Playing The Waiting Game In California
The LA Times reports from California. “April’s new-home sales figures remained weaker throughout the state compared with a year earlier, with total sales falling 40%, the California Building Industry Assn. said. And after holding steady for several months, median asking prices fell 6.2% statewide as builders slashed prices to move unsold inventory.”
“San Bernardino and Riverside (county) sales fell 18.3% from the previous month and were down 54% from a year earlier. The median price edged down 4% to $419,000 from a year earlier.”
“New-home prices rose year over year in Los Angeles and San Diego counties, however. Industry observers say builders in these areas are more likely to offer incentives such as free landscaping and interior upgrades, instead of discounts, to sell homes.”
The Bakersfield Californian. “What’s up with Bakersfield’s housing market? New home construction has slowed, but it hasn’t stopped.”
“The number of single-family home building permits filed in the first quarter of 2007 was 1,187, compared with 1,874 in the first quarter of 2006, a 37 percent decline, according to the Construction Industry Research Board.”
“Statistics show sales of existing homes in Kern County have dipped. First quarter 2007 sales were about 800, compared with 1,230 in the first quarter of 2006, said Delores Conway, a real estate economist at the Lusk Center for Real Estate at the University of Southern California.”
“In April, 204 new homes were sold in Bakersfield, compared with 256 homes in April 2006, according to information from Gary Crabtree, a local real estate appraiser. The new home median price for April was $297,250 compared with $342,000 in April 2006.”
The Sacramento Business Journal. “Sacramento-area’s new-home sales declined 25 percent in April, compared to the same month last year, according to a closely watched report released late Friday.”
“The Sacramento region’s median-home price dropped 10.5 percent to $409,990, from $457,950 a year ago.”
“‘It looks like we’re still playing the waiting game…in which buyers are looking for fire-sale prices which may never materialize,’ Patrick Duffy, managing director consulting for Hanley Wood, said in a news release. ‘With lenders increasingly working with homeowners to stave off foreclosures…they’re looking for different solutions than we saw in the mid-1990s, when it was more common to simply dump bank-owned homes on the market at deep discounts.’”
From News 10. “Nearly 20 percent of Sacramento homes are worth less than the value of their mortgage. Some 3,400 Sacramento County property owners faced foreclosure in the first quarter of 2007, up nearly 200 percent from 2006.”
“‘This one woman was paying $2,000 a month and is now paying $5,000 a month after a year,’ said real estate investor Tony Sedillo.”
The Sacramento Bee. “That big foreclosure auction on June 23 at Cal Expo is drawing ‘good, but not great’ response, said Robert Friedman, chairman of the Irvine-based auction firm, Real Estate Disposition Corp. Friedman said 220 bidders have registered for 107 area houses being auctioned.”
“But there’s still plenty of time. Two weekends of open houses for the bank-owned repossessions begin Saturday.”
The New York Times. “On a foggy Sunday morning last month, the parking lots around the convention center here were filling fast. On this occasion in Riverside, two lenders put 100 properties on the block. By the end of the day, 93 had sold. Most of the properties were in fast-growing exurban and desert communities in Riverside and San Bernardino Counties east of Los Angeles.”
“The company that held the auction had been dormant for a decade. ‘We went into hibernation, and we’re back!’ said Robert Friedman, the chairman of the REDC in Irvine.”
“In some cases, he said, the institutions sold the properties for less money than they were owed. ‘It’s not a happy occasion,’ he said. ‘They’d rather take a little loss quickly, rather than waiting and seeing.’”
“Foreclosures have surged in Southern California in the last year, particularly in outlying areas. In seven counties, lending institutions foreclosed on 6,007 properties in the first quarter of 2007, up from 721 properties in the first quarter of 2006, according to DataQuick.”
“The concern among many bidders at the event was that even if the properties sold for 20 or 30 percent less than their value at the peak of the market, the price might still be too high.”
“Jim and Betty Botley of Chino were looking to spend what Ms. Botley defined as ‘$300,000, and that’s it.’ The house they wanted went for an auction price of $550,000. The Botleys thought that it would have needed $50,000 to $100,000 for renovation. After the repairs, auction fee and closing costs, they couldn’t see how anyone got a deal.”
“‘We learned a lot today,’ Mr. Botley said. ‘You can probably buy them cheaper on the market than buying here.’”
The Desert Sun. “Last Saturday’s auction of cowboy-hero Hopalong Cassidy’s home in Palm Desert by auctioneer Pacific Auction Exchange drew nearly 250 curious lookers, a dozen solid bids, and a sales contract for $467,500.”
“Not a bad turnout, insisted Steve LaRocque, Pacific Auction Exchange owner, particularly considering there are roughly 2,200 homes on the market in Palm Desert alone.”
“A spate of real estate auctions have hit the Coachella Valley recently. Today, for instance, PAE representatives hope to take bids on nine Desert Hot Springs properties.”
“Auctioneer Hudson & Marshall’s properties, spread across the Coachella Valley and beyond, are owned by lenders and asset management companies. ‘We anticipate (we’ll) sell to the highest bidders at significantly reduced prices because banks want to quickly move bad loans off their books,’ said Dave Webb, principal at Hudson & Marshall.”
The North County Times. “The San Diego County economy will weaken through the end of this year, but it shouldn’t fall into recession, according to an economist who compiles an index of leading indicators.”
“The index dropped slightly in April, the 12th decline in the last 13 months. That signals slower job growth, higher unemployment and continued slow home sales, said Alan Gin, a professor of economics at the University of San Diego.”
“‘Job growth has slowed considerably,’ Gin said. ‘It’s almost exclusively due to the housing market.’”
The Press Enterprise. “At a conference in Riverside this week, economists presented dueling forecasts that gave different weight to the influence of the housing market downturn and subprime mortgage failures on the rest of the economy.”
“Christopher Thornberg was more pessimistic than Mark Schniepp. Thornberg emphasized that his bearishness about the Inland Empire doesn’t go very far. ‘I am talking about rough weather for the next couple years,’ he said. ‘This is a bend, not a trend.’”
“In a report handed to those attending the conference, the two economists agreed the housing sector in the Inland Empire is ‘clearly in a recession.’”
