remains sound, despite the rise in foreclosures. Prices have softened, but there have been no steep declines.”
Many of the properties that I see which were sold in 2005 or later here in SD are already back to 2005 prices. I frequently see properties on Craigslist that are listed at break-even prices or less than the current owner originally paid. I’d like to know what this guy would consider a decline.
Herbert Hoover
Statement on the National Business and Economic Situation.
October 25th, 1929
Public Papers of the Presidents
Herbert Hoover
IN REPLY to press questions as to the business situation the President said:
“The fundamental business of the country, that is the production and distribution of commodities, is on a sound and prosperous basis. The best evidence is that although production and consumption are at high levels, the average prices of commodities as a whole have not increased and there have been no appreciable increases in the stocks of manufactured goods. Moreover, there has been a tendency of wages to increase, the output per worker in many industries again shows an increase, all of which indicates a healthy condition.”
http://www.presidency.ucsb.edu/ws/index.php?pid=21979
Prices have softened?
Geez, prices are declining!
Pretty soon some Real estate genius will say “pricing are getting very cuddly right now, but they should start bottoming, and they will be getting big and strong before too long. So don’t miss this buying opportunity. Buy now!”
No kidding. This is like the 14th month, where most of the idiots on CNBC are saying housing has bottomed.
I can show you properties that are at 2003 levels…and not selling. We have a long way to go in SD (pre-2001 prices, IMHO).
Call me when you see some at 2001 levels.
HAS ANYONE HEARD OF THIS???? A real estate TURD selling his own house in my development said that in July the FED (FANNIE/FREDDIE) will be offering 4% refinancing loans to anyone who has a job and credit? He says this will SAVE the California market. I have not heard this has went forward. He says the Fed will save the day. BTW… He has his house he bought last year at $659k for sale at $710k. He told me he has already had some bites (this is CRAZY for these crappy Centex POS here!). Is it true that the Fed is going to save the day?? Should I be looking for another country to go to??? The dude kept trying to sell me as we were talking, telling me he could get me a GREAT rate. I told him I don’t care about the rate I care about the PRICE. He thinks I’m nuts. Oh well, I ended the conversation that if he was willing to make the payments on the house, I’d buy it!!
I’ve never known the govt to specify the exact rate at which anything will be offerred… it’s always tied to some index or other. The House has passed HFA revamp legislation, but the Senate has not even picked it up yet (last year they didn’t do so at all). The Senate would first have to pass a bill, the differences with the House bill would need to be worked out, and the President would need to sign the shared bill. And then FHA would have to work out the actual paperwork and procedures to offer any changes… which might take Office of Management and Budget clearance if there is a new form or new data collected (takes about 6 months). Thus July is a virtual impossibility… basically it would have to be a top priority for two branches of govt. and quite frankly I don’t see that happening… the proposed no downpayment part of the legislation alone could more than tie up any negotiations between the House and Senate for months.
So in sum… no changes in July.
Other: Freddie Mac is tightening up lending in September, which might further reduce subprime loans. If you want to try to influence the way housing reform will happen, now is a good time to write your senators.
Thank you so much for the clarification!!
My weekend is going to end on a much better note now!
Can you provide a link that the full House actually passed that? I saw that the financial committee passed it, but I wasn’t sure if the House had passed it yet. I know they passed some manufractured home reform….
I may be wrong about the full House… I’ll check and get back to the board tomorrow. But you are definately correct that it passed committee… with the no downpayment part.
Does anyone know if the house bill is considering loosing restrictions on 401K borrowing for houses. This seems like an obvious way to get the market going in the short run.
Oliver
I remember reading something about Fannie Mae coming in with loans to save the FBs’ a$$es, I don’t think they need any Senate approval to do that as they are nominally an independent entity. That might be what the seller is talking about, unfortunately. As I’ve said before, I smell a bailout brewing in 5 years or so.
First we had wishing price. Now we have wishing legislation. Maybe we need to start an urban legends page of our own so that people can look up realtors stories? I always check Snopes.com when I get an e-mail that sounds too good or too outrageous to be true. Now we can check Snopes_real_estate.com.
Did he really use the word “The Fed?” The Fed refers to the Federal Reserve bank, which does not make retail loans to consumers. So, no, he is way off base.
