We Haven’t Got Close To The Bottom In California
The Record.net reports from California. “Lackluster sales of existing homes in San Joaquin County rose slightly in May, but the median sales price slid for the third consecutive month, this time to the lowest level since the spring of 2005. The median sales price has steadily fallen from $395,000 in February to $370,000 last month. That compares with a high of $425,000 last July.”
“Meanwhile, the number of listings, fed by rising foreclosure numbers, broke the 5,000 mark for the first time since the downturn began in the fall of 2005.”
“‘The prices are coming down,’ said Jerry Abbott, president of Coldwell Banker Grupe, Stockton. ‘When people are reducing the sales price of their home, they’re not reducing it by $3,000 to $5,000, they’re reducing it by $10,000 or $15,000 - or more. In the last 30 to 60 days, we’ve seen more of a willingness to do that. It’s either that or go into foreclosure for some people.’”
“The number of homes for sales countywide jumped from 4,962 in April to 5,291 last month. At the current anemic sales pace, it would take 17 months to sell those homes if no other houses went on the market in that period.”
“‘It is a painful transition, no doubt about it,’ said Sean Snaith, consultant to University of the Pacific’s Business Forecasting Center. ‘With all the inventory, it’s difficult to sell a house, and there’s downward pressure on prices.’”
The Record Searchlight. “Shasta County had its worst May for home sales in nine years, while foreclosures rose dramatically. The median sales price paid for a home in May was $275,000, down from $290,000 in May 2006, DataQuick reported.”
“‘Investors and out-of-town buyers are not coming in to buy those homes like they were two years ago,’ said Glen Jones, associate broker in Redding.”
“‘More homes are going back to the banks that financed them because they don’t sell at auction. That has added to the glut of listings, which Mike Van Bockern, a Shasta County foreclosure specialist, says has the potential of driving down prices.”
“The Shasta Association of Realtors reported this week that more than 2,000 homes in Shasta County were on the market — some 500 more than in January.”
“‘Those (bank-owned homes) are probably going to be sold at 80 percent of what a comparable home sold for. So that becomes the new comp and drives down prices even more,’ Van Bockern said.”
“‘If you need to sell, you want to price your home competitively and not chase the market down,’ said William Parsons of Parsons Realty in Redding.”
“That means if a seller needs to get $300,000, the home shouldn’t be listed at $340,000 in hopes the buyer will haggle, Parsons said, adding that there’s too much competition for sellers ‘to be playing games.’”
“Homes in some stage of foreclosure in Shasta County in May jumped 55 percent from a year ago. ‘We haven’t got close to the bottom,’ Redding commercial real estate agent Tom Shuck said Wednesday. ‘Others may disagree…but the numbers speak for themselves.’”
“‘The problem is we got people who are just giving properties back to the bank; they are not fighting to keep them because they owe more than the house is worth,’ Van Bockern said.”
“Wednesday morning, Van Bockern tried to auction a home that had a $200,000 first mortgage and $50,000 second mortgage attached to it. ‘The property wasn’t worth what they owed on the first,’ Van Bockern said.”
The Daily Press. “With the number of home loans entering the foreclosure process reaching record levels in the United States, California is leading the nation in new foreclosures, analysts said.”
“‘The market has leveled off and is moving downhill,’ said Gary Stater, president of Gary Stater Realty Inc., who has more than three decades of experience in residential real estate in Apple Valley.”
“Stater cites relatively low interest rates and the rapid growth in the housing market that peaked early last year among the dynamics leading to the decline in the housing market. ‘Homes sold at the drop of a hat in 2005 and many buyers purchased with 100 percent financing or more,’ Stater said.”
“‘Now that the market is saturated in homes, we have a huge oversupply of homes,’ he said.”
The Union Tribune. “The continuing slowdown in residential construction dragged down San Diego’s economic outlook in April, according to an index released yesterday by the San Diego Institute for Policy Research.”
“Economist Kelly Cunningham, who compiled the index, said the decline in residential building is likely to continue well into 2008. ‘Developers have been scared out of the market because of the slump in housing prices,’ he said. ‘And it looks like it will be at least a year before that improves.’”
“In a further sign of the tightening real estate market, one of San Diego County’s largest real estate firms has acquired one of its rivals, a move that could be a harbinger of things to come in a sharply contracting industry.”
“The top executives at Coldwell Banker and Seaman portrayed the acquisition as a marriage of two strong firms and denied that the weakness in the real estate market had an impact on their decision to merge.”
“Rick Hoffman, who heads Coldwell Banker’s regional operations, said that declining real estate sales will prompt more mergers. Hoffman noted that between May 2005 and May 2007, residential real estate sales have fallen 41 percent in the county, which means much less work for the county’s 28,900 real estate brokers and agents.”
“‘It’s a sobering number when you realize that sales are down 41 percent,’ Hoffman said. ‘There are going to be small independent brokers as well as large players that are going to have to face the realities of the market.’”
“Over the past year, 2,100 real estate brokers and 700 ‘“credit intermediation’ workers, mostly mortgage brokers, have lost their jobs in San Diego County, according to data from the California Employment Development Department.”
“‘There’s just not enough work now,’ said Nathan Moeder, who tracks the local real estate market at London Group Realty Advisors. ‘We’re starting to see shops close up and mortgage brokers closing their doors, looking for jobs elsewhere.’”
“Those figures don’t tell the full story. A large number of workers in the real estate industry are self-employed and do not show up in the state’s figures, which are based on company payrolls.”
“Workers from Champion Signs in San Diego were busy pulling down ‘For Sale’ signs from One Source and replacing them with signs from Coldwell Banker. Greg Speaks, who oversees business development at Champion, said the assignment to replace 369 One Source signs came at a good time for his company.”
“‘Normally, this is our busiest season,’ Speaks said. ‘We’re usually spending a lot of time during this season putting (home sale) signs up and taking them down. These days, we’re still putting signs up, but we’re not taking very many down.’”
“‘Unless they’re in the upper end or dealing with luxury properties, brokers are hurting,’ said longtime San Diego real estate broker Bob Schwartz. ‘In the middle range, $500,000 to $750,000, or anything below, there’s a huge amount of inventory and not a lot of buyers.’”
“Schwartz, who has been selling homes for 30 years, recently turned down four prospective clients because they owed more money on their houses than he thought could bring in on a sale. He said a house in San Carlos that he is familiar with has been on the market for 18 months.”
“At first it didn’t sell because it was overpriced, but even after the price was substantially lowered it hasn’t sold because there is less demand. ‘Back in November and December, people were saying that in spring the market would turn around, but that hasn’t happened,’ Schwartz said. ‘I’ve seen absolutely no pickup and maybe a slight decline.’”
“‘The slowness that we’re going through now makes me wonder what’s going to happen in fall and winter, which are the traditional slow times,’ he said.”
the pain my rich smug bastard neighbors must be feeling makes me positively giddy! well, they were rich and smug anyway…
Care to share their story?
come to think of it most of my neighbors have lived on the street as long as me and are okay people. in fact my favorite neighbors are the ones hosed the most. think they bought about mid-`05, paid around $800 for a house that sold in about 2000 for about half that amount. Nice friendly people with 2 little kids. Maybe i will get them snorkels for Xmas.
Actually it is more like a few people at work who pity me for being a naive renter, and who bought in the last couple of years so as not to throw their money away on rent. thanks for caring man.
At first my co-workers kept asking me when I was going to buy again after selling for a decent profit. I think it’s a “misery loves company” thing. Now, they get it and don’t look at me funny anymore. In fact, they’ve been asking me what I see out there in the market. I sugar coat as best I can while still delivering the bad news. Then I conclude with “but then again, I’ve been wrong for 4 years now.”
Both bought a new house before selling the first. Been 9 months on one and 4 months on the other.
Surprising to hear that people around Seattle are finally getting it. My relatives sure don’t. In fact, I’ve yet to talk to someone in the area that does. The denial is epidemic there.
BB,
On the other hand, I’ve got a co-worker/friend near Ballard in Seattle who claims his place is worth $750K. He bought it for $325K in 2003. The only comps I’ve seen nearby are in the $550K range, which I think is $200K too high.
He wants to sell and get a place for $1M. He’s 30 years old. When I was 30, I was nervous paying $170K for my first place. So, I’ve still got some work to do…..
I should add he absolutely, positively sees no issues in the market.
“Hasn’t slowed down HERE” is a common quote from him.
BB, you’d kindly asked a few months ago about my moving to Seattle, and at the time I was still in LA. Well, I have arrived, and, after being rained on for a few days, life here has been pretty wonderful. Despite our dear friend Shug (from Seattle bubble blog) warning me of a frat-boy infested neighborhood, the area I’m in in Ravenna is lovely, a mere block from the park. And contrary to warnings from others on this blog and others, I’ve been treated well despite my being from LA. (Yes, I know, wait until winter and see how I feel then.)