“Thornberg said forecasters who stick to models derived from historic trends won’t give enough importance to the unprecedented implosion of subprime mortgages. ‘We rely on history repeating itself. But nothing like this has ever happened before,’”
“Cutbacks in home construction and sales will cause some job loss, he said. Furthermore, he said, a tightened mortgage market combined with existing debt and falling home values will prevent people from continuing to refinance their homes to keep up the consumer spending that has buoyed the economy.”
“Jack Kyser, chief economist for the Los Angeles Economic Development Corp., said ’sober-sighted housing analysts’ agree the worst of the sub-prime mortgage meltdown is ahead and that Riverside and San Bernardino counties, along with San Diego County, will be hit the hardest because the region saw many homes built when such high-risk mortgages became popular.”
“Jack Kyser, chief economist for the Los Angeles Economic Development Corp., said ’sober-sighted housing analysts’ agree the worst of the sub-prime mortgage meltdown is ahead and that Riverside and San Bernardino counties, along with San Diego County, will be hit the hardest because the region saw many homes built when such high-risk mortgages became popular.”
Watch Kyser and friends spin the housing disaster for C.A.R. constituents…
http://www.youtube.com/watch?v=QQU3Q1t6rrE&mode=user&search=
“Spin” is the right word, alright. I was disappointed to see Cagan spewing the “realtor gets seller a better price” stuff. However, Cagan recently gave an interesting talk predicting a million foreclosures (makes sense to me, I objected to “2 mil” yesterday). Find Cagan’s talk here:
http://www.csupomona.edu/~rerc/RERCSC%20Chris%Cagan%205.30.07.pdf
Oops, I did that wrong. Really I found the Cagan talk by Googling “cagan california real estate,” and I’d better not try again to copy the link name, or will screw up again.
http://tinyurl.com/3b8dvg
pathetic
220 bidders have registered for 107 area houses being auctioned.”
My wife and I are headed out to check out a half dozen of the Elk Grove homes (just out of curousity). Will report our experience when we get back.
We visited four properties in Elk Grove (all we had time for):
10150 Festa Court (starting bid: $279k; prev valued: $481.5k)
2460 sqft; 4bd, 2.5 ba
Someone had quite the party before moving out. Basically all of the carpets would have to be replaced and the walls repainted. Nice layout. Three bedrooms plus a bath and laundry upstairs. The master suite was decent sized with a large walk in closet and bath. The kitchen cabinets and remaining appliances were in good shape, though. Most interesting feature was the garages: (1) two car garage plus a single car garage on the other side of the house. All of cul de sac with a nice, but odd-shaped yard (.25 acre). Pretty far down south. It would take about $10k in superficial renovations, including interior and basic landscaping, I would imagine. I’m guessing the reserve price is somewhere around $450-476k. We’d only be interested in it for no more than $315k ($325k if it were in better condition), which isn’t going to happen until at least this time next year.
10216 Shoech Way (starting bid: $279k; prev valued: $620k)
2659 sq ft; 3 bd; 2.5 ba
House is in great shape, except for dying grass outside. Small yard, but there’s a drainage canal right behind it. Big kitchen with a modest sized family room attached. I didn’t care much for the tile floors in the kitchen/great room or the wood railing on the staircase going upstairs. The master bedroom was fine, but the two smaller bedrooms were smaller than you would expect for a house that size. My guess is that the reserve price is over $500k. Definitely out of our price for the time being, but no one should pay more than $350k for it.
5512 Adobe Spring Way (starting bid: $219k; prev valued: $388k)
1844 sqft; 4 bd, 3 ba
Nice sized home probably built in the early 1990s. One bedroom downstairs, three bedrooms (including master bed) upstairs. Smaller kitchen than the earlier two. It had wood laminate floors downstairs. They did something funky with the garage, semi-finishing it into a playroom or something. But it looked simple enough to undo (basically just tear out the flooring). Backyard was small, but sufficient. No walk-in closets in the master bedroom. The living room had two-story ceilings. Home was in pretty good shape. My guess is that the reserve price is somewhere around $325k. I wouldn’t pay more than $250k for it.
5132 Moon Run Way (starting bid: $179k; prev valued: $382.5k)
1436 sq ft; 3 bd, 2.5 ba
The biggest mark against this home are the neighbors on either side: loud music blasting and monster trucks parked in the driveways. So the curb appeal is immediately tempered by the white trash impact of the neighbors. House is in decent shape, but noticeably smaller than the other ones we had seen. I think 1750 square feet is really are minimum requirement for our first home. We didn’t stay very long I’m guessing a reserve price of around $300k. I certainly wouldn’t pay more than $200k for it even if we were interested.
General impression is that there aren’t sufficient bargains to be had at an auction this early in the correction. I don’t think that we’ll bother even going to the auction even though the Cal Expo center is less than 2 miles from our apartment. There were a LOT of homes for sale in these neighborhoods. What the trip did for us was confirm our inclination to hold off on buying for at least a year. There will be a lot of lovely homes just like these on the market in another year or so priced 25-50% below the present level. We’ll continue to monitor the market (as well as the advertised prices on a new Dunmore development that looks interesting), but we’re definitely in a wait-and-see mode for the time being. Decent bargains are coming soon though, I think.
Thank you for the on-the-ground report. This stuff is the best.
For the realtors lurking here, this is what’s expected for a 6% commission.
Thanks Walt.
Thanks, great job.
I’d just like to say thanks as well for your report!
I’m sorry, but I wouldn’t even pay the starting bid on those for Sacramento.
Moon Run Way
I’d demand at least a 25% discount because of the stupid street name.
The biggest mark against this home are the neighbors on either side: loud music blasting and monster trucks parked in the driveways.
Biggest mark indeed - a showstopper for most legitimate buyers. Perhaps it would be of interest as a meth lab or marijuana growing facility. For the rest of us, the house is not only worthless, it actually has negative value.
Flatt, the bloggers around Sacramento have pulled the covers on the REDC USHomeAuction.com activities. While the houses are advertised at opening bids near 55% of “previous value”, the auctioneer has some interesting rules buried in the fine print: The auctioneer can open the bidding and the actioneer can keep bidding against you, until the bidding reaches the foreclosing lender’s reserve price. The reserve price is undisclosed. This is a SHILL AUCTION. It is a waste of time. Only GF’s and future FB’s will put themselves in a postion to bid when the owner can enter bids against you. REDC is doing more of this junk in Modesto, San Mateo and Atlanta, when the finish F’ing over the Sacramento crowd. Amazing they can even legally them auctions. It should be called “Hyped Shill Auction”! And the reserve prices should be advertised. They don’t disclose the reserve price, because no one would go to the auction. Looks like only a few will go anyway.