Or perhaps he meant “The Feds,” as in cheap crime film references to the FBI or Treasury agents fixing to bust a caper the mugs were laying down.
Yes, the guy used the term “FED”. He’s a real turd. Liar too boot! I knew he was full of crap when I first started talking to him. He said he’s been in the real estate business 28 years - he must then know what a downer looks like. He could not refute any of my claims about fraudulent financing, appraisals and loans which are going to adjust en mass over the next few years. I also got into a discussion about the Chinese diversifying out of our treasuries which will cause rates to rise. (end to Greenspan’s conundrum). He just kept telling me about the “good” rates he could get us (due to our high income and credit score). When I left him he said “well I guess you will buy when rates are at 10%”. If rates go to 10% then I’m sure prices will come back to reality!
“If rates go to 10% then I’m sure prices will come back to reality! ”
So fast that it’ll make your heart stop. By the way he was lying about the fed thing. But I’m sure you knew that.
Don’t worry about it. Any financing that keeps owners afloat is just delaying the inevitable, making their loss even larger when they finally choke.
Right. They can’t afford it now so lower home values, negative equity, fewer buyers, stricter lending standards, higher bond rates, higher mortgage derivatives prices and grim outlook are going to save their asses. Uh huh.
It’s time for them to bend over and take their medicine.
I don’t think the guy has had licks much less bites…………
drip…drip…drip…Hello 911 ?…I’m a FB and I’ve been mugged…drip…drip..drip…THUD !
The only thing I would support is a 4% loan to cover the difference between the short sale and the loan value.
If you’re alluding to the FB actually paying back the difference and getting a 4% loan for it, that would be a great idea!
OT…..but this is mind blowing.
Real estate scam emerges — ‘Crash and inflate’ method generally leads to foreclosure.
From the article………….
“Mortgage fraud ‘becoming a problem’
In an e-mail to the North County Times on Friday, an FBI official did not provide information on any specific cases, but said that “mortgage fraud is clearly becoming a problem, requiring the FBI to partner with other law enforcement agencies, regulators and industry.
“Combating significant fraud in this area is a priority for the FBI, because mortgage lending and the housing market have a significant overall effect on the nation’s economy,” wrote special agent Darrell Foxworth, who works out of the agency’s San Diego office.
He wrote that nationally, between 2004 and 2006, the number of reported cases submitted to the FBI and other law enforcement agencies has doubled, going from 17,127 to 35,617. Those cases reflect nearly $1 billion in losses to lenders, Foxworth wrote.
Lackner said he wants to see justice served. The average bank robbery nets the robber about $5,000, and why should crimes that involve much more money be any different, he asked.
“If you look at some of these (mortgage fraud) cases, on one day alone, someone did the equivalent of robbing 10 or 20 banks in one day,” Lackner said.”
http://www.nctimes.com/articles/2007/06/03/news/top_stories/22_42_166_2_07.txt
“If you look at some of these (mortgage fraud) cases, on one day alone, someone did the equivalent of robbing 10 or 20 banks in one day,” Lackner said.”
MORAL OF THE STORY: If you are going to steal, be sure to chose a method which is so prevalent, difficult to monitor and out of control that you are unlikely to ever be brought to justice.
Using the 35,617 cases figures and $1B, I get about $28.1k/case.
Don’t forget to subtract the $28.1K fraud premium off any future lowball offers you make.
“The recent developments are to be expected, as they reflect long-term trends, said Ed Leamer, director of the UCLA Anderson Forecast. Leamer said housing markets tend to go up and down, but cycles are different for price than for sales volume. Typically, sales fall first and fast following booms, while prices decline later and drift down slowly.”
For how many years did they drift down after they started drifting last time? (Hint: In CA, they started drifting down in 1989, and did not stop drifting down until 1996 or later.)
And if this time is no different, when will CA prices stop drifting down this time? (Hint: We just read that the S&P 500 / Case-Shiller index peaked in 2006…)
“‘The volume cycle has already made a major adjustment,’ he said. ‘We may not be on the bottom, but we aren’t far off the bottom.’”
Morphology for REIC-sponsored economists:
Lereah — Liareah –Liarer — Liamer — Leamer
There’s LYING in there somewhere!