As to the denial, it is very, very thick here. I try to keep my mouth shut, but I find I can’t hold it in. I bumped into a developer at a party the other night and would not agree with his assessment that people are now comfortable spending 40% of their income on housing. I asked him why I should buy when I can rent such a great place for a third the carrying costs. He just stared at his feet. Game over.
Nice to have a few other WA state folks on this blog. The good news for us is that, even though we are the last to leave the party, our RE hangover will probably be greatly accelerated due to the fallout in other areas. Why? First, national media coverage and the associated change in psychology. Second, tightening credit, rising mortgage rates.
I’m licking my chops at the thought of 8-9% rates and 20% downpayment requirements.
Got cash?
“I’ve got a co-worker/friend near Ballard in Seattle who claims his place is worth $750K.”
Anyone can “claim” anything they want. I wrote all the songs on Dark Side of the Moon.
I’m licking my chops at the thought of 8-9% rates and 20% downpayment requirements.
You ain’t too far off the mark, boy. I’d add another 1%.
In my neighborhood near Microsoft in Redmond, I am seeing completed but unsold new houses for the first time in years. Up to last fall, new houses were sold before the walls went up.
Also, one flipper down the street who bought at 999,450 last July and had advertised (FSBO, not on MLS) for $1.1M this spring still has ‘for sale’ signs in the window, but the mirror-image new home across the driveway was on the market for $945K recently (may have already sold, don’t see the sign any longer). OOPS! Damn those builders, undercutting the ‘true market’ value!!!!
Just a couple of andecotes from a neighborhood drive-by FB watcher (munching popcorn, yum).
catspit: If you don’t mind me asking, are you renting on the east side or west side of Costa Mesa? I’m currently in an apartment (near OCC) and looking to rent a SFR (ideally, in CM, but looking at a lot of other areas, too). The rent on the SFRs seem awfully high though (most seem to be around $2500 +/- a few hundred). I’m hoping to find something (3/2 with 2 car garage and decent sized back yard, and will accept dogs - don’t have them yet, but will get them) for around $2000-2200. Thanks for any info.
I think the landlords are like the sellers. Don’t be afraid to make a lowball offer. If you have good rental history, etc, you might get in for a lot less than asking price. My LL tells me good tenants are tough to find. last time i drove by there is vacant house like 15th and Santa Ana (or Tustin?) in Newport Beach. Asking 3k a month, but vacant and in need of work. I like rentals a little rundown, then i can do what i want and LL is happy for me to do it. Call and offer him $2k and see what happens. (And pay month to month only i think this guy is staring down foreclosure barrel…)
WaitingInOC, look for someone that’s been looking for a renter for a while (e.g., look for repeat CL postings) and make an offer.
Some of the SFR owners may be trying to cover the mortgage but starting to realize this is folly and ready to get what they can get…
Has anyone here done that? Can anyone give their story? I am interested especially in landlords here that do that.
i have an ad at craigslist to break my lease.
guess what:
in seven months on CL ive only seen 5 young couples come to look at the place. when i moved here i never noticed a lot of “do it yourself ” projects. the young ladies who have looked are very particular and want granite this and and hardwood that.
when my lease is finally over my scary LL will flip when he can’t rent this place out. i guess that will be my only retribution.
true stories:
i lived twelve years at the coast in the same place. before 911 my nice landlord hung himself at age 43. sad. the next year his widow lost entire house in scripps fire. sad too. i moved out to get away from cigarette smokers. very sad.
before this ill fated move i was “flipped out” before my lease was. that LL was nice but greedy and owned millions worth of duplexes. i wonder if he ever got 654,000 for the place i was renting.
im fastening my seat belt and getting ready for the CDO meltdown.
Typical Silicon Valley Prices 2000 sq ft home over 10 years
1998 200K
2000 550K
2007 700K
even going down to year 2000 prices is nuts…
we got to go past that–down to mediam around 350K…
thats well more than 50% correction…
From what I am seeing on both the Eastside and Westside Costa Mesa LLs are trying cover their costs by asking very high rents. Two come to mind, A) the ex is moving out of her place on Federal St (Westside), 2bd, 1 bth, pets ok, ok front yard, no real back yard, 1 car garage, not SFR, small 1 bd in back. She is paying 1800 and LL is raising rent to 2100! Can anyone say HELOC? B) SFR on Orange (Eastside) near 19th sold last year for 1.2 mil, now asking $3700/mo rent. It’s a nice house, but on a busy street and that is way too much rent for this area even if it doesn’t cover their PITI.
I’ll share stories…
1) When I sold in San Diego and permanently moved to Mpls (early 2005), I was mocked by some acquaintances, who all said: “why are you moving to Flyover land. now that you’re going there, you’ll never be able to come back because your home there will lose money, and ours will go up 15-20% per year. you’ll be stuck there forever”. now fastforward, and all three have either NODs or pre-foreclosure proceedings.
2) The older brother of my wife’s best friend (and college roommate back in the day): he bought 10+ speculative homes in the Sacramento and Vegas and Phoenix areea. told us how rich and smart he was. Fast forward to today: he is losing everything, he used all the equite to HELOC himself a nice life, and now he is upside down for over $1M and living in 400sq ft studio in the Marina (SF) with his pregnant girlfriend considering how to go BK but keep all the toys.
3) my old coworker: finished residency and decided to stay in San Francisco. As a doctor, felt he “deserved” to live in luxury, so bought the cheapest nice condo he could find in Pacific Heights neighborhood. (I don’t know the price, but very high). now here we are a decade later, his loan balance is HIGHER and he has to not only work 60hrs/week as an MD, but he also has to work extra shifts on the side. Wife is pregnant (second kid) but she has to work as well to make mortgage payment. They never see each other due to both working all the time to pay for the house. They don’t want to sell because after the sale they wouldn’t have much left over to buy anywhere else (my understanding is that they’ve HELOC’ed once or twice to catch up on bills and to pay off some school debt)
There but for the grace of God go I…..or any one of us, except that we all stumbled upon Ben’s blog a couple of years ago. Amazing stories, HIC. Thanks for writing them up. It reminds me to be humble and be glad the seller rejected my $840,000 offer in Dec. 2005. I came to the web the next day to study housing trends, trying to justify increasing the offer. Little did I know what was waiting for me here. The resulting knowledge I gained has been responsible for a $500,000 swing in my net worth, including interest, $2,000 in rent vs. $5500 in mortgage pmts (we just renewed for a year) and depriciation ($195,000 drop in the last 14 months). I still pinch myself as I watch the houses roll into foreclosure and come out the other end 30% below last years price.
well i hate to compare $$ to religion, but this blog is almost like belonging to a church. I have seen the light! Amen, brothers and sisters…
Yep, that’s why I like to tell my brothahs and sistahs:
TESTIFY!
I think the unoffocial church on the blog is Rev. Billy’s Church of Stop Shopping. (it is easy to find with google)
I would put in the link but don’t want this post to be sent to spam purgatory.
This blog (and others like it - Patrick.net, CalculatedRisk, The BigPicture) are like the thinking person’s church –a badly needed antidote to the fanatical RE-worshipping religion of the masses. Come to think of it, RE-worship is closer to a cult, or maybe cargoism.
“Father Stucco and Sister TXChick saving souls, one at a time”
I talked two people out of buying condos at the peak in San Diego largely thanks to this blog. They now give me lots of free beer. Some I couldn’t save but at least now they respect my opinion after watching the meltdown.
One thing is for sure - I have seen the light!
TESTIFY!!!
LOL are you kidding me on #2 unbelievable. Wow…
Yeah, and to think I was already at “wow” on #1.
#2 went #2 all over #1.
Ah, three well reported stories. Next time give your ditties a title, like “CORNHOLED!”. Just a suggestion..
Heres one from the MLS in Westlake Village CA,
A foreclosure just came up for sale at 3,570,000
The guy bought it in 2001 for 2 million even.
In 2005 he takes out 1 million in Heloc, then defaults and the bank takes it back.
Sure beats saving. He’s probably in Amesterdam living off the 1 mill plus whatever other debt he defaulted on. Pretty spectacular home too almost 6000 sq feet. Id rather have the money. ONE MILLION DOLLARS. wow.
I expect this type of story will be REALLY REALLY common. Leave town with cash, give house to the chumps(the bank).
here is the link:
the last sale for 492k is the foreclosure (never sold for that, its the second forclosing after buying the first)
http://redfin.com/stingray/do/printable-listing?listing-id=839400
Crikey, I wonder if this is still possible… Amsterdam sounds good…
In 2005 he takes out 1 million in Heloc, then defaults and the bank takes it back.