Nice find, each of us should email the any journalist who covers this crap with the truth.
Aren’t shills supposed to be illegal? How do they get away with this BS so openly???
If probably isn’t illegal if it is disclosed.
They are just counting on the GF’s not to read the fine print.
Hey, it worked for the mortgage brokers!
“Job growth has slowed considerably [in San Diego],” said Gin. “It’s almost exclusively due to the housing market.”
We know what he means, but that’s a very odd way of putting it. Evidently, capital and human resources that could’ve been put to better use got sucked into producing unnecessary houses…so the problem is really due almost exclusively to the previous state of the housing market, not to the current state of the housing market.
According to builders 20 % of employees are illegal. They went to Washington a few weeks ago to plead to allow illegals to stay and do jobs Americans will not do.
We can afford to slow down a lot more.
“Evidently, capital and human resources that could’ve been put to better use got sucked into producing unnecessary houses…”
the human resources got sucked in from latin america, and the capital resources got sucked in from asia
Long term this will lead to redistribution of wealth form Asia to US Middle class. After all Middle class gave up wages for illegals and outsourcing/offshoring.
Revenge of middle class
Most jobs in San Diego can be outsourced… software engineer, biotech technicians etc.
Expect cheap houses on the beach soon.
Auctioning Riverside homes in NYC… that’s intersting.
just trying to save some time for everybody….
it’s faster to fly to NY from LA, than drive to San Berdo
Beating experts yearly sales downfall estimates by 46%
“San Bernardino and Riverside (county) sales fell 18.3% from the previous month and were down 54% from a year earlier. The median price edged down 4% to $419,000 from a year earlier.”
Wow that’s a gigantic decrease. How much were sales down last year from 2005? Sales must be down close to 75% from the peak. Ouch
It’s good to see more realistic statements–that RE will be a problem for the “next couple of years” and that the worst of the subprime problem is still ahead. This compares to statements by NAR and Ben B. that the housing slow down is lasting longer than expected–probably until the end of 2007. There needs to be a substantial decline in inventory before anyone can start predicting the end of the “housing problem.”
After watching the video, I probably need to take back my comments about realistic, non sugar-coated comments. At least the one analyst is saying that inventory is the most important statistic, which I agree with.
Any official inventory will always have a huge uncounted number — the number of second, third, forth, fifth homes bought for “investment” waiting for the market to come back. They won’t be for sale, but in a sense they really are. Any uptick from any level, will be met with more of this hidden inventory.
“It’s good to see more realistic statements–that RE will be a problem for the “next couple of years” and that the worst of the subprime problem is still ahead.”
Notice it’s all about subprime, though. No one mentions Alt A.
Yet.
At each and every stage of this train wreck you folks have predicted what was going to happen and the talking heads have echoed the party line until it was completely impossible to do so without looking like the fools they are. And only then did they change their tune, but with the requisite softening language to bring in the GFs.
Alt A is already mentioned, but only in the context of the collapsing CDO market. It’s too complicated for J6P, but everyone else already knows Alt A is screwed, but they don’t know who ones it!
“In a report handed to those attending the conference, the two economists agreed the housing sector in the Inland Empire is ‘clearly in a recession.’”
“Thornberg said forecasters who stick to models derived from historic trends won’t give enough importance to the unprecedented implosion of subprime mortgages. ‘We rely on history repeating itself. But nothing like this has ever happened before,’”
The above were a couple of understatements, mine is as follows;
” You HAVEN’T SEEN anything Yet !”
Thornberg does has a dry sense of humor.
All of California is going to feel the pain created by the most bubbly areas. Think how much our banks have loaned to the builders…
Banks are going to tighten up so much they’ll have pucker butt.
Got popcorn?
Neil
You will know the Honeymoon is OVER …when your new wife Limits your popcorn IMPUT Neil.
Congradulations
I’m curious, Mikey. What does Neil’s marital status have to do with the popcorn or the distribution thereof?
Enjoy your Sunday.
BayQT~
I just thought that she might like to keep him slim, trim and healthy ..to MOW the lawn when they buy at the bottom
ROTFL
She does want to keep me healthy. You won’t believe how much weight I gained on the honeymoon. Want to splurge? The Alfred Wong’s on Oahu has an incredible 7 course meal. Ok, tasting portions… but yummy!
But we’ll have plenty of time for popcorn.
Get plenty of it!
Neil
For Inland Empire and maybe for whole U.S. housing market is important if U.S Congress will pass the Immigration Amnesty, that will be also Amnesty for whole B.S population …
We’re the screwee in California. PERs and the Teachers funds have bought these sub-prime, sub grade MBSs and their capital for retirement has been lost. The tax payers will make up the short fall.But what’s new in Calimexico. The Trustees should be perp walked
“The concern among many bidders at the event was that even if the properties sold for 20 or 30 percent less than their value at the peak of the market, the price might still be too high.”
The whole problem in a nutshell.
“many bidders”
Oh my, she sheeple are getting religion… think what will happen once they stampede for the exits…
Got popcorn?
Neil
Apparently, the Univ. of Louisville basketball team is losing a recruit to the “housing bubble.” The player’s family had planned to move to Louisville from San Diego so they could watch their son play. However, they apparently cannot sell their home in SD. Here’s a quote from Lousiville’s coach….
Pitino: “Distance is a factor in a lot of scenarios and today some families decide to move with players, and it’s very difficult for that to happen in certain scenarios. I’m not talking about anybody in particular. We understand certain situations.”
The kid is now looking at UCLA and Arizona.
The housing fallout is admittedly still mild, right now, but it is beginning to permeate deeper into social situations that are typically unaffected. This thing is going to be huge when it’s everything’s accounted for…
Of course we do know that they *could* sell, just not for the price they were asking for.