I don’t read his comment about “the bottom” as meaning the bottom of the price cycle. It can’t, given his remarks about the usual sequence of events. I think what he meant is, volume is nearly as low as it will go. That could actually be true. To me, the probability that volume will continue to decline precipitously is only 50-50. Prices will go much lower, I am sure of that.
“Even so, fear that failing subprime loans will depress home prices has caused some buyers to unnecessarily delay purchases, he said.”
What’s the hurry to buy, when prices are falling and inventories are increasing? Unless you are rich enough to risk losing $100Ks and shrug it off, I suggest waiting to see how this debacle unfolds.
First-time buyers are delaying purchases for one of two reasons: 1) They can’t get approved for the loan they need to buy or 2) They have saved up a down payment and given the housing market they don’t want that down payment to be wiped out shortly after closing.
“Even so, fear that failing subprime loans will depress home prices has caused some buyers to unnecessarily delay purchases, he said.”
In addition to this reason for not buying now, I don’t want to buy into a neighborhood that ends up with a lot of foreclosed and vacant houses. Vacant house are magnets for crime, even it nice neighborhoods.
“‘This year, we’re going to see prices drop in every market across the country for the first time since the Great Depression,’ said Steven Smith, a property appraiser and consultant from San Bernardino.”
Comparisons with the Great Depression seem to be cropping up here and again in the MSM these days. Here is another one that keeps rearing its head:
“The savings rate in the United States dipped to zero in 2005 and has even fallen into negative territory, the first time since the Great Depression.”
http://www.kansas.com/business/consumer/story/86087.html
‘Bout time there was another Great Depression. That is the a$$-kicking that America needs!
“Most of America needs.” I hate the fact that I might be getting tossed through a meat grinder because of the stupidity of those around me. Collective punishment sucks when you didn’t do anything wrong.
True Dat!
Yes, this is true. A person could have shown the proper restraint with respect to housing, built up his savings, etc. But then despite doing everything right, he could lose his job because it was economically sensitive and had more volatility than the employer could bear with the economic contraction.
Societally speaking, the housing bubble sucks, and we would be better off not having to go through this remedial economics primer. But in a market system like ours, booms and busts are part of the game unfortunately.
Most people don’t understand that you should save the most during good times so that they can sustain you in the bad times. They save less during booms because you can always just start saving “tomorrow.” Someone is always clamoring for you to spend it today. And then when the bust comes, they get religion, but now saving is very hard because the relatively easy money is gone. No bonus, maybe no job, your portfolio has shrunk, credit is expensive, etc.
Selfishly speaking, I am looking forward to the implosion. You can get some real economic opportunities during times of widespread distress, and like others here, my powder is dry.
GS~
Not only are there legions of F*cked house borrowers, but the same Axis of Weasles lending looters aka Sallie Mae and cohorts are stickin’ it to the higher education loan crowd.
Boston Globe ran a column in it’s financial section which had a Q&A forum with 4 “borrowers”…Debt amounts for three of the respondants…$55k, $65k, and $69k.
Average age of debtors…23.
Gist of the comments…How the f*ck do I get out from this back breakin’ debt. I get no pay raises at work, and everything else is going up. I’m already 6 months in arrears, I’ve just lost my job…
The living dead.
And the Boomers think their gonna foist their million dollar white elephants on this crowd to fund retirement?
The whole US is livin’ on illusions.
This is a pretty funny read.
***
HSBC found that 49 percent of respondents with at least $250,000 in income aren’t saving more because they simply “want some spending money.” In 28 percent of the cases for those who earn between $100,000 and $250,000, they do not save more because “something unforeseen always comes up.” And in nearly one in 10 situations, people who earn $250,000 or more say they aren’t even earning “enough to make ends meet as it is.”
***
I do know of a few people who are in this situation, and they’re not kidding either. It isn’t because they blow all of their money on trinkets and toys although there is some of that going on. The ones that I know who are actually struggling in life despite their $150K-250K household incomes are first time buyers in CA (particularly from other states) who ponied up $1M + for their homes.
For these folks, first time house buying is a great net worth equalizer. Despite all that income, they’re just like the dude making $40K a year with a $400K home: they’re broke (but they have nicer things.)
Polonius got it wrong, he should’ve said:
Neither a borrower nor a borrower be.