UNUM the professional disability insurance had similar problems.
Surgeons would take out multi-million dollar policies and then proceed to cut one of their fingers off during a procedure.
Hey-it only hurts for awhile.
“That means if a seller needs to get $300,000, the home shouldn’t be listed at $340,000 in hopes the buyer will haggle, Parsons said, adding that there’s too much competition for sellers ‘to be playing games.’”
What’s this “needs” nonsense? You’ll take what is offered and be happy with it! Alternatively you can go to foreclosure. Regardless, shut up and take the cure!
Actually, what they meant to say was “greeds to get $300,000.”
LOL!
I’m just happy the Realtors are starting to see the light.
Trying to ignore declining home prices did not help them as much as they had hoped. It simply encouraged sellers to keep their wishing prices high, and buyers can’t afford to purchase- thus a stalemate
RE agents obviously make money based on SALES, and a stalemate is worse than a declining market.
Thus, the new talking points are designed to talk sellers down WITHOUT alienating new buyers. (you can’t let buyers know that they’ll get a bigger house for cheaper if they wait).
thus, you get comments like the above… basically telling sellers to price lower, and then bring in the great catch phrase “now is a great time to buy” for buyers.
If this still continues, you’ll hear more “lower your prices” propaganda…
matter of time now.
The new realtwhore ad campaign is, literally, nauseating. The upside is that when this is over, they will be exposed to all as salesmen. Saying that they are “seeing the light” is too kind and complementary when any “light” they “see” will only be used for deceit and trickery.
I’ve just about given up hope the prices can come down quickly. But I still hold out a little hope that some barrage of MSM stories of the “housing crash” variety could still shake things loose. It would require slow news on most other fronts, and possibly a run of bad days on Wall St. to get the ball rolling…
Failing that, I’m ready to sign other lease.
sign another lease. We did. But watch (1) mortgage rates; (2) downpayment requirements; (3) income requirements; and (4) credit history.
When a potential buyer needs 20% down, good credit history, limited to 3x income, no credit card debt, good work history, etc… In a nutshell there won’t be any buyers. The slow sales we are seeing today will seem like a boom time in the rear view mirror. Depending upon how fast credit tightens, this could unravel faster than previous bubbles.
Never never never trust realtors no matter how the market turns. Up here in NorCal realtors are still using fake multiple bids stories to pump prices higher…
“My real estate agent told me they were expecting 10 offers and so we should bid at least $850,000,” my friend told me incredulously. “Is that really how things are nowadays?”
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2007/06/15/carollloyd.DTL
price will fall when realtors are barred from creating fake bids and are required to have bidders present like a real auction.
Sales cut in half…inventory at 2 times last years units… and realtors screaming multiple bids are happening everyday…
Wow. He should follow up - if the Realtor is lying, he should publish that fact.
In fact, why don’t we have a hall of shame here? The worst hucksters should have their own feature listings here, where they can be Googled…
Whoops, just read the article… who knows, I’m sure there are still SOME sought-after properties where there are a few bids, just vastly fewer than before, and the people bidding up in a crashing market know, or should know, what they’re getting into… but in any case, I still think Ben should host a hucksters page…
I just put in a bid on a house. the house was listed at $1.35m. (Saratoga) I bid 1.376m. My realtor witnessed 4 other bids and was told that there were 11 overall. I do trust her, she has been showing us places on and off for a few years, and has advised us against some places. So the highest bid was $1.55m. Is it possible that the seller’s agent is lying? Sure, but why would she lie about a higher bid in order to turn mine away? Plus, once it records I can look on Zillow to see the actual sales price. I have done this on other places and it matches what the selling agent said.
Hmm, when did you do this? Because when I checked the MLS listings for Saratoga, I found 110 homes for sale and only one was a pending sale (this one was less than 800,000). Every other listing was active.
In the “stuff” business, we call these folks the “haftaget” crowd. They overpaid for an “anteek” and when you ask what they want for it, they’ll tell you they “haftaget” what they have into it. So the stuff rots on a shelf or in a garage or warehouse.
Sooner or later, they don’t “haftaget” whatever the price was anymore. Of course, they don’t have a mortgage on it.
As a renter, you hear a lot of that “haftaget” riff, too.
“‘The prices are coming down,’ said Jerry Abbott, president of Coldwell Banker Grupe, Stockton. ‘When people are reducing the sales price of their home, they’re not reducing it by $3,000 to $5,000, they’re reducing it by $10,000 or $15,000 - or more. In the last 30 to 60 days, we’ve seen more of a willingness to do that. It’s either that or go into foreclosure for some people.’”
This trend just kills me - classifying 10K or 15K reductions as “significant price cuts.” A 15K cut represents a 4% reduction off that stated 370K median - and these RE shills insist that buyers are really starting to get great deals because of those cuts.
We’re still in the denial stage of this whole saga. FBs are still seeking wishing prices, and are praying that another 4-5% cut is all it will take to get some GF to take their rapidly depreciating asset off their hands.
I live in West LA, and I love going on ZipRealty just to watch what I call the “Dance of the FB”: the growing number of listings where the sellers decrease their price by about 10K a month from their 600-700K initial price on some 2 bd/2 bath condo with a $500 HOA. Why would I pay anything close to that price for an apartment that’s likely worse than the one I currently rent for $1800/month???
What can go up 30% in a year can go down 30% in a year. This should be the first thing a bank, Realtor, appraiser tells a prospective customer of the housing market. I thought that 10% was the universal starting “price cut” to get things moving - cars, houses, boats, whatever. It is funny to see the $595K house “reduced” to $591K, then $587.5K, etc.
Tell it brother! Testify!
[Hearing what I think is Aretha singing in the background, "Are you ready for a miracle? Ready as I can be!"]
Oh, wait, maybe it’s Patti LaBelle?
Just remember that what goes up by 50% only has to come back down 33% and you are back where you started. The drop does not need to match the rise to wipe out any gains. A 50% rise followed by a 50% drop doesn’t make you even. It makes you broke.
Perhaps, but not as broke as a 100% rise followed by a 100% drop!
See Japan RE market for that one…
‘In the middle range, $500,000 to $750,000, or anything below, there’s a huge amount of inventory and not a lot of buyers.’
I love this - the “middle range”. To qualify for (and afford) a loan at this amount you would need a top 10% income in San Diego. Your PITI will be between 3800 and 5500 a month assuming you put 10% down at 7% - Not many potential buyers have the required down payment, and fewer yet can afford these kinds of payments, which do not even include maintenance and HOA fees if applicable. I doubt there are many who can actually afford this kind of home and qualify under current and future credit restrictions in the current potential buyer pool. To be inline with incomes the “middle range would need to be $250K - 300K.
It will happen. As reality of the market sets in, 200 to 250 prices will appear as the 500 to 750 prices will be history. Good weather just won’t cut it or realtors saying buy now before the price goes up will be laughable.
It will happen, but it will take time. Seems like a *lot* of time from where I’m sitting…
With few buyers who have any funds of their “own” and credit standards higher, the easy buyers are gone. Trade up market dead is dead as no one with common sense buys in a “falling market”. Wall St Boys will be discovered now for their phony scams will hurt all credit markets. The truth is coming out now and real estate will fall fast. Nothing to stop this hard fall as reality sets in soon. Won’t take long.
Hell hath no fury like scorned reality.
This crap of the best off buying the medium home is crap also. Do the highest earners ever want to buy in the medium (shitty) area? No!
Do you think the highest earners are in their 20’s or 40’s? Don’t you think that those highest earners (in their 40’s+) bought homes years ago long before this bubble?
This is where I see the statistics being used by the liers the most. The top people do not buy the medium home, so who does that leave (qualified) to buy everything bellow the top properties? NOBODY!!!!
This horse will rot in the sun until the medium income falls close to the medium prices.
In the mid 90’s it took RE here in Stockton to fall to a point that buying was cheaper than renting before things got moving again. IMO it will be much cheaper to buy than rent at this bottom because the credit will tighten much more than it did in the 90’s. If you don’t have good credit, no debt, good job (long term and verifiable) and a fat bank account you can forget about borrowing money for a home in 2012.
I agree credit will be very tight in the future. Not just because of the current losses, but because there will be very little liquidity. The whole Fredd/Fanny thing which was supposed to put more folks in homes will end up putting more out of homes (see law of unintended conequences). This whole mess could have been averted by placing strict lending caps and income verification in place, but alas …
“Racist.”
Did you see how easy it was to demonstrate why down payments and tighter standards were thrown out the window? Anybody that proposed your plan would quickly be hit with one single stupid, meaningless, volatile word. Thus we have the mess we now see before us.