Yeah, you’re right…probably had to take out a lot a of home equity loans to fund all their travels with their superstar son…He’s a nice prospect…7-footer with skills. In Lousiville it was a “wtf” situation since this kid’s family had been featured in the same newspaper a year and a half ago — a fluff piece about how “excited” they were about moving to Louisville, with their son. Of course, the piece was littered with propaganda about Lousiville’s “hot” real estate market. (I’ll see if I can find the piece).
The kid was a big enough loss that a coach the caliber of Pitino felt the need to point out the “real” reason he wasn’t coming.
Kevin
KY real estate is SO cheap compared to San Diego. We have a division in KY (Somerset) and one in San Diego, most young families moved right after we opened it, they got huge 3000 sq ft homes for $200-250k!
If they just sold for a realistic price they could move in a heartbeat, they are shooting for a wishing price. Looks like their greed will cost their son a spot on one of the best basketball programs in the nation.
If this kid ends up at UCLA then UCLA is a sure lock to win the NCAA championship next year. They already have the #1 recruit in the country, B Love. Interesting how the parents handle attending their sons games at UCLA/Westwood, an extemely tough commute even for LA residents.
He’s not going to UCLA - he’ll go to Arizona. His “trainer” is a guy named Suzuki who’s tight with the staff at Arizona.
As an aside, if you believe anything that comes out of Pitino’s mouth, you’re awfully gullible.
As a second aside, when/if Jrue Holliday signs with UCLA, they’ll have the best recruiting class in the country.
“’sober-sighted housing analysts’ agree the worst of the sub-prime mortgage meltdown is ahead ”
This is clear evidence that we are still in the top of the 3rd inning. The analysts and other *experts* are still focused on the subprime meltdown and ignoring the sh!tstorm that’s just up ahead. Pretty soon there will be a concurrent Alt-A and perhaps even a healthy dose of prime in meltdown mode.
This RE downturn is so far from over that it’s still much closer to the beginning. There will be a lot of crow to eat by even the bearish analysts that keep describing the bottom in the not too distant future…
From the NYT article on auctions in Riverside, Ca.
“Throughout the bidding, the loudspeakers shrieked at rock-concert levels. The young men in tuxedos — called “ring men” by the auction company — ran up and down the aisles, spotting bidders.”
At pauses in the bidding, the auctioneer would shout encouragement. “What the heck?” he would say. “It’s only money!”
This is basic auction overwhelming 101…
The ring men, dressed much nicer than anybody in the crowd, exhort them to bid, and the audience (almost all auction rookies) are awed by the whole auction experience, and not unlike a tent revival meeting, the plebes oftentimes do as they are told, bidding more than they’d planned to, or worse.
A recipe for disaster, buying real estate via the auction route…
See my comments above in the 2nd thread: This is a Shill Auction. The auction rules allow bidding on behalf of the seller until an undisclosed reserve price is reached. This is why the first bid starts $100,000 above the opening price. Shill bidder by the owner’s rep. And REDC, the auction company is going to Modesto, San Mateo, and Atlanta when they are done in Sacramento.
All of these auctions have some shillery going on…
It’s the pomp and circumstance part that does people in.
Some people get pulled in even without all the pomp and circumstance — i.e., people like me. We should never be allowed to set foot in an auction!
My grad school used to auction off Lost & Found items that no one had claimed by the end of the year. My friends and I went to one of these so we could pick up some nice bikes for cheap. All my friends went around looking at bikes and deciding which ones they would bid on. Since I didn’t know very much about bikes at the time, I passed on this crucial step. When time came to bid on them, I got over-excited and bid on one of the earliest bikes the auctioneer offered. My friends seemed really surprised; I understood why only when the auctioneer moved away from that bike to one of the next ones. It turned out the bike was missing a wheel. All this still didn’t deter me, for soon afterwards I bid on another bike, this time one with a missing seat. (I could see that it was missing a seat, though, so perhaps this was even more foolish.) The two bikes together cost me only $24, thank god! Both languished in my basement till I threw them out before moving to California.
I don’t intend to go to any housing auctions.
I am a renter who moved to the Golden State 5 years ago. I have been living on the Westside during such time and have been eagerly awaiting a collapse in the market. It seems that every prediction is coming true - the subprime mess, etc. But, the only thing I am not seeing is price reductions. In fact, two very crummy homes sold on my street for asking price on the first day of listing. Do the homeowners’ have it right with respect to the Westside?
How do you know what they sold for?
Maybe you could post the addresses for us?
Maybe you could have picked a pseudonym that didn’t refer to a game about, essentially, building real estate.
Maybe you could troll somewhere else.
There is a legitimate housing shortage on the Westside.
You can begin throwing popcorn or tomatoes or whatever you want at me now.
Why do you believe that? Seriously. There are more people buying now, it’s the buying season. Also, most people think that this *is* a great time to buy, because prices have come down a bit from last year. And after the last 6 years, you can actually negotiate as a buyer. They think this is the bottom, and it’ll start going right back up soon.
They are wrong.
Plysat, LAIG is right in the sense that there are still people who can and will pay ludicrous prices to live on the west side. It’s a desirable place to live, and until things get a lot worse than they are now, there will be a housing shortage here. We’ll only have a surplus when no one who wants to move here can afford to, or when it becomes an undesirable place to live.
Even if prices fall 30 to 50%, where do you think the bottom fishers will buy first when the economy starts to recover? Unless, of course, someone gets a permit to dump a few hundred acres of landfill in the Pacific Ocean and makes some new beachfront property
You live around here - how much extra do you pay to live where it’s 20 degrees cooler in the summer and 10 degrees warmer in the winter compared to say, Studio City?
Assuming, of course, that you define “west side” as I do, which is everything within 2 miles of the beach and south of the Santa Monica mountains. If you define the west side as everything west of Downtown LA or Western Ave., that’s a different discussion.
BTW, I agree that this is a terrible time to buy. But the supply of GFs with the bag of money and the box of stupid has clearly not been exhausted.
I say that because prices here are staying high, inventory is still moving, and whenever I have a vacancy I get a lot of applications, even at high rents.
Beware of “moving” inventory at asking price (or higher). Nothing much moves without a bonus cash back at signing.