Nice. At least we can say that the housing crash will result in a redistribution of wealth from the stupid rich, to the intelligent poor. I think that’s pretty damn fair.
Ha. If only…
I expect the current crash to result in a redistribution from the stupid wanna-be “rich” to the genuinely rich –just like every other bust in history.
“On the other hand, Leamer said, ‘The price decline is just starting. And we expect that to last for a considerable time.’
‘It’s definitely a buyers’ market,’ Leamer said. ‘By that I mean, if sellers want to move their product they are going to have to do what the builders are doing, which is aggressively price and promote.’”
Do you think he actually doesn’t realize that individual used home sellers can’t afford to ‘aggressively price and promote’ in order to compete with deeply-discounted new homes? Like a poster pointed out yesterday, pricing aggressively is tantamount to an admission that you are seriously underwater. Rather than facing the pain sooner, most sellers will hold on until the day they are foreclosed and the sheriff drops by to pry the keys out of their cold dead fingers.
“Like a poster pointed out yesterday, pricing aggressively is tantamount to an admission that you are seriously underwater.”
And not just for yourself! For all your FB neighbors as well.
Not sure about that at all. Pricing aggressively right now, if you have a lot of equity in your home, is a *great* way to make a killing before the market implodes.
Problem for a lot of these sellers is they have gotten so starry-eyed and greedy in the past few years that they’ll end up losing a lot by NOT pricing aggressively at this crucial time. C’est la vie.
Ca’t speak for the rest of the U.S., but in Klownifornia “that” type of homeowner has all but disappered. Virtually everyone here is either mortgaged to the hilt or has ATM’d their house to death via HELOCs and cahs-out refis. The only sellers left who can afford to deep-discount at this point are the homebuilders. Everyone else will hold on until the sheriffs come, as GetStucco says.
“Leslie Appleton-Young, chief economist for the California Association of Realtors, said there is no question prices also are going to pull back from the ‘unrealistic appreciation in prices’ that occurred during the boom of the 2000s.”
Hmmm. So someone from CAR is finally calling a spade a spade. The statewide market must be shaping up to be a disaster if LAG is going on record that the boom wasn’t sustainable.
“Robert Campbell, an independent San Diego economist, said a strong economy and low interest rates can’t eclipse the market’s need to return to price levels that more closely reflect the region’s income levels. Campbell said he believes the county is in store for a severe price decline, in the neighborhood of 35 percent.”
We are finally hearing the “experts” cop to what everyone on this blog knows. It’s not going to be some short, painless, soft landing, everything back to normal in 6 months recovery.
And I just love that tighter lending standards are coming at a time when prices are going through the roof - gas, healthcare, groceries, which will make it that much harder for potential buyers to have a nice clean balance sheet and a downpayment. Just perfect.
Ben, what about starting another blog in a few years where all of us can share local market information? When it’s safe to buy a house again, of course -);
Lisa:
Robert Campbell used to post here and has been a fairly consistent bear.
why doesn’t he still?
Not sure why he doesn’t post here anymore, but he’s been just as bearish as the rest of us…for years.
Campbell’s been ahead of the game all along. He often posts on the SDCIA board (I haven’t read there in a while, so not sure if that’s still the case).
I think it is that the MSM is finally ready to hear from the Campbell’s, Norris’, Thortberg’s and is giving them air time. They are not saying anything new - they are simply timely in the current news cycle.
Bruce Norris did a study of who and what was quoted during the downturns of the early 80’s and 90’s. Many of the exact same people who were/are quoted this time. (”We’re at the bottom”, “real estate will take off soon,” etc.) During the next run up and years of downturn they will be quoted again. But no one wants to hear/print the bad news until it is “proven” and safe to print as it is now.
“Smith predicted that home values throughout the country will fall 25 percent to 50 percent below what they were at their peak, which was in 2005 or 2006, depending on the region.”
Anything for example exceeding 30% off peak market prices in most markets in the USA - would (in economic terms) - be the equivalent of a large meteorite hit
That is very disturbing
I’m guessing that meteorite will wipe out most of the real estate dinosaurs.
The settling dust cloud and global cooling in the aftermath will wipe out the rest.