Hey, I was born in East Africa - That makes me every bit an “African American”. I cannot be a racist
The whole Fredd/Fanny thing which was supposed to put more folks in homes will end up putting more out of homes (see law of unintended conequences).
Raine’s don’t give a rat azz. He done got his $100 million.
The whole Fredd/Fanny thing which was supposed to put more folks in homes will end up putting more out of homes (see law of unintended conequences).
Raine’s don’t give a rat azz. He done got his $100 million.
median
tight credit = real credit terms used for many decades…
My girlfriend and I (and our little dachshund) went walking around the North Park, then the South Park neighborhoods of San Diego. Nice little areas, especially North Park near Upas and Morley Field.
Anyhow, some of these little post WWII homes, little homes, are on sale for the UNBELIEVABLE price of 600K and up! Incredible. Not as bad as the other night when we walked around Mission Hills and homes were in the 800K and up range. Man, in SD I think it is going to have to be buying foreclosures from a bank or a lender in a large newly built area. These little neighborhoods are nice though, I can’t stand the big tan stucco neighborhoods that were built recently.
One thing I am amazed at though is that it is VERY evident that the equity fairy has been visiting many of these homes and neighborhoods. It looked like almost all the houses in NPark in the area I mentioned were refurbished and repainted. The spending boom that is now unwinding is going to be painful as many of these people are in complete and utter denial.
The big risk in the “equity” game is that borrowers do not see it as debt, rather as a debit against the savings in their “piggy bank” house. When prices fall, and they will, what is left behind is pure debt which must be paid for with hard work, oh yeah and a bunch of old rusting Hummers etc…
–
“what’s going to happen in fall and winter”
In the fall we will have wild fires and in the winter floods. To top it all off we may even have an earthquake next spring. As to the 2007 summer it would be the summer of draught.
Four seasons!
Jas
You’ll enjoy the REIC cheerleader’s thoughts in, of all things, comment #13 following this story:
http://www.azstarnet.com/sn/related/188519.php
Think monthly payment, people…
From the article:
“The housing sector will push the U.S. economy into recession unless the Federal Reserve cuts its benchmark rate at the first surge in unemployment, said Kiesel, who expects the Fed to reduce rates.”
unfortunately, Mr. Kiesel, the Fed has little control of Mortgage Rates, the so-called “conundrum”. Raising the Fed Funds Rate from 1% to 5.25% over 2 years did not raise mortgage rates. And for the same reason dropping the FFR from 5.25% to ???% will also not lower mortgage rates.
Dropping the FFR will only cause a speculative boom elsewhere. The 10 yr Treasury is what determines mortgage rates, as well as lender sentiment. I hardly think a drop of the FFR will make Bear Stearns or Merrill Lynch want to securitize mortgages. I hardly think a drop in the FFR will make BofA want to lend more.
The 10 year is kind of an indicator, but investors want a premium over it - and that spread will widen as more MBSs and CBOs fail miserably…
It is weird to read this, I know Mark and think he has to be misquoted or taken out of context.
This is his most recent piece from April
U.S. Credit Perspectives
Mark Kiesel | May 2007
Still Renting
“…Based on the current outlook for housing, I will likely be renting for one to two more years. While many factors that influence housing prices have turned negative, I suspect we have not yet hit bottom. In fact, housing prices should head lower throughout the rest of this year and next year as well. …”
http://tinyurl.com/3acrow
“Raising the Fed Funds Rate from 1% to 5.25%…”
Oh I get it now. It’s called the Fed reset.
Ha ha! I love how he predicts a 1-2% decrease in price in 2 years. And then says “It doesn’t matter if you overpay cause you’ll be selling again in 4 years!” Um… short term in RE is EXACTLY when you have to worry about overpaying. What an idiot!
And, sad to say, his line of reasoning is what passes for brilliance in the local REIC. However, fewer and fewer Tucsonans are buying into his BS.
I did enjoy that comment number 13, “The actual cost of homeownership has very little to do with purchase price.” Ha ha. In my life I have bought two houses, one condo, and several less-developed properties. With a single exception I bought them all for cash, and sold most of them for paper (all paper retired now except the last). Since I buy for cash the actual cost of homeownership has EVERYTHING to do with purchase price.
“”It’s a blood bath,” said Mark Kiesel, executive vice president of Newport Beach, Calif.,-based Pacific Investment Management Co., the manager of $668 billion in bond funds.”
It is? Why do I tend to think we’ve seen nothing yet? Either that or he already sees what’s coming…..
How many bond funds will fail this year…
$668 million here…
a few hundred million there…
Pretty soon we’re talking real money.
The credit market is about to tighten up…
I’m not thinking Bear Stearns or ML are gung ho to dump a big bet into the CMBS markets… quite the opposite.
Got popcorn?
Neil
Sell no bubble, hear no bubble, speak no bubble.
Lordy so many people are going to financially wiped out. They don’t get it: even if they dropped it by 100k, there aren’t that many buyers who can qualify and ones who do, already may have bought. They’ve eaten their seed corn.
‘Developers have been scared out of the market because of the slump in housing prices,’ he said. ‘And it looks like it will be at least a year before that improves.’”
That is a lie about developers moving forward. In Devore off the 15 freeway they are moving forward with a 5000 home project.
“‘The market has leveled off and is moving downhill,’ said Gary Stater, president of Gary Stater Realty Inc., who has more than three decades of experience in residential real estate in Apple Valley.”
I always wondered what it is like selling RE in the inland empire or in the high desert….”and over here we have what I like to call the cooking corner, with great venting and reinforced walls to protect the neighbors in case of a accident, and low profile enough to keep those pesky sheriffs from suspecting. I like to call this development dancing horse meth meadows.”
I follow the Apple Vallery/Victorville area for fun as I used to live there when Dad was in USAF. Our family used to own some properties there but sold to the next GF’s during the RE good times before the base closed.
Checking the foreclosures/pre-foreclosures on Foreclosure.com and they must have 2000 homes listed and flapping in those dry desert winds.
Everything on the entire valley is UP FOR SALE except Roy Rogers stuffed horse Trigger and I think they shipped him to Branson, Mo. many years ago…him and the LAST Roadrunner
A lot of flipper and idiot blood will run all the way down the Cajon Pass and beyond before this is over.
“‘There’s just not enough work now,’ said Nathan Moeder, who tracks the local real estate market at London Group Realty Advisors. ‘We’re starting to see shops close up and mortgage brokers closing their doors, looking for jobs elsewhere.’”
Geezuz, it’s about time. I’m sick and tired of seeing realty, title, and mortgage company shops on every damn corner. The’yve ruined the landscape. Next in line: decreases in commercial lease rates. The disease is spreading throughout the economy.
Bantering:
the only problem is that OTHER shops and small businesses are also closing up shop.
This isn’t California, so sorry for being somewhat OT, but in our vibrant “Uptown” area businesses by the droves are going BK.
The reason? Their leases got too expensive, and they couldn’t pass on the prices to consumers.
Thus, businesses are failing at an alarming rate.
The commercial space owners cannot drop their lease rates, because they “need” a certain amount to cover their operating expenses (since they’ve bought high, or renovated at high expense, or refinanced, etc).
Thus, the boom in development is now killing small businesses.
Eventually, we’ll have a lot of empty retail space, and hopefully eventually it will pencil out so that small businesses can survive… but Uptown might not survive.
I see the same thing happening in many San Franciscan neighborhoods (where turnover is always high but seems higher of late) and also in the expensive San Diegan neighborhoods: especially Old Town, Hillcrest, and Gaslamp District.
In LA, many units are simply untenantable, because owners have paid so much that they can’t afford to lower the rent, and no one can pay it. I see overpriced units just languishing on the market. I don’t know how the landlords can afford to eat such a long vacancy, either.
A lot of this boils down to BS “proforma” rents made up by brokers such as Marcus and Millichap, which bogus rents they use to jack up the purchase prices and hence, their commissions. Once you buy the building, though, good luck finding real tenants who can pay those rents without piling in a bunch of family members or roommates.
But why would anyone look at proforma? If it’s an existing rental and its occupied you have the #; if it’s vacant you have to wonder why.
They just fill it up with tenants who don’t know any better, maybe even shills, so you’ll pay the inflated price, then those bogus tenants move out and you’re stuck trying to replace them at those rents.
They have to sell you on the pro forma rents, because the deals in LA don’t pencil using actuals.
Marcus and Millichap and Sperry Van Ness are devil spawn. Times must be getting hard for them because their signs are starting to show up at some of the oddest places on some truly horrible buildings.