The L.A. market came to the party late. It is behind the curve by almost 2 years from San Diego and Sacramento. The Bay Area is about 1 year behind the California front-runners. LAIG is right. Sort of. A lot of the demand is false, and the tightening credit will trash L.A. Yes, there is a lot of high-end money, but the median household income dropped from about $45K in 1990 to $42K in 2000 (nominal, not accounting for inflation). The market is just responding to the easy credit. the market will also react to tightening credit. Once the house price inflation tide turns, you will know what the Warren Buffet quote means.
The west side didn’t immediately roll over the last time around, either, but it did roll over. Just a matter of time.
” I say that because prices here are staying high, inventory is still moving, and whenever I have a vacancy I get a lot of applications, even at high rents”
The Westside, basically LA city/County west of La Cienega blvd to the ocean, and from the 10 fwy north to the hollywood hills, is indeed a desirable locale with some ‘moneyed’ folks. Hi-powered lawyers, Beverly hills bankers-doctors, and the entertainment big money are here, at least up in the vaunted hills above sunset blvd.
The Westside is actually a small portion of the big LA County Market, one of 15 distinct county goegraphic regions. Virtually every one of these regions will FALL HARD IN THE INEVITABLE RE CRASH:THE WESTSIDE, BEACH CITYS, AND PASADENA WILL BE THE LAST BUT THOUGH THEY ARE RESILIENT THEY WILL BE BREACHED EVENTUALLY. Even now the SFV is seeing foreclosure pain and real price drops.
The pain will hit the Westside as the hollywood hills ‘palisaded walls’ will be breached and the SVF foreclosure wave will rush thru the breach and assault the westside, thou it will be bitter house- to-house, hand-to-hand combat, or maybe a better analogy would be a long seige operation.
Over-bubblicious Westside RE prices are heavily dependent upon a healthy economy, rising stocks, runaway inflation, open printing presses, ect. A hard recession(deflation) would most likely have adverse affects upon westside RE prices, as westside entertainment industry depends on continued consumer spending.
Funny article about house-flipping on the high end in LA (which is still going up, up, up) in today’s NYT Style section:
http://www.nytimes.com/2007/06/10/fashion/10gallin.html
“‘It looks like we’re still playing the waiting game…in which buyers are looking for fire-sale prices which may never materialize,’ Patrick Duffy, managing director consulting for Hanley Wood, said in a news release. ‘With lenders increasingly working with homeowners to stave off foreclosures…they’re looking for different solutions …
Pat is confused. The ‘fire sale’ will be the direct result of his next sentence, “With lenders increasingly working with homeowners.” Which means that the lenders are really saying, ‘Get your mortgage caught up or else.’
>>‘With lenders increasingly working with homeowners to stave off foreclosures…
“Sacramento-area’s new-home sales declined 25 percent in April, compared to the same month last year, according to a closely watched report released late Friday.”
“The Sacramento region’s median-home price dropped 10.5 percent to $409,990, from $457,950 a year ago.”
Prices are down 10% from last year, sales volume is falling, but according to Duffy there is no point in waiting around for bargain prices.
Well I would guess at most LA prices will stay flat until the next riots or earthquake. Then one of those will shake the bottom out of that market. It could be ten years. But that would make a 4.9% T-bill (reinvested every term) a much better deal than an LA house returning 0%, wouldn’t it?
SoBay, You are correct. Then add this info from Channel 10, right below Pat’s assertions:
“Nearly 20 percent of Sacramento homes are worth less than the value of their mortgage. Some 3,400 Sacramento County property owners faced foreclosure in the first quarter of 2007, up nearly 200 percent from 2006.”
So Pat, why do you think 20% of the Sacramento homeowners will not walk from their FB status? Particularly when this continues to get worse. Let’s see, Sacramento has 2 million people, so using 2.7 people per household, there are 700,000 housing units. The ownership rate is 69%, so 480,000 homeowners? 20% is 96,000 homes mortgaged in excess of value. And how many home sales are there annually? Maybe 30,000/year in a good year. This statistic alone should flash a big red warning signal. Three years supple of potential foreclosures. And the party has not even started yet. These stats seem so absurdly out of balance, we better ask Max and Agent Bubble to analyze them. They are at http://sacrealstats.blogspot.com/ and the last posting indicates 20% of the Sacramento listings (16,500 total) are distressed (REO, short sale or preforclosure). It sounds like a lot more may be added to the total very soon.
Re “lenders working with homeowners” — I used to do a lot of restructuring to accommodate borrowers with temporary troubles. If I had anyone really behind now, I would repossess ASAP so that I could sell ASAP. Of course it’s easy to say that when nobody is more than a few days behind.
Keep your powder dry. We’ve got five years left to the bottom. Don’t fire until you see the fear in their eyes. Apologies to the ghosts on Bunker Hill.
This is so early in the correction that, if you mapped it to last time, you would have seen the same thing. S&Ls held on early, but that darned GAAP finally caught up with them. Once the bank examiners see the crap on the books and the negative earnings, there will be NO CHOICE. No way will the feds let banks hold on to this crap.
I look at it as a necessary intermediate step in the realization process. If it never seemed like prices would fall, you have to convince yourself that the current situation is a plateau, otherwise… Oh who am I kidding? This Patrick Duffy is scared out of his mind. Here’s the breakdown on his employer Hanley Wood:
“Hanley Wood is a leading-edge business-to-business media and information company reaching audiences in residential housing and commercial construction.
We have four operating divisions that produce magazines, Web sites, trade shows, and events: collect, analyze, and interpret industry data; and create customer marketing solutions.”
Brother, can you spare a dime?
A little under 900% more foreclosures from this time last year…
yikes!~
“Foreclosures have surged in Southern California in the last year, particularly in outlying areas. In seven counties, lending institutions foreclosed on 6,007 properties in the first quarter of 2007, up from 721 properties in the first quarter of 2006, according to DataQuick.”
We rely on history repeating itself. But nothing like this has ever happened before,’”
History is repeating itself…This is like the ‘90/’91 bust only 10X worse because this debacle has at it’s roots massive amounts of fraud and dishonesty.
Took a decade in most markets for real estate to regain it’s losses in the last downturn.
This time the nature of the beast has the capacity to take down the entire system as we know it.
You just know all the derivative and hedge fund crowd are scrabling around draggin’ out the blast nets to try to contain the coming explostion.