I like to think that those of us on this blog are the small, mammalian creatures that will survive underground until prices re-attach to fundamentals.
I hope you are right, but realistically it is quite difficult for members of the endangered middle class to stay afloat when a War on Savers is in progress.
35% devaluation were common place last time RE went nutz like this. there is on BIG difference this time tough.
the prices (hence the losses) are 10x bigger.
oh the horrror!!
There’s that pesky median again. I can assure you that same-neighborhood, equivalent-house prices of homes that actually sell are already down about 20% in the Sarasota, Florida area. Same for new houses sold by builders. The median isn’t down much, but buyers today are able to get much more house for the same amount of money than those who bought in 2005.
25% is in the bag. 35% is certainly possible.
50 percent? Maybe.
In the bag? You can’t say that…Gary Watts has a trademark on it. Hallelujah!
Gary Watts predicted OC home prices would decline 30-40% over the next 3 to 4 years in 1990. I wonder if he would be willing to make a prediction for the next 3 to 4 years.
He is cooking up the prediction as I type. The difficulty of the task explains why he has been out of the media limelight for months on end.
‘The North County Times. “San Diego County’s sluggish housing market is churning out single-family home sales at a pace barely above the low point of the recessionary 1990s, according to an analysis of regional statistics.”’
A couple of details in the sidebar graphs to the NC Times story merit attention:
1) The “Percent change in sales of existing single-family homes 1982-2006″ shows the drop for 2006 was only matched over the entire period by the drop in 1995 level. Importantly, the 1995 drop was at the end of the last bust (1989-1996 or so); this time is different, as the 2006 drop was at the very beginning!
2) The other graph projects used SFR sales in 2007 to be the lowest since 1995. But the new construction rate has not nearly fallen off in proportion. I wonder how this disconnect between the supply side and the demand side of the market will resolve?
I will add a prediction here (with the up-front disclosure that my predictions are subject to the same black swan risk as REIC economist predictions, though not biased by bribery like theirs are):
VIEWED THROUGH THE LENS OF THE REAR VIEW MIRROR CIRCA 2012, THAT SAN DIEGO HOME SALES VOLUME GRAPH IS GOING TO LOOK LIKE A PARABOLIC BLOWOUT FOLLOWED BY A CRASH, QUALITATIVELY SIMILAR TO THIS GRAPH:
http://tinyurl.com/3au2g5
Not enough dip in that chart GS
Agreed. A boom of this magnitude will likely significantly overshoot to the downside, not simply revert to the mean of the relatively recent past. Translation for non-HBB reading Americans: Graph fall down, go boom.
Help me! I’ve fallen and I can’t reach the median!!!
Stucco didn’t say that Toll Bros has reached its price bottom!
With respect to #2, builders need to build. And they will price aggressively to get their homes sold. Land prices will adjust (have adjusted) almost instantaneously to make building those homes profitable again.
I suspect that sales will shift more toward new homes being sold than resales of existing (why buy used when new is cheaper?). Existing home inventories will rise and their sales will continue to languish, and foreclosures will accelerate as the current “strong hands” (equity to spend) become the “weak hands” with ARM resets. Soon enough, comps from the second sale after a foreclosure will begin to hit the market, making it even tougher for the “strong hands” to justify their prices.
Only when existing home sellers are willing to lower their prices will their inventories be more in line with what new inventories are. Homebuilders need to build will make sure of that.
“Borrowing a baseball analogy, Campbell said, ‘We’ve got innings four through nine to go…and that’s assuming we don’t have extra innings.’”
I feel the baseball analogy is appropriate: this crash is slow as h_ll and boring to watch, but you keep watching anyway because you’re afraid you might miss something.
So very true, and that’s what keeps us coming to the HBB day after day, year after year.
If I miss a day, I feel incomplete.
So quick recap, those who want to sell will either bite the bullet or wait, the crash is well under way and the credit bubble is done - now housing will painfully go back to market norms. We have no clue as to how long or hard this will be, however we know that it isn’t going to be right until rents are in lie with value and inventories are in decline. Ohh…and if you thought 10% was the most people could lose in So Cal…wrong wrong wrong.
In my town, Running Springs, a Zillow survey shows that houses bought in 2005 and sold in 2007 almost all took a 15% to 20% loss. Doh!