Funny, I had a similar experience with a neighbor in Huntington Beach.
There are idiots who will pay proforma rents.
My neighbor is able to rent a condo near Goldenwest Community College for $3K/mo.
I live walking distance to the HB pier in a SFH with 2 yards, 3 parking spots and a garage for under $2K/mo.
Kinda scary…
“In LA, many units are simply untenantable, because owners have paid so much that they can’t afford to lower the rent, and no one can pay it.”
It’s much less expensive to lease the space at a lower rate than let it sit empty. Vacancy will be their death knell. Think “culling”.
Absolutely, letting a home sit empty when it could be renting for $2K a month is like throwing that money away. The fact the payments are $4K each month is irrelevent, and reduces the loss to $2000 a month rather than $4000, which makes sense. Of course I would not rent from a person I thought to be in this position.
HIC:
I’ve seen it with my own two eyes. Small businesses are having a really hard time. But, it’s progress, really. Once the vacancies are huge, prices will drop, and small businesses will once again, be attracted to the area. This will take quite some time, but it has to happen.
I’ve seen it with my own two eyes. Small businesses are having a really hard time.
Not here in Mazzholeland. Things are hunky-dory.
It’s sooooooooo….good in fact,
The DEM gov is lobbying hard for a 2% Meals and Lodging tax to be individually implemented by cities and towns because they’re are going broke paying for the health insurance coverage and pension dole-outs and can’t get constituencies to vote for budget overrides.
WTF…the price of cheese for a pizza only went up 55% and the shellfish flats from Freeport, ME to Cape Cod are closed due to Red Tide. What’s another 2%.
NO FRIED CLAMS FOR YOU!
Speaking of small businesses closing up shop, here’s the report from Tucson:
http://www.tucsonweekly.com/gbase/Currents/Content?oid=97006
I see an amazing amount of “small business” and mid-business office, retail, and industrial space vacant in the south bay. Torrance seems to be the hardest hit…
Its scary already…
Got popcorn?
Neil
Do you remember Hawthorne during the early 90’s bust? A veritable ghost town.
OK, freind of mine just bought a condo, to be finished in a year. I was horrified! But he can’t resist the pull of easy money. He says it won’t ever be a cash drain because the rent will pay the mortgage. That is, the rent the developer tells him he ought to get once this thing is finished! Should he be worried? (Ha ha, dumb question!)
“Over the past year, 2,100 real estate brokers and 700 ‘“credit intermediation’ workers, mostly mortgage brokers, have lost their jobs in San Diego County,”
………and the rest that still have their “jobs” aren’t making any money. It’s hard to quantify the hit that being taken in the commission only field of real estate employment. There is a lot of folks just warming a seat at desk these days.
Maybe the monkeys with the football will let them join in their game.
They are the football, and by the time the monkeys are done with them, sitting at a desk will no longer be an option.
LOL. Your monkeys and football comments never cease to make me laugh.
Company I work for leases 25% of one floor of one wing of a commercial office building. The rest of the 75% of our floor/wing is Nova Star, American Title, and a now defunct bank. In the 4 months I’ve been there, I’ve never seen more than 1 person in the Nova Star office that could easily fit 20+. The title place has 3 people working in there, and it too can easily fit 20+ people. The no vacant bank space could hold cube farm for 30+.
So, 75% of the wing could hold 70+ people, but is occupied by 4.
Our lease is up in a few months. If they think of raising our rent, we’re out. In fact, I think the company is looking for a cut in rate if they want us to stay.
Any LA or SF news?
How many times must I tell you that ya gotta leave LA?
And go where? Nevada or Arizona, where I can fry through the summer and have to drive everywhere I go, and eat out at chain restaurants like Appleby’s every night? Buy a mcmansion on a 5,000 foot lot that looks like 50,000 other houses in my neighborhood, with no restaurant or supermarket in walkable sight? I can’t live like that. Besides, I can’t live anywhere where there aren’t homeless, or illegal aliens standing around looking for work, it just wouldn’t feel like home.
Try Florida (man, that’s sheer heresy to a Cali). Humidititty will prevent you from frying, but you need to get used to breathing underwater.
You forgot about Florida’s bonus: mosquitoes!
Ahhh I love the mosquito-free SoCal life.
Mosquito-free only because the air in SoCal is more toxic than any over-the-counter insecticide.
I thought SoCal was free of mosquitoes, too, but I learned on this blog that this is not true. Apparently, they’ve been breeding in those abandoned green pools at the flopper homes.
“I thought SoCal was free of mosquitoes, too, but I learned on this blog that this is not true.”
Those b@st@rds are everywhere. I haven’t found one place where they aren’t on me immediately. My least favorite of all living things.
Have I previously posted the mosquito national anthem, first reported by Don Martin in Mad Magazine 40 yrs ago? It goes like this:
mmmmMMMMMMmmmmmMMMMMMMMMMmmmmmMMMMMMMMMMMMMmmmmmmMMMMMmmmmmmmmmmm…
ROTFLAMO, gasp…can’t breathe, az, TOO funny.
There was a west nile death in San Bernardino County (Inland Empire, CA) due to mosquito in 2004.
We get one or two in our rental house (which is in Inland Empire ) every day over the past week. Ugh.
Besides, I can’t live anywhere where there aren’t homeless, or illegal aliens standing around looking for work, it just wouldn’t feel like home.
That leaves open most of the U.S. as a possibility still.
LMAO……somehow I knew I’d rile ya! Keep the sarcasm comin’, I love it.
Try downtown PHX
Inspector & La;….I think SFjack can help if he is luring….We discussed this sometime back and he said that there was lots of empty storefront retail speace that would normally cater to small business…I hope he can chime in….
“…I think SFjack can help if he is luring….”
Sounds a little creepy…
I can’t even begin to count how many small and mid-sized towns I’ve rolled through and noticed BRAND NEW strip malls completely empty. There has to be literally hundreds of these things sitting around waiting for the party to start. Who the f**K would invest in one of these malls without knowing demand for it?
What’s really scary, is that builders and developers in both the retail and commercial sectors built purely upon speculation. It’s as if there was zero market research. It’s like opening up a North Face Parka shop in Phoenix, or a bikini company in the Yukon Territories. Unbelievable.
I may be taking a trip across country in the next month, and if so, I’ll be taking notes. If I remember correctly, you’ve been RV’ing it. Sounds like fun. The pup and I will be using a tent.
Universities as well…
I was shocked to read that Rensselaer Polytechnic University now has debt as large as its considerable endowment. And this university isn’t alone. Nation wide universities have gone on a HUGE borrowing spree, believing that “if we build it, the dollars will come”. IT being a new stadium, research building or student rec center/union. Dollars coming from increased enrollment, more research grants, donations, sports success, etc…
The problem is that this is more or less a zero sum game, so there will a lot of losers over the next couple of decades saddled with fantastic amounts of debt. Is there ANY dimension of our economy not throw out of whack by crazy borrowing/speculation?
Who the f**K would invest in one of these malls without knowing demand for it?
Drug money.
It’s as if there was zero market research.
A good solid appraisal would have said so in it’s feasibility analysis.
However, all those preparers who would dare speak the truth, were all lined up at the edge of pit and shot thru the head.
GHD - short answer: no.
This is why I am truly depressed when I think of the future - not vindicated. Just depressed and a little anxious. Wait. I think there are drugs for both these symptoms. See you at CVS.
Anyone familiar with the flipper site http://www.discountedproperties.com? Thoughts?
I only looked at two counties in Florida, don’t see anything that strikes my fancy, but some of the asking prices there are almost (I said ALMOST) in reality range for this area. Of course, just about all of them need rehab and there are a few “In Your Dreams!” properties. Still, at least in the two counties I browsed, I actually appreciated the apparent realistic disclosure of condition. Although you have to “sign up” for more detail, natch. I ignore all the estimated costs, potential sales price and profit, I’m looking for a little low-maintenance concrete block POS I can pay cash for.
Housing “Blood Bath”, ABX Free Fall, CDO Market Shock and Worries About “Systemic Risk”
Roubini and bloggers discusses this………very interesting reading.
http://www.rgemonitor.com/blog/roubini/
Still at stalemate in the South Bay (Los Angeles beaches). Inventory increasing, some sales at reduced prices. We’re going back out to play at the open houses this weekend. Interested in measuring realty sentiment, and just mixing it up a little. The vibe is beginning… an awareness seems to be moving in like the pre-dawn dew. What event, or shift will trigger the rush for the exits?
I was in Hermosa last night over at the Shore watching a friends band play, it is an interesting neighborhood….definitely can perceive the age as in older LA County though.