However, Joe Lieberman ( a true moderate) was talking about invadin’ Iran tonight.
Nothin’ like an escalating war to take everybody’s mind off the looting of the till by the gangsters of Wall Street.
Joe Lieberman is a true moderate? A true warmonger, perhaps, or true closeted neocon. Moderation can’t meaningfully exist in the current ideological environment in which there is really no center to speak of.
“Joe Lieberman ( a true moderate) was talking about invadin’ Iran tonight.”
Lieberman is a serious ally of Bush/Cheney…you gotta wonder, with the amnesty deal off the table, now there is no distraction from the disaster in Iraq and the increasing disaster on the domestic economic front…what is this guy up to? And who’s pulling his strings.
I agree 100% about Wall Street gangsters and looting. But Lieberman is no moderate. He is 100% neocon. In fact, he works for Israel. We just pay his salary while he does their bidding.
Ditto for Diane “war-instigator” Feinstein too.
Joe momma has it right. Joe Lieberman is 100% neocon. I live here in Connecticut and think Lieberman is not to be trusted. He’s all about Israel. We should run him out of town.
Can’t wait until people are bidding for food on ebay. Come on! This is capitalism. Shouldn’t food, like housing and energy, go to the highest bidder?
Sorry. This is capitalism. Survival goes to the highest bidder.
Food does go to the highest bidder. There’s no gov’t control on food prices. It’s pure capitalism. It’s driven food prices down quite a bit over the past 100 years or so.
In fact the bidding for food has been quite effective in creating a market.
If you like good beef, you probably know that it’s practically impossible to buy it at a supermarket any more. The best meat goes to the hight end restaurants, followed by the niche markets and butchers, followed by Whole Foods, and Costco, followed by the supermarkets, followed by Jack in the Box and Micky D’s, followed by Purina.
imploder has good beef
Have you heard of farm subsidies?
I was at a back yard party yesterday and a good looking blond with after market bolt on’s (boob job) casually mentioned that she was moving this week because the bank was auctioning off her house. She was not sure where she was going to live, but mentioned to the guy she was with that she may need to move in with him. I was the only one flabbergasted! Everyone nodded and did not mention anything. I wanted to ask a million questions, but not knowing the crowd that well I just listened.
She said she was selling her rhino (some type to off road vehicle) and other stuff, but she did not have the title, Well Fargo held the title so the vehicle is hard to sell. She paid $11,000 and wanted to get $9,000. Her twenty something son and here were arguing about him moving in with his girlfriend. She was pressuring him to move in with his girlfriend. Yes, he had the required prison gangster tattoos with designer cloths. Urban tough guy.
I was at a party yesterday afternoon and overheard a conversation which made me stifle a laugh. The wife of an ex sub-prime broker was talking about how sub-prime has totally collapsed and they (she and her husband) are now thinking of moving out of southern California. The conversation got funnier. It seems he quickly got himself a “real” job with a construction firm where he worked prior to jumping on the sub-prime bandwagon in 2002 as a broker. The job pays much less than the money he was stealing, um, commissions he was making on exotic loans BUT he told her recently he thinks he might get laid off because his employer said work is not coming in. Then came the really funny part. One of the listeners in the group said, “What will he do?” The wife replied, “Well, we can’t afford to live here anymore so we might move to Florida or Texas. You can rent a house for half what it costs here.” You couldn’t make this stuff up.
TX seems to be everyone’s escape hatch from CA. Wonder what happens when they get into $$ trouble over there, where do they go, Baghdad? LOL
palisades park
Oh, and here I was thinking all these years those were trade-up buyers from TX.
I was at a bar in LAX on Wednesday and when the young woman on the next barstool turned to me and said:
“I know this is a stupid question, but is a dime, like…ten cents?”
She was quite serious–counting her change so she could buy a drink. The dime confused her. Poor America.
“Well, we can’t afford to live here anymore so we might move to Florida or Texas. You can rent a house for half what it costs here.”
you can rent a house in california for half what it costs to buy in california (1/3 in many areas)
AND you can rent a house in Texas for half what is costs to buy in Texas.
blonds, boob jobs, off road vehicles, tattoos and designer clothes….this story is the perfect slice of life description of Simi Valley in all it’s socioeconomic glory,
LMAO
Here’s a dumb New Yorker question (non-car owner)…How can you sell a car without the title? If the bank has the title, is it collateral for something?
I don’t think that you can. If you don’t have a title, it means that the loan holder (actual owner) wants mo’ money.
It’s done all the time. Just make sure the buyer knows ahead of time that it will take them a week to get the title.
Write up a bill of sale (you should be doing this anyway) and state that title will be delivered within 10 days of their check clearing.
I’ve sold 3 cars like this. It costs you an extra $40ish - overnight the title from the holder to you to sign, and then overnight the title to the new owner. The only time the process ever took me more than a couple days was the last one (now car-less by choice). Had the loan through a “local” bank owned by a national company. It took forever to go through all the bureaucracy - never again will I deal with one of those big banks. I’ll be pulling two accounts as soon as the ABN AMRO deal finalizes.
Yes it is. I lived in TO and Moorpark CA for 45 years. Lots of mental illness there.
…after market bolt on’s…
LMAO!
Heard my 60 y.o. dad call them “store boughts”. Heh.
me2!
A little concern here about all the articles about bottomfeeders and actual buyers coming into the market…are they catching a falling knife, or will all their buying activity slow or stop the bloodflow?
I’ll go with knife catchers. I not only follow the bubble stuff here and elsewhere, but also pay attention to larger issues such as where rates are headed, troubles in the MBS realm etc… IMHO, there’s probably nothing that can stop this. The snail-like pace here in LA drives me nuts, but I think the eventual outcome is inevitable.
You will see many “false bottoms” as this mess unfolds. The eventual bottom in a bust after boom is just as hard to predict as a top in the boom BUT the pattern NEVER changes. That is, dip buyers and GF’s and those who listen to the media and ESPECIALLY tv shows like CNBC’s Comedy Business Show, move in and slow the speed of the down process.
In fact, it would be much easier if there was simple capitulation, fb’s walked away and gf’s sat it out and the whole mess was simply washed away in a few weeks, the bottom was established and we could all go from there. Ain’t gonna happen.