We went to one open house back in 2005. There was a lady standing there with tears in her eyes watching the realtor herd people through the house. She was a big, fat middle aged divorcee, really pathetic. I knew she was a divorcee because I had researched the house and saw the divorce in the records. I feel sorry for the poor sucker that married her and has to pay her alimony. But anything would have been better than living with that cow.
The house sold later that month and the realtor said it sold for X but when I checked the county recorder it had sold for X-10,000.
San Bernardino properties can all be looked up online at the tax collector website: http://mytaxcollector.com
Wow. Sure hope nobody has the misfortune of marrying you.
Men that feels a woman’s worth is entirely in her appearance deserve women that feel a man’s worth is entirely in his net worth.
Fortunately, there are enough of both to go around.
So true, SD RE Bear!
Can you imagine the amount of whining that’s going to be directed at our Senators and Representatives by people whose house values are way below their mortgage debts?
“Bail us out. Do it for The Children!!”
I have two serious questions which I haven’t seen asked on this blog and other bubble blogs, so please lend me your thoughts.
We can see that the REIC is trying virtually anything to keep the buying and selling environment going. I’m wondering what they will urge the government to do with HOLDING.
As you know, millions of flippers are renting out their stuccoboxes while they’re unable to flip them. They’ve become “holders”. In many markets — and most certainly in the bubbliest ones — rental prices are not covering the holding costs. The holders (in effect, “accidental landlords”) are still losing significant cash from their burn rate. So:
Q1. Is anyone seeing government movement to “correct” this price differential?
I’m thinking that this correction could be a form of “reverse rent control” (RRC), where a state or city government can simply declare that rentals must cover the costs of ownership, or at least the mortgage.
The big weakness for the holders is that rents are so often markedly below their real carrying costs. If attempted, this RRC can simply force renters to cover the speculation costs of the “smart guys” who are flipping RE. Since all rentals in the area of government authority are affected, renters will be trapped, and the government’s War on Savers can continue apace.
If governments are actually considering implementing RRC, naturally they have to come up with a marketing plan to spin the renters into accepting further abuse. So:
Q2. What are the details of this marketing plan?
Will the governments claim “covering mortgages is serving the public interest”? Will they claim “loss-mortgaging from depressed rents just invites money laundering”? I’m interested in how governments will spin the attack on renters in order to calm the renters while collars are riveted around their throats.
Uhhh, you’re really serious about that??? You sure you’re not a permabull in disguise???
What you just described would lead to a mass exodus from SoCal by those who actually do the real work. Aint going to happen…period. Second, that is essentially monetizing bubble gains…that is a form of hyperinflation and without raising wages would be political suicide.
Nice try at initiating topic here, but you need to do better than that to fool the posters here.
Look, buddy, I’m not fooling anyone. We live in crisis times. The government essentially declared war on savers and workers a long time ago and that policy is bearing fruit now. The government now serves the interests of owners, up and down the scale. I’m only asking if my musing has any merit and if anyone was seeing such actions.
After all, RENT CONTROL isn’t just some flightly idea I pulled out of my keister — rent control really exists! So it’s logical to assume that our capitalist-aligned government would try something EVEN MORE outrageous as some sort of amalgamation of both “cross the line of property rights” and of course “attacking the renter class”.
If you’re not seeing this where you are, then just say so. I’m after the truth, not MSM spoonfeeding, and I certainly don’t have to accept criticism of even having raised the questions.
As for a mass exodus … sure, that is one of the risks of imposing RRC. However, raising rents still captures some fraction of renters since people can always absorb a rent increase, and — taa daa!– if real regional RRC is implemented then some fraction of renters are truly trapped. Even with an exodus, enough will be left over to spend themselves poor just to meet their new rent obligations to their government-protected “accidental landlords”.
I hope I’m wrong and I’ve seen no indications that my questions are being implemented. However, we have crazy and corrupt government nationwide, so it’s equally crazy to assume otherwise.
Just an opinion.
Rent control is instituted by very liberal governments to protect the renter at the expense of the capitalist system. A Democratic maneuver.
RRC would be at the expense of the capitalist system, but I could only see it implemented by the conservative side. But, such a system would hamper the free market, which I don’t see any conservative proposing.