Redondo and HB were my hangouts for the 3 years I lived there until April 2006. Everytime I go back I check up on the neighborhoods and see if I can see more signs on the lawns. The sellers have been very stubborn and price drops are still unnoticable. Something will give. I’m interested in 90254 and 90277 (around the Esplanade and in Hollywood Riviera). I am very patient.
Patricio, you must be 21 or 22. In Hermosa, you age out at 30. That doesn’t stop us, however!
Ha…I turn a very young 39 next month!
My buddy is the son of Nevil from the Specials and he has a band called Dreadstarr who are very good live….sadly he and his pops are not talking and he hasn’t seen his band play yet, quite a shame. I meet 18 year old people who act like 85 yr olds, age is very relevant to Gov records and that is about it. =)
3 unit just finishing up next to me in south redondo. 3 unit with one sold right across the street. Neighbor in my 8 unit just went into escrow for less than what he could have gotten last year; probably 100k less. He took 850 when asking 875. Should be interesting to see if the new units get the 725/sq ft they are asking for ! At 850 our units are going for about 60% of that. I dont care how much granite you spread around, I think these new 3 units could spell trouble for the builders. That could be the trigger….local builders going belly up and dumping what they have on the ground.
Bill and jona, I’ve lived in all 3 beach cities and the best mix to me is in 90277 Riviera Village area. By 3/qtr 2009, look for a 35-40 % trim. Next year only 15-20%. Taking 850 when asking 875 will be a story he’ll be telling forever when they’ll be at 525 in a few years. Are those the conversions on Catalina Ave?
The vibe is beginning… an awareness seems to be moving in like the pre-dawn dew. What event, or shift will trigger the rush for the exits?
This: the realization that a house is not a convertible bond. The implied rental value has always been the yield, but somewhere along the line someone decided that houses had to trade at a premium to catch possible future increases in implied or imputed rental value. Eventually (quickly, in fact), this became accepted as obvious, and houses had to trade even higher in order to simply catch future general appreciation in prices - houses became convertible bonds trading at a huge premium to conversion value.
But, as prices fall, buyers will see the “convertible feature” has little or no value, since after all, it still has to reflect the pootential for future increases in implied RENTS. Houses will return to a multiple of rents, based on interest rates. And everyone will see that that is the obvious and only way to value houses.
My take is that the South Bay, beach cities, PV, SP, Lomita, Tor, has dropped 10% om value/price from the peak of last year. However, it seems to be picking up. I am more busy now than I have been in a year. Refinances are up at least 100% and purchase loans up 50%—for my bank. I do not know why except that the big jump in rates may be getting people nervous (up 1/2% in 5 weeks.) Everyone buying has a reason, such as moved into area, new baby on the way. Should they wait? Probably, because I think we are 2 years or more from a bottom.
(My experience is not typical of the market. We are a bank that does only A+ prime loans. Typical score:750, typical equity/downpayment:20-40%)
I think in SF it may take an earthquake….
man it’s been hard reading this blog every day and hearing about things finally coming down, and still hearing about overbidding happening in some San Francisco neighborhoods.
In my used-to-be-quaint-now-trendy SF neighborhood I see more for sale signs, and houses seem to take 1-2 months to sell.
What I have noticed is “for rent” signs in windows. This is new.
Little LA anecdote illustrating the inane market here. At lunch with my RE bull friends… Someone they knew just sold their WeHo condo. Purchased in ‘05 (probably@ 100% IO at, I’ll guess 6%-ish) for 395k, no upgrades.
Listed at 467k, on mkt for a month or so. Got offer at 460, countered w/ full price… sold.
Comment by friend… “…amd they only paid 5% commission, so they made around 40K! They can go buy a nice car for cash!”
I give up… :-/
He would be lucky to have broken even at your above numbers. Was it rented? My estimate is that anything over $1,500/mo in holding cost and he lost his ass and $1,500 wouldnt cover the interest. Not to mention HOA or any other cost he incurred.
Nobody wants to look like an ass, so they lie!
Not rented… lived in it. I know those numbers are right, and yeah, at a generous 1600 mo payment, it cost 38k to live there, but they woulda spent that on rent anyway, so if nothing else, they got some of their “rent” back…
My point is the idiotic mindset… “Look! Free Money! It’s easy! Buy a car!!!” Until this changes here, this market is gonna be very sticky. And annoying…
Another thing that annoys me is the freaking buyer.
Realtor: “The seller countered at full price”
Buyer: Excellent! I’ll take it!
WTF?!?!
It’s going to take awhile for the residents of WeHo, Beverly Hills, Pacific Palisades to get it, they think they are immune to the regular joe and their problems.
Don’t I know it. “It’s different here. Everyone is rich. Everyone wants to live here.” blah blah blah. I really can’t wait for it to fall apart. What’s it gonna take?
Foreclosures lots and lots of foreclosures. It’s amazing how that changes a areas pysche. people start looking over there shoulder and thinking it could happen to them.
Yeah… It seems to be starting in zips like 90019. Once it starts perking up north of olympic and points west… *then* we’re talkin’. I think there’s still a fair amount of equity from the last few years that could be liberated to slow this areas descent down. I’ve got time and cash though…
And, as illustrated above, there’s plenty of Kool-Aid swilling knife catchers around… Once they disappear…
90069 will be last to fall in weho
mrincomestream and smlandlord:
can you guys look up 643 Raymond Av., SM. It’s a bankruptcy property, listed at 895K, a tear down built in 1910. I offered about 100K below list just for the hell of it, seller wouldn’t even counter, and apparently accepted an offer today above list. No bubble here. Crap.
LAIG-
LOL Why??? Does the camper in the backyard come with it . Well it was listed for 1.3, but why on earth would you buy that? A duplex for 795k is insanity. LAIG you need to learn the art of patience. That’s just horrible.
But you can walk to the beach
Three quarters of a million dollars to be able to walk to the beach.
Seriously?!?
BayQT~
Seriously.
No I bet it is the truth, it is just taking longer here because of the amount of wealth here to buffer inevitability and reality to fruition. Just like tide and a bucket, you can try but eventually this will wash them out. It is hard for most to understand that are not here, I like in HB and see it and I know all things have an end to them…regardless of reserves.
Sure there was no cash back to buyer involved here?
There’s all sort of dodgy dealings going on in Santa Monica, especially north of Montana.
The amount of ‘tear down - sold “as is”‘ properties there is amazing.
In other words, a perfecly nice early 20th century crafstman (under 2000 sq ft) on a decent lot that hasn’t been ‘converted’ to a 6000 sq ft Persian Palace yet (the SM equivalent of a McMansion).
Still, even for ‘land value only’, they’re still asking well over 1 million for these places…..
If you’re interested in SM then there’s a good blog -
http://westside-bubble.blogspot.com/
(don’t know if you post here, Westside Bubble, but I thought I’d give you a plug)
20,235 homes available for sale in Orange County, CA according to OC Real Estate FInder (Wednesdays data) - a record!! I’ve never seen so many OC homes for sale since I’ve been living here over the last 15 years.
Come mid-August and September there is going to be a lot of desperate sellers wondering what happened to Gary Watt’s predictions.
Ain’t seen nutin yet homie!!!!
Wait till the superbowl listing surge in 09′ =).
We have classic mortgage broker/real estate agent/appraiser fraud going on as I write this in Rockville, MD. There is a unit (townhouse) located in 20852 on Tildenwood Drive. Listed price and sale price are very close at 600k. This community of townhomes has 2 that sold in the last 6-7 months (the only sales in this community in that time frame). They sold in the mid 400’s. Almost 150k difference, the soon to be FB probaly doesn’t realize those other sales happened and an Appraiser will not use those comps in the report as it will not substantiate the sales price. The Appraiser will go out of that neighborhood and use superior comps to try and support value. I wish I knew who to report this info too to stop this madness.
to whom ever you would report a bank robbery to.
From 6/12/2007 to 6/19/2007, there were 9 homes sold in ZIP code 90274 for an average price of $2,009,556.
1) $1,628,000 on Cataluna Pl
$1,505,000 on Via Pacheco
2) $1,299,000 on Chelsea Rd
3) $1,175,000 on Palos Verdes W Dr
4) $4,000,000 on Pine Tree Ln
5) $1,459,000 on Via Colusa
6) $2,910,000 on Via Del Monte
7) $1,460,000 on Via Estudillo
9) $2,650,000 on Via Segovia
Prices are not going down in this particular zip. Who are these buyers and my guess is not many of these homes were built after 1975!
God i hope that ‘first’ crap does not start again… i thought it ended on this blog a couple years ago.
Despite turmoil in the housing markets that includes record foreclosure numbers, mortgage rate increases and home price depreciation, homeowners don’t believe there’s a real estate slump, according to a new poll.