If you study charts, go back and look at the weekly or monthly chart of the QQQQ’s on the stock market from 2000. $120 top - all the way down to $20 (Yes, $20!) bottom. I only give the QQQQ’s as an example but there were hundreds of stocks which showed the same pattern after the tech bust. The chart looks roughly like a staircase as dumb money jumps in (dip buyers in a down market) and stop or slows the bleeding for a little while until the next leg down. These are the people ho think they are smart or who listen to the realtor b.s sound bites like, “Now is a great time to buy.”
In this particular boom, you only have to concern yourself with 2 things. THAT’S ALL. Forget the media real estate experts and their crap. All you need to know now that the boom has topped and reversed is:
(A) When the bottom IS reached, it will stay there with hardly any movement for several years and buyers will have plenty of time to look around. Why? Because real estate speculator investing is going to leave a very bad taste in investors mouths for many, many years after this, the greatest boom and bust in US real estate, is over.
(2) The bottom will be in as near as damn it when the affordability level is reached. THAT is a looooooong way off in many, many places. 5% drop, 10% drop, 20% drop, 30% drop will be the norm all the way down.
Don’t be mislead by tv anchors like Maria Bimbolina. This mess is only now starting to unravel. Bank problems, hedge fund problems, foreclosures, bankruptcies by builders, have yet to appear in large numbers but THEY WILL. Just sit tight, plug your ears and hold your nose until AT LEAST 2010. If you know (or hear) of people buying $600,000 properties who have incomes of $60,000 to $80,000 a year, you are looking at GF’s who will become FB’s.
Mike, you are so right. I put three offers out a month ago on bank owned properties. 15-16 times rent. Not much rental cash flow after expenses, but I thought I would try and I have a hard time being patient. None of the offers was accepted. On one property I was beat out by someone offering $15,000 more, but needing financing (I was all cash 15 day close.) I noticed today the house came back on the market. The financing fell thru. I did a little research yesterday, and guess what? D.R. Horton was undercutting all the foreclosed properties by $10,000. Brand new home and they pay all closing costs and give me $10,000 back at close. This just confirms how much further Sacramento will fall.
What per cent of condos for rent are really for sale but are only being rented because the market is soft “right now”? 80-90%? Kinda like AMZN (and the inimitable drkoop.com) being “unsellable” during the 2000 slide because the market was soft “right then.” Unfortunately 10% corrections in the housing market currently take around six months rather than a day for dotcoms. It’s been slower than I thought (and predicted) but I’m still thinking accelerating Y-O-Y declines from here for awhile.
Thanks Mike, good post, like your conviction. 2010, huh?
http://www.usnews.com/usnews/biztech/articles/070610/18realestate.htm
“they still have a lot of money in the ground,” Credit Suisse housing analyst Ivy Zelman says of the raw land still on builders’ books. “And the only way to get their cash back is to build more houses.”
This explains why these numbnuts builders, continue to build houses that nobody wants…
And this did not happen in the 1990 to 1995 correction. Most builders were private and knew enough to quit building. This time the publics will keep looking for cash flow, even though they eventually will go BK.
1 in 130 homes in foreclosure in Stockton. It was on the news yesterday Ch 5 bay Area.
call back when it’s 2% that seems to be the bleed out zone
it’s different this time
you have to back to the depression for this kind of #
““Nearly 20 percent of Sacramento homes are worth less than the value of their mortgage.
I can’t believe that statistic. There’s something missing. Maybe 20% of homes bought in 2005-2006. Certainly not 1 in 5 homes in the Sacramento, it would be Mad Max there every night.
It maybe true when considering home equity loans, and considering the cost to sell, and the actual price a seller may get.
At least these folks sound like they were wise enough not to become knife catchers, and did some thought before going to the auction, I mean, learning experience.
Jim and Betty Botley of Chino were looking to spend what Ms. Botley defined as ‘$300,000, and that’s it.’ The house they wanted went for an auction price of $550,000. The Botleys thought that it would have needed $50,000 to $100,000 for renovation. After the repairs, auction fee and closing costs, they couldn’t see how anyone got a deal.”
“‘We learned a lot today,’ Mr. Botley said. ‘You can probably buy them cheaper on the market than buying here
‘You can probably buy them cheaper on the market than buying here’
Evidence that these auctions are merely marketing hype.
Bill in Phoenix. You have posted you were doing pretty well. It is your civic duty to go out there and catch a knife for some poor, in over their head, flopper or two. Or, at least, rescue your family that are not doing as well. In reality, your posts are great, and congratulations for doing well, saving, etc. I learn a lot from your posts. Keep up the great work.
LOL. Thanks! I enjoy reading your posts as well! I will continue to look as though I’m not doing well
the quote about “fire-sale prices” enrages me. this is nothing other than “buy now or be priced out fovever” spin. what he’s basically doing is trying to get folks to stop waiting for unreasonable price declines before buying. it’s a hidden form of peer pressure. it’s like saying, after buyers put in a low-ball offer a year ago, give us your real offer. it turned out those low-ball offers were soon real offers and it will turn out that those waiting out will eventually get their fire-sale offers.
such is the bubble bath.
got soap?
See my post above. His employer is 100% REIC dependent. He’s a shill. He can only be what he is.
A couple of gossip stories from Chico (hey, there’s not much else to do here….)
Story 1:
In 2005 a house went on the market in the golf course community we left. It was listed for 850k, and languished for several months. Then….. the price goes to 989k and sells about 2 months later. Never thought much more about it, but at dinner last night, my “gossip pusher” tells me the loan owners are in a bit of trouble. Seems the ARM they used to purchase is adjusting, and the payment is going from (this is where I tell you to sit down) $6700/month, to $10,000/mo. They apparently can’t afford this.
In addition, every sheet rok nail in the house is popping out. He emphasized “Every One” in the entire house. Didn’t even know how this was possible. Owner is hoping this shoddy construction might be an out…..
Story 2:
A well known doctor is building a very large Frank Lloyd Wright style house in the same area. Huge home hanging over the side of a hill…..looks beautiful. The budget to build this home was to be 1.5M, but it is only about 2/3 complete and they are already 2.5M into it. Now they are hoping to “git-er done” and unload it for 3M. Good luck with finding a 3M buyer for your 1.5M house. The doc’s other home which is also for sale, was dropped from 2.25M to 1.975M, and as unbelievable as it might seem, no takers in Chico (40k HH incomes here).