I haven’t seen this in my market, nor do I ever expect to see it in any market.
Hi BR:
Rent is the real value of an asset. The price can’t be leveraged the way a mortgage can and it is the biggest indicator of how out of whack the housing prices are in some areas. I don’t think this government is organized enough to set up an RRC or anything else as they have bigger fish to fry. Also, the people losing money right now are not important to this government and they could care less if they go under. People would love to charge more rent, but if my rent doubled I’d move in with someone. Same costs. I think a government trying to fix rents higher would be political suicide. (And I think rent control should be outlawed - have never understood why a landlord isn’t allowed to get market value for their property.)
However, other changes such as allowing rental losses (passive income losses) over $150,000 might be implemented which would slow the downturn. If you got 40% of your loss back in taxes it would help. But the gov’t is hurting for money so I don’t see that happening anytime soon either.
There’s a lot the gov’t could do, but thanks to red tape, not much they will do which is good for all of us who believe people should be able to buy homes for less than 10 times their income.
Don’t lose sleep over it and just keep repeating to yourself “Housing bubbles don’t pop - they deflate slowly. A few more years and I will buy.” (Years, not months. Enjoy pay half the cost to rent vs. buy right now.)
Yes, this will happen, along with passing the “you must rent a house from a flipper” law, compelling you to:
A. Rent a house from a flipper.
B. Not move out of the house, no matter how high the rents get.
Speaking of high…
There’s already a solution to the challenge the flippers face….it’s been around for a LONG time, and it’s called foreclosure.
Let the market work itself out, and in time things will return to normal.
Your plan would completely screw the bottom 30% of the population for the benefit of those who took stupid financial risk.
Look, it’s not “my plan”. I’m a renter, a saver and a worker. As far as I’m concerned, the US, state and local governments all declared war on people like me a long time ago. I’m just trying to anticipate how the government will screw over people like me even further, since we savers and workers are expected to pick up more and more of society’s tax bills.
You say foreclosures will work it out. Well, gee whillickers, my state (OH) as well as several others are spending tax money on bailing out these foreclosures. MA even tried to push a moratorium on foreclosures! Although the money won’t go far and MA’s action is “voluntary”, these are still DETAILS on how our governments will try to stop foreclosures. Will they get far? I hope not, but I still have to ask for the details.
Remember, renters like me live in the bottom 30% of the population. We’re USED to being screwed for the benefit of those who take financial risks, stupid or otherwise. Our gasoline is now a much higher cost because others bought expensive SUVs that were also expensive to fuel. The same thing applies to natural gas … which is now used in great quantities for running turbines during the summer since people (not us 30%) have over-indulged in AC. We live in a fog of hypercapitalism, where we have to anticipate the next necessary product or service being bid artificially into the stratosphere simply because it makes some damned fool even richer … and all of that is blessed by the government. Screwing over the bottom 30% is now THE PLAN and I have every motivation to STOP the plan.
Well. A 50% decline would be interesting. So people that had huge gains and traded up would have zero equity or might even be in the red. Imaine going from having 300K in equity to having zero on a 600K purchase in Torrance or San Pedro. Poof and its gone. Almost all of those people increased their leverage by HELOCing some big vactions and some fancy toys.
So if there is a really significant drop (should be) along with the expected employment shocks of the next several years. It could significantly undershoot on the downside. All the leveraging going negative should be amazing to watch.
I am really going into severe bunker mentality. Stocking up on whiskey, ammo, gold and penicillin.
“A 50% decline would be interesting… It could significantly undershoot on the downside.”
Word.
On Sat their was what the real estates called open house Sat. About 250 homes in a large area of abot 2,500 homes were open and of course many of these sellers are either blind or just don’t want to see the storm clouds. Almost identical homes were priced in many cases 200 to 400 k more then their counterpart it was really absurb after awhile. When you question these people as to why a home up the street was 900k and theirs was 1.3 million for the same digs they said, “they are in trouble they have to sell we don’t???”
Why get in a argument, after about 20 homes with the same attitude we left as did most of the many who showd up. To tell you truth the 900k homes weren’t worth it let alone the grossly overprice, this tells me that the public for the most part still doesn’t want to get it or doesn’t want to here it, so i say let them go broke, i wasn’t there to make them rich that was for sure?