Most - 55 percent - are confident that their homes continued to increase in value compared with a year ago, according to a nationwide telephone survey conducted this month by The Boston Consulting Group (BCG), a business and management strategy firm.
New article:
“WASHINGTON (Reuters) - Although existing homes are selling at their slowest pace in four years, most Americans are confident their homes are worth more now than they were a year ago, according to a survey released on Thursday.
A poll conducted by the Boston Consulting Group found that 55 percent of Americans believe their house would sell for more money now than last year, compared with 59 percent who felt the same way last summer. Eighty-five percent expect their home to be worth even more in five years than it is now.”
————————
WAY too many people of these people watching “Dog the Bounty Hunter” too.
link to whole article: http://www.reuters.com/article/businessNews/idUSN2137660020070621?feedType=RSS&rpc=23&sp=true
sorry ’bout the long link, littleurl.com is down.
“…most Americans are confident their homes are worth more now than they were a year ago…”
That’s such a silly poll. Why wouldn’t they think that? Hell, my son thinks his comic book collection is worth a million books. You can believe anything you want but sometimes belief and reality are two different things.
Maybe this is a bits bucket topic, but…
Looking for advice on choosing between money market and CD’s to park some cash. Should I do a 50/50 split to be safe (that is, is it folly to try to predict future rates)?
Thanks
As far as parking some cash for say, about a year, prior to making a RE purchase, it seems to me it doesn’t really matter, generally speaking. But if one has certain goals or needs or has a longer timeline, a moneymarket or CD or treasury’s details make a difference.
As far as bubbles, things are finally happening. Perhaps there are ways to take advantage of this rare bubble-deflation situation right now, on the way down.. and of course later, when it rebounds… in RE, securities or wherever.
This period could be of historic significance.. a very rare oppportunity to amass great wealth. It will likely become a very competitive market. ( but never amongst this friendly HBB brotherhood.. no way :`)
What to do and how to position oneself for the next 10 years or so deserves some serious thought and discussion, imo. The time to plan is now.
Foreclosures up in Pima County (southern Arizona):
http://www.tucsonweekly.com/gbase/Currents/Content?oid=oid:97515
ANOTHER RE MOGUL IN TROUBLE - 8 NOD”S!!
http://bakersfieldbubble.blogspot.com
Wow, that guy is going for a record. Think he’s an H1B visa? If he is, some tech company is minus a worker.
“The top executives at Coldwell Banker and Seaman portrayed the acquisition as a marriage of two strong firms and denied that the weakness in the real estate market had an impact on their decision to merge.”
Yea right, R.E. companies did this in the 90’s also. However this time survival mode is coming to the forefront a little early.
Sorry to see the Walnutcreek condo.
From 330 - 293k in 2 months.
Says fire sale and any reasonable offer accepted.
1b/1b - 700+sq ft near bart.
still on the mkt.
What is it about condo’s that make folks spend that kind of money. I have yet to see a condo I would spend more than a 100 grand for and it was on Wilshire fairly large and had a heckuva view.
“‘Those (bank-owned homes) are probably going to be sold at 80 percent of what a comparable home sold for. So that becomes the new comp and drives down prices even more,’ Van Bockern said.”
Bingo. This is why Subprime won’t be “contained”. As these loans blow up and go into foreclosure, voila, they become lower comps for everyone else in the neighborhood. And most of the sales are still private. Wait until foreclosures really pick up steam.
And don’t get me started on Alt A. That will be another chunk of inventory.
Sorry if this has already been posted….
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/06/21/BAG9QQJ3BP1.DTL&hw=berkeley&sn=007&sc=430
Berkeley 6/21/2007
Man who killed family described as grim
Suicide note said they hit ‘financial breaking point’
From the article “In 2005, the couple bought their three-bedroom 1918 Craftsman home on Northside Avenue in Berkeley for $640,000 from a woman who had been a patient of Kawai’s, according to public records and neighbors.
On June 6, 12 days before the tragedy, the couple refinanced the mortgage on their home and took out an additional $72,500 loan, records show.”
If you buy a new home in the High Desert one company will throw in a brand new Prius with the sale. This place is toast but they keep building more houses.
ANOTHER MOGUL in Bakersfield with 8 NOD’s:
http://bakersfieldbubble.blogspot.com/
Here is an entry from a Realtor on another site………..
I’ve been selling real estate the past 7 years and have been quite successful, that is until last June. I primarily marketed a northern suburb of Minneapolis which has experienced tremendous growth in the past 10 years.
Frankly, it’s over. The housing market has officially crashed. Here are some recent sold statistics for the area I market:
March thru June 15
(2004) Sold 172 units
(2005) Sold 216 units
(2006) Sold 168 units
(2007) Sold 53 units (350 active listings)
During this same timeframe only 17 new construction listings have been sold. Of these, 6 of them were bank owned. Currently, there are approx. 130 active new construction listings.
Ok, so the housing bubble has popped; what does that mean for the average person? First, we are losing the largest manufacturing industry in the U.S. You will begin to see unemployment tick up, but many of these jobs were under the table. Meaning, the skilled workers were being paid cash. These individuals will not be able to file for unemployment. The loss of these jobs will bubble up over the next 1-2 years and will surface on the bottom lines of retailers like Home Depot and Lowes.
Second, as prices fall, home equity loans will be a thing of the past. Falling home prices are the single leading factor in the bubble burst. Prices started falling well before foreclosures were an issue. My estimation is prices began to fall in early 2005. Homes prices have now retreated to 2003-04 levels. Meaning a home that sold in 2005 for $250,000 is now selling for $220,000 (as long as it’s in perfect condition). Homeowners’ getting over their heads financially is nothing new; however; the difference now is they can’t just sell their house, because they owe more than it’s worth. I turned away 20+ listings this year due to homeowners being upside down on their mortgages. As a result, they are walking away and letting the banks foreclose on them. As more and more foreclosures (up 90% from last year) hit the market home prices will continue to be pressured downward. Before it’s over (if things don’t spin totally out of control) we will see price levels equal to the year 2000…Approximately, a 20% decrease in prices.
Now, you may say, “great, I can’t sell my house for what I owe on it. I will just stay and wait for the market to turn. I have a good job and can get use to the idea of staying in my home a little longer. This problem doesn’t really affect me.” Wrong, as more and more homeowners are unable to tap into their homes equity they will no longer be buying cars, 4 wheelers, big screen t.v.’s, computers, lawn tractors, updating kitchens, roofs or siding etc. Millions and millions of homeowners will be putting off discretionary spending out of necessity. This will result in a tremendous fallout in the retail sector of our economy, which in turn, will have a direct effect on the transportation and manufacturing industries. Many jobs will be lost and many more homes foreclosed.
Finally, as the housing market crashes, so does the tax roll of state, county and local governments. These institutions have built their budgets on the back of the housing surge during the past ten years. It will not be unheard of to see local governments going bankrupt, schools shutting down, police departments with skeleton crews and social programs slashed. You will quite literally see ghost towns, large developments with empty Mcmansions, because it made more sense to walk away than pay the exorbitant property tax.
Sounds depressing doesn’t it. Well, history shows that it will be depressing. This is exactly what happened before the stock market crash that lead to the Great Depression
11:54 AM, June 21, 2007
Dawning realization is both a beautiful and awful thing, is it not?
ChillinIntheOC - Gary’s office spoke to me. Here is the prediction (posted over weekend).
From: Gary Watts [mailto:gary@impactre.com]
Sent: Friday, June 15, 2007 3:14 PM
To: ‘Donna’
Subject: RE: some questions on OC real estate going forward
Alan,
When I have time, I answer some of the more sincere emails and I find yours to be one of them. The first thing that I noticed is the 10 years you did not buy California real estate. It might have been because of what the San Francisco Examiner had forecasted in 1996: “a home is where a bad investment is!” That line may have kept you and others out of the housing market. Had you bought that $400,000 home, then sold in last year in California and moved to Albuquerque, you could have purchased at least 3 to 4 more homes, had no mortgage and more monthly income. I am happy that you did finally buy and that you love it there. In the future years, you should find that you made a great investment decision.
In California, the days of really big housing price run-ups are over for now and probably for quite a few years. However, despite what you read or hear in the media, the Bay Area and southern California are holding their own. Last month the Bay Area, even with declining sales, posted a new peak median sales price of $660,000 which represented a gain of 3.4% from May of last year. In southern California, even with declining sales, the median price rose 4.9% over the past 12 months to a new high of $505,000. Here in Orange County, our price was up but barely at 0.01% from last year. This is not bad when you consider all the media news about foreclosures, late payments, sub-prime collapse, etc. There are still so many buyers fence-sitting but I assume that a couple of more months of prices continuing to increase versus the same period last year, will get them back into real estate homeownership before interest rates begin to rise.
I am not naïve about the problem areas, especially the newer communities where a lot of building, exotic loans, and rising house payments are hurting buyers. When you look at the numbers, they are very small compared to all the homes, condos, mortgages that exist in this State. Today, the notices of default for the last quarter totaled 46,760. While that seems like a huge number, it represents only 0.008% of all mortgages in California – a number too small to effect or affect home prices in any meaningful way. Also, I should point out that only 11% of those “notices” actually end up as a foreclosure. The other 89% were successful is stopping the foreclosure by obtaining new financing or selling their home. By the way, last month 24 states saw a decline in their foreclosure starts. Maybe, just maybe things are near the end for those individuals who purchased a newer property near the beginning of 2005, with little or no money down, using the exotic loans. The good news is that when you measure those types of loans versus all mortgages in the U.S., they represent only ½ of 1% of all loans in the U.S.
I hope this clarifies some of your issues and in another year, we can once again compare notes and see how things are going. A year ago, many emailed me about the immediate Housing Collapse. Here it is a year later and despite what they have read in the media, most of the housing market is still in good shape.
Gary Watts
P.S. To address your other statement about people moving out of California, you are correct. Maricopa County in Arizona received 11,375 Californians in the past
year. Yet with all those departures – even to other states, the State of California and especially southern California still had positive population growth.
——————————————————————————–
From: Donna [mailto:donna@impactre.com]
Sent: Friday, June 15, 2007 12:30 PM
To: gary@impactre.com
Subject: FW: some questions on OC real estate going forward
—–Original Message—–
From: al jones [mailto:housingbubblesobstory@yahoo.com]
Sent: Thursday, June 14, 2007 10:34 PM
To: info@impactre.com
Subject: some questions on OC real estate going forward
Gary. I am a former California and Orange County resident. I made what seemed to be pretty good money working for Pacific Bell/SBC during 16 years in California. I made on average about $70,000 per year. When I got married, my wife made about $55,000. Together that appeared to well above the average income for CA. I couldn’t conceive of paying $400K for any home, yet alone $623K. Alas, I never purchased a home in CA (was in the Bay area from 1996 to 2006). We were finally disgusted with CA and I was burned out on my job. We moved to Albuquerque, bought a nice home for under $300K (2700 sq ft, one of best neighborhoods, safe). Even paying a fixed 30 yr, best interest rate note takes enough chunk out ($2200/mo) of our $100K income. This house would have been $1.3M in Irvine or East Bay area where I last lived. People like me are leaving CA in drove. The best proof is Uhaul one way rates. Lake Forest CA to Albuquerque NM $2176 and reverse was $360. That means 8 trucks leaving your area for my area for every one returning. I also did financial planning for a couple of years and the people’s finances were in terrible shape. Best example, a family where husband/wife made $13/hr bought a $850K house. They were told they had a $2000/mo loan that wouldn’t change. Well, fine print said differently. Those folks are probably a foreclosure statistic. There are 10 of thousands of such people in CA that bought into those suicide loans. It should be obvious the math doesn’t add up. How can you sleep at night pushing more people like this to financial bondage and future homeless people? How can prices in CA do anything but go way down? Is the undocumented workers picking strawberries at $15K per year going to keep buying the $720K homes (documented case of such in Hollister). Please advise. I will share your answer with thousands of interested folks if you have the courage to answer this email.
Thank you
Alan - a former CA resident and glad to be out of there. If more people knew how nice life was outside of the crime, traffic, smog, high cost, crowds, high taxes, subpar health care, falling apart infrastructure, etc even more would be leaving and CA will be left with the uber rich (Paris Hilton if she is out of jail) and the dirt poor (draining what is left of any public money). I don’t think Arnold can save the day here.
I am not trying to be mean, negative, or anything. I would just like some straight answers and not the NAR fluff.
I was thinging about a few things related to LA and th market
First the number of listing and momentum in west LA is so huge but still small relative to population. One of the things that happens is this area really lags because people see a chance to buy into the westside when the price dips a little bit.
Second I think as the economy tanks over the next couple of years people will shy away from a lot of movies due to cost. So that is one of the first discresionary things to cut out. We are not there yet so things are still pretty good. When that happens a there should be some downturn.
Second Aerospace is in a high cycle that should last a little while longer. When governent spending curtails over the next couple of years it will be brutal for Neil and me. That should also begin to hit around 09 when the second wave of resets begins to crest and will last till 012.
All the while the rest of the state will be suffering for a while and funding for public services will be low. Gang activity will increase particularly with the Mexican maffia influence. So crime should be a big fricking mess.
Anyhow, those should take a while to hit so the big price drops are not here yet.
My other worry is that the FED will give a lot of leway and under market rate loans (perhaps with Democrat congressional backing) so they can hold on to all those REO and write them off the books slowly. THis would be akin to the Japanese holding/hiding all those losses and bad loans. Should lead to a longer draw out deflationary environment as we saw there.
I think the banks/fed/gov might decide a long drawn out painful deflation will be better than a widespread credit event or repudation of the debt system that plaugues us now.
We are all wondering why the huge inventory of REO is only slowly making it to the market. Perhaps it will be the FED/FM/CFC et al slowly bleeding that supply back into the market.
It would be a stealth bailout and a soft landing that sucks the life out of the market for 20 years.
First!
Not. Cute, but we don’t play that game here.
BayQT~
Not only not first, but didn’t place or show either. Pity….
Way down at the bottom of the comments, in fact.
Notice, however, that his posting time is 11:10 PM. Perhaps Ben opened a can o’ Blog master whoop-ass to knock ‘im down? LOL.
Yes, they did start out as first, I saw it.
LOL! This is funny. Ok, so they may have started out as first….but we still don’t play that here. I REALLY love a good game the same as the next person…THAT one, though, is lame.
BayQT~
Wow, not only are you not the First comment, you got skunked badly. Better luck next time.
You were first. Now you are LAST!!!!!!!!!!!!!!!!!!!!!!
I love the “this cannot continue”.
“the Commerce Department said construction of new homes fell in May as the nation’s homebuilders were battered by the crisis in subprime lending and rising mortgage rates. Industry sentiment about the housing market fell in June to the lowest point in more than 16 years.
Secondary effects from the housing downturn like layoffs and restrained consumer spending could also start surfacing, said Aaron Smith, an economist with Moody’s Economy.com . But the overall drag on the economy from the housing industry should decline in coming months, he said.
”Building permits cannot continue declining at the pace they have,” Smith said. ”
http://www.nytimes.com/aponline/business/AP-Economy.html
Sorry, but from the same link, they report this as though it is a fact. Paulson said it, so therefore it is true. No questions please.
“Wall Street is fairly confident that falling home prices and rising mortgage defaults won’t damage the broader economy. Treasury Secretary Henry Paulson said Wednesday the housing slump is nearing an end and that the losses so far have been contained. “
Gotta love Cueball Hank. Like I said, he may want to suspend his dollar diplomacy trips to China for a while….
‘’Building permits cannot continue declining at the pace they have,’’ Smith said.
Funny, even when housing was rising to ridiculous pricing levels, the conventional wisdom said ‘real estate ALWAYS goes up’.
We are not where near the bottom here in SoCA. House prices are still way too high and not budging. Sellers are still holding out for big profits, they just don’t realize buyers are patient and will wait for years at this point. SoCA house prices need to be realistic with the wages that are not going up. Big a starter house at 1/2 million is totally outrageous in CA. Cost of living and taxes are high enough to pay. More and more native Californians are moving out , they are fed up with the state, it’s not a pretty place to live anymore and with our illegal immigration problems, it gets uglier.
“‘The prices are coming down,’ said Jerry Abbott, president of Coldwell Banker Grupe, Stockton. ‘When people are reducing the sales price of their home, they’re not reducing it by $3,000 to $5,000, they’re reducing it by $10,000 or $15,000″
$10-$15k HA!
How about $200k?
Got 20% down?
A friend bought a house in 2003 for about $530K with a $470k mortgage.
Today the Mtg is $550k with an additional $100k heloc loan.
$180K more in debt last 3 + years.Can u say sinking ship? Always wondered where they got all the money to do all these things.
but I am just a poor sorry @$$ renter sleeping well at night with a wad of cash.lol!
Also know another person who wentto Tampa area and bought 6 condos. was able to unload 2 condos, but is holdign the bag on 4 more. Deep deep trouble i would say. But this has happened all over the country 1000’s of times over.
It is a major train wreck in motion. I will not buy until I get a fair price meaning prices at the long term trendline of appreciation, but in CA this means about a 50% drop in prices.