Just a couple “changing financial landscape” RE stories to brighten your Sunday ……
Good Grief! I like Chico, but the type of money you are writing about would easily buy me an ocean view house in San Simeon and I could fly out to my engineering contracts from the SLO airport. Or an ocean view condo in Laguna Beach and use the John Wayne airport. Chico? It’s the same deal about fools buying $1,000,000 houses in Phoenix. You could get a great ocean view for less and with a stable temperature range in southern California! Egads!
Hey Bill,
I know people who do exactly that. And you know what - it’s a saner way of living in some respects. The only problem comes when you need to hire help to take on bigger projects.
As it becomes possible to do more and more jobs remotely, a lot of engineers are doing the majority of their work that way.
Most of my friends I made since 2000 are also consultants and they travel thousands of miles to work. Some fly out every weekend to home and arrive back at work Monday morning. The money is very well worth it at the place of work. The home location on the weekends is worth it to them (relatives, friends, and so on). extreme commuting is not for the type of people who are very concerned about relationships rather than bringing home the money. But there are tradeoffs to everything. I sacrificed a potential happy relationship and becoming a father for life as a highly compensated bachelor.
The market in Chico is a 300k house, and I’m sure the majority of sales are done with the craziest of loans.
There are probably about fifty 600k – 1M spec homes setting on the market here, but just when I think the builders are getting a bit worried, 4-5 “Big City” folks come and buy one for 50k under asking, then fall for the 200k in upgrade fees. While they might be tickled to be in this home for 1M (assuming it doesn’t fall apart), there is nothing but a greater fool that will ever support these prices…..nothing. Maybe that’s what areas like Chico will become – an equity refugee camp without the ocean views.
But like the roach hotel….. the new Chicoans check in, but they don’t check out.
I love the micro brew (Sierra Nevada) and the Graduates restaurants and party places in Chico. Next door neighbor owns them but won’t live in Chico. Too rural.
Chico is a great town. Great ale,bluegrass, and skinnydipping with river goddesses in upper Bidwell Park are high points. But I agree it has nothing to support $500k homes. Same here in a Rogue Valley. A nice place to live, but too sleepy for many, with imperfect weather and few engaging or well-paying jobs. GFs are the main driver of the RE economy.
Yo! Here’s a quote on an AOL article about subprime problems in Detroit:
“This has stripped us of our whole pride,” says April Williams, 47 years old, who has until August to pay off her mortgage or vacate the two-story Colonial at 5170, where she and her husband have lived for 11 years. “There’s going to be no people left in Detroit if they keep doing this to them.”
Okay. The problem I have is with “if THEY keep doing this to them.” Does they mean the lenders? It’s somehow the lenders fault that people used their Detroit homes as ATM machines? This is typical of Americans - don’t accept full responsibility for ignorance on personal finance - pass the blame to the bad guy - the big business lender.
http://realestate.aol.com/article/investing/_a/subprime-aftermath-losing-the-family/20070608095509990002
What about the innocent victims? Her 40 Koi.
Pretty Amazing how RE Marketing and Greed turned the American Dream House INTO the Hassle of your Life.
Did my HBB duty this weekend. Busy busy.
1) Got the woman I’m dating to put her Manhattan 1BR on the mkt for 600K. She’s moving here (not for me) and was thinking about keeping the NYC place to rent out in case she doesn’t like it here. Apparently, her father was giving her similar advice. Get it out the do’!
2) Dissuaded a couple moving from LA to SFBay from buying. She is looking for a new job and her husband will be a prof. MrBubble queries, “So what’s your price range?”. She says, with a glib tone, “Oh, about 600K”. So after I dislodge whatever tapas morsel that was clogging my esophagus, I say bluntly, “You do realize that, historically, you would need to have a combined HH income of 200K, 120K for a down-payment and the place would need to rent for 6K a month for that home, right?” You could almost hear the grinding of the conversation brakes right there. The hosts say, “Ummm, he’s been reading up on this stuff for a while”. But you know what’s different for a few months ago? She shakes off the blank stare and asks for more info!
3) Argued about renting v buying in LA (Is there a place calling Central City?) I didn’t even go after this guy’s assertion that LA prices won’t go down and STILL whupped him good.
Thanks to all on the blog! I’m no fun at parties!
Sorry. “Here” is SF.
another couple buying into mortgage hell because a wife needs a status home so she won’t be a lowly “renter”. what a dirty word. I’ve heard this story a million times. like my former co worker that bought her house in, oh, 2005, and bid and bid and bid over asking price to ‘win’ at 750k or so. They could *maybe* afford it since they were selllling their current house and making a killing, i’m sure. Still, it’s going to hurt when they lose that 20% down to depreciation.
I loved her stories of ‘prices aren’t going down’ and ‘it’ll be worth a million in a few years’ and the classic buy now or be priced out forever. Times change
I have been reading this forum for some time. I live in the SF Bay Area (specifically Fremont). Whenever I read a California article, it is mostly about San Diego or LA or Sacramento. Very rarely do I read something about the SF Bay Area. Is there no bubble here?
There is a bubble here in SF. Have you checked out http://www.burbed.com? The audacity of the prices of these POSs is galling. I could deluge you with facts and figures, but I’m not the most knowledgable person here and perhaps have more of a doom/gloom confirmation bias (AKA tin-foil hat wearer). Unfortunately, I don’t think that many of the folks “here” read posts that are more than a few days old (sometimes it seems like hours). I sometimes don’t unless I’ve posted a question. I suggest that you post what you wrote at the beginning of a “Bits and Buckets” OT thread and watch the comments roll in.
“Very rarely do I read something about the SF Bay Area. Is there no bubble here?”
Well hows this for an example:
3 bedroom
3bath
2100 sq ft
Price-$19,750,000
On the plus side it does have an ocean view.
http://www.idxre.com/idx/detail.cfm?cid=2933&bid=4&pid=726055
Holy s—! Where are the house pictures? “50′S BEACH HOUSE ACCOMMODATES THE WHOLE FAMILY! OR BUILD YOUR DREAM HOME” Ahhhh. It’s a 50s POS knock-down.
This is ourrrrrr